[Federal Register Volume 91, Number 65 (Monday, April 6, 2026)]
[Rules and Regulations]
[Pages 17384-17602]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-06600]
[[Page 17383]]
Vol. 91
Monday,
No. 65
April 6, 2026
Part III
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 and Certain Contract Year 2026
Policy and Technical Changes to the Medicare Advantage Program,
Medicare Prescription Drug Benefit Program, and Medicare Cost Plan
Program; Final Rule
Federal Register / Vol. 91 , No. 65 / Monday, April 6, 2026 / Rules
and Regulations
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 422 and 423
[CMS-4208-F3 and CMS-4212-F]
RIN 0938-AV40 and 0938-AV63
Medicare Program; Contract Year 2027 and Certain Contract Year
2026 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: Final rule.
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SUMMARY: This final rule revises 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:
Effective date: These regulations are effective June 1, 2026.
Applicability date: These regulations are applicable to coverage
beginning January 1, 2027.
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 Gross, (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:
I. Executive Summary
A. Purpose
The primary purpose of this 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 rule
includes a number of changes that would improve these programs for
contract year 2027 as well as codify existing subregulatory guidance.
We note that, as with previous rules, the new marketing and
communications policies in this rule are applicable for all contract
year 2027 marketing and communications, beginning October 1, 2026.
B. Summary of the Key Provisions
1. Medicare Part D Redesign
We are implementing 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 codifying the statutory changes to the phases of the Part D
benefit made by the IRA related to the deductible, the 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 D benefit, we are also codifying technical and
conforming changes to our specialty tier regulations. We are codifying
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 are codifying 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 are revising Sec. 423.2300 by
adding paragraph (b) to establish applicability dates for the Coverage
Gap Discount Program, revising Sec. 423.2345 by adding paragraph (f)
to terminate all Coverage Gap Discount Program agreements, and making
conforming changes for clarity.
3. Manufacturer Discount Program
We are codifying 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
are adding new subpart AA to part 423 to codify the Manufacturer
Discount Program requirements and are making 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 final rule, we are finalizing changes to simplify and refocus the
areas included in the Star Ratings, including changes to the measure
set with the exception of the Diabetes Care--Eye Exam measure which
will remain in the Star Ratings. We are also finalizing that we will
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 will 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 appreciate commenters' suggestions
on ways to further simplify and modify the Star Ratings program to
further drive improved quality of care and reduce regulatory burden.
The measure removals will apply (that is, data will be collected
and performance measured) for the 2027 measurement period and the 2029
Star Ratings, except for the Call Center--Foreign Language Interpreter
and TTY Availability (Part C and D) measures and the Statin Therapy for
Patients with Cardiovascular Disease (Part C) measure, which will apply
beginning with the 2028 Star Ratings. Not proceeding with the HEI
reward and maintaining the historical reward factor, finalizing
additional information about the data available to Medicare Advantage
(MA) organizations and Part D sponsors during the plan preview periods
before each Star Ratings release at Sec. Sec. 422.166(h)(2) and
423.186(h)(2), and clarifying the process for measure
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removals at Sec. Sec. 422.164(e)(2), 422.164(e)(3), 423.184(e)(2) and
423.184(e)(2), will be applicable upon the effective date of this final
rule and apply beginning with the 2027 Star Ratings. We are also
finalizing the technical clarification proposed in 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 proposed rule, which appeared in the Federal Register
on December 10, 2024 (89 FR 99340) (hereinafter referred to as the
``Contract Year 2026 proposed rule'') to provide details about how the
enrollment-weighted measure score is calculated when a consumed or
surviving contract is missing data for a measure; this provision will
be applicable upon the effective date of this final rule and apply
beginning with the 2027 Star Ratings.
5. Provisions Related to Supplemental Benefits Being Finalized From the
Contract Year 2026 Proposed Rule
In the Contract Year 2026 proposed rule (89 FR 99340), we proposed
several policies that were not finalized at that time, some of which
are being finalized in this CY 2027 final rule. Specifically, we
proposed to strengthen the administration of Special Supplemental
Benefits for the Chronically Ill (SSBCI) by increasing transparency and
clarifying eligibility requirements, including a requirement to make
plan-developed SSBCI eligibility criteria publicly available; we are
finalizing this provision as proposed. We also proposed to codify and
clarify requirements for the administration of supplemental benefits
through debit cards to promote transparency, consistency, and program
integrity, and are finalizing this proposal with modifications,
including not finalizing the proposed prohibition on marketing the
dollar value of supplemental benefits. We are finalizing these
proposals to support beneficiary access, informed choice, and
appropriate administration of MA benefits.
C. Summary of Costs and Benefits
BILLING CODE --P
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[GRAPHIC] [TIFF OMITTED] TR06AP26.027
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BILLING CODE ????-??-C
D. Publication of the Proposed Rule, Responding to Public Comments,
Finalization of Proposed Provisions, and Requests for Information
The proposed rule titled ``Medicare Program; Contract Year 2027
Policy and Technical Changes to the Medicare Advantage Program,
Medicare Prescription Drug Benefit Program, and Medicare Cost Plan
Program,'' appeared in the Federal Register on November 28, 2025 (90 FR
54894) (hereinafter referred to as the ``Contract Year 2027 proposed
rule'').
In response to the Contract Year 2027 proposed rule, we received
approximately 42,632 timely pieces of correspondence containing a
variety of comments on the proposed rule and the requests for
information (RFIs) contained within the rule. Summaries of the public
comments within the scope of the proposed rule and our responses to
those public comments are set forth in the various sections of this
final rule under the appropriate heading. We note that some of the
public comments were outside of the scope of the proposed rule and are
not addressed in this final rule. We also note that we do not respond
specifically to the comments pertaining to the RFIs, but we thank
commenters for their feedback.
In this final rule, CMS is not finalizing the proposal to establish
a special enrollment period for provider terminations and are not
addressing comments received on this proposal. We acknowledge the broad
interest related to this topic and will continue to consider the extent
to which it may be appropriate to engage in future rulemaking in this
area.
E. Conclusion
Finally, we are clarifying and emphasizing our intent that if any
provision of this rule 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 are codifying 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 took effect before the
Contract Year 2027 proposed rule and other changes went into effect in
2026, as described later.
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. 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 for the
first cohort of selected drugs went 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. The IRA made
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 consists
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, we pay a 10 percent subsidy for selected drugs during a
price applicability period. This phase ends when the enrollee has
[[Page 17388]]
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 (FFDCA)
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
provides 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)
We proposed to codify at Sec. Sec. 423.100 and 423.104 changes to
the Part D benefit made by the IRA related to the deductible, the
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 proposed 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 proposed 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 proposed 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 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 also proposed 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 proposed 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
[[Page 17389]]
annual OOP threshold specified in Sec. 423.104(d)(5)(iii).
We also proposed to revise Sec. 423.104(d)(3), which specifies how
the initial coverage limit is determined. We first proposed to remove
the references in Sec. 423.104(d)(3) to paragraphs (d)(4) and (d)(5)
of this section because those 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
proposed 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 also proposed to add new Sec. 423.104(d)(3)(iii)
to state that, for 2025 and each subsequent year, there is no initial
coverage limit.
Finally, we proposed 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 proposed 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 proposed 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 proposed 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 proposed
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
proposed 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 proposed 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.
We proposed 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 proposed 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 proposed 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 proposed 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 proposed 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
proposed 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.
---------------------------------------------------------------------------
\10\ https://www.cms.gov/files/document/2026-announcement.pdf.
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As a result of these changes, we proposed 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.
[[Page 17390]]
We proposed 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 proposed 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 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 proposed 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 proposed
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 proposed 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 proposed 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 this final 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 a
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 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 final 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 proposed 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
[[Page 17391]]
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
proposed to revise Sec. 423.104(e)(5) to align our requirements for
alternative prescription drug coverage with the changes made by the
IRA. We proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 did not propose any additional changes to
this section.
Comment: Many comments were supportive of our proposals to codify
the changes to the phases of the Part D benefit made by the IRA. We did
not receive any comments opposed to our codification of these
requirements.
Response: We thank the commenters for their support of our
proposals.
Comment: A few comments expressed support for our proposed revision
to the regulatory text at Sec. 423.104(d)(1) to specify that the
deductible does not apply to ACIP-recommended adult vaccines or covered
insulin products. A commenter encouraged CMS to provide simple and
clear guidance on immunization coverage to plans, their beneficiaries,
as well as the range of providers who serve them.
Response: We thank the commenters for their support of this
proposal. We agree that clear guidance is important to support
implementation of these requirements. We will continue to provide
guidance to Part D plan sponsors, providers, and beneficiaries
regarding coverage of ACIP-recommended adult vaccines as appropriate.
We refer the commenter to Medicare.gov, the Medicare Learning Network
Fact Sheet on Medicare Part D Vaccines, and Chapters 5 and 6 of the
Medicare Prescription Drug Benefit Manual for some of our existing
guidance on this topic.\11\
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\11\ MLN Fact Sheet on Part D Vaccines: https://www.cms.gov/files/document/mln908764-medicare-part-d-vaccines.pdf; Chapter 5:
https://www.cms.gov/files/document/chapter-5-benefits-and-beneficiary-protection-v92011.pdf; Chapter 6: https://www.cms.gov/medicare/prescription-drug-coverage/prescriptiondrugcovcontra/downloads/part-d-benefits-manual-chapter-6.pdf.
---------------------------------------------------------------------------
Comment: Many commenters who were supportive of our proposals to
codify the changes to the phases of the Part D benefit also expressed
concerns about potential unintended consequences of the redesigned Part
D benefit. Commenters stated that the reallocation of financial risk
under the redesigned Part D benefit creates incentives for plans to
control costs through increased utilization management, increased usage
of step therapy protocols, narrower formularies, restricted pharmacy
networks, and reduced coverage for certain brand or specialty drugs.
Several commenters emphasized that, without sufficient safeguards,
these behaviors could undermine the intended affordability and access
benefits of the redesigned Part D benefit. A few commenters highlighted
the potential negative impacts these behaviors may have on high-cost
and medically complex populations, including beneficiaries with end-
stage renal disease (ESRD), hospitalized patients transitioning from
inpatient to outpatient care, and low-income beneficiaries. A commenter
noted that these behaviors may also increase administrative burden for
hospital clinicians, thus delaying treatment initiation and
complicating discharge planning and care coordination.
Due to these concerns, several commenters urged CMS to strengthen
its oversight of Part D plans, particularly with respect to formulary
design, utilization management practices, and appeals processes. A
commenter also urged CMS to require minimum formulary protections for
certain drugs and prohibit Part D plans from removing drugs mid-year in
response to increased plan liability.
A few commenters requested that CMS monitor the impacts on access
to drugs and evaluate whether costs are being shifted to beneficiaries.
A couple of commenters emphasized the importance of monitoring both
standalone prescription drug plans and Medicare Advantage prescription
drug plans. A few commenters also requested that CMS increase
transparency around formulary and evidentiary review findings so
stakeholders can better understand how access is evolving under the
redesigned Part D benefit.
Response: We thank the commenters for their support of our
proposals to codify the changes made by the IRA to the phases of the
Part D benefit. We appreciate the commenters sharing their concerns
regarding potential unintended consequences of the redesigned Part D
benefit, including the possibility that changes in plan liability could
influence formulary design, utilization management practices, and
beneficiary access to prescription drugs. We agree that robust
oversight and monitoring are essential to the successful implementation
of the redesigned Part D benefit, particularly for medically complex
beneficiaries and those transitioning across care settings. We will
continue to monitor the implementation of the redesigned Part D benefit
as part of our ongoing program oversight.
We emphasize that Part D plan sponsors remain subject to existing
statutory and regulatory requirements regarding formulary design,
utilization management, pharmacy access, coverage determinations, and
appeals. We will continue to oversee plan compliance with these
requirements and monitor plan behavior through our comprehensive
clinical formulary review process, which includes
[[Page 17392]]
evaluation of tier placement and utilization management restrictions
and criteria.
We note that there are several longstanding statutory and
regulatory safeguards in place to protect beneficiary access to
critical medications. Section 1860D-11(e)(2)(D)(i) of the Act and Sec.
423.272(b)(2)(i) require that CMS not approve a bid from a Part D
sponsor if the design of its plan and its benefits, including its
formulary structure and utilization management program, are ``likely to
substantially discourage enrollment by certain Part D eligible
individuals.'' In addition, Sec. 423.120(b) establishes requirements
for Part D formularies, including the requirement at Sec.
423.120(b)(2)(i) that formularies include at least two Part D drugs
within each therapeutic category and class. Section 1860D-4(b)(3)(G) of
the Act and Sec. 423.120(b)(2)(v) further require Part D sponsors to
include all covered Part D drugs in the classes and categories of
clinical concern identified by the Secretary, with limited exceptions
as described in Sec. 423.120(b)(2)(vi) and Chapter 6, Section 30.2.5
of the Medicare Prescription Drug Benefit Manual. Finally, Sec.
423.120(e) limits the circumstances under which a Part D sponsor may
make negative formulary changes during a contract year.
We appreciate the commenters' recommendations regarding
transparency and will consider appropriate opportunities to share
additional information regarding the formulary review and oversight
process in the future.
Comment: Several commenters requested that we develop clear and
simple beneficiary communications about the changes to the Part D
benefit. The commenters stated that beneficiaries and their caregivers
must understand how costs accrue over the plan year, what payments
count towards the annual OOP threshold, how catastrophic coverage
works, and what costs to expect across benefit phases. Another
commenter recommended that CMS encourage plans to use mobile
applications and digital tools for beneficiary education on the new
benefit structure.
Response: We thank the commenters for their suggestions. We agree
that beneficiary education and clear communication are critical to the
successful implementation of the redesigned Part D benefit. We will
continue to support the development of educational materials to help
beneficiaries understand the redesigned Part D benefit. We encourage
the commenters to refer beneficiaries to the Medicare & You Handbook,
which provides general information on Medicare benefits, costs, rights,
and protections; the Evidence of Coverage document provided by their
Part D plan, which provides details on what their plan covers, how much
they will pay, how to file a complaint, and more; and Medicare Plan
Finder on Medicare.gov which allows users to compare Medicare health
and drug plans in their area and compare costs.
Comment: A commenter requested that CMS establish a formal
mechanism for patients and patient advocacy organizations to
communicate directly with CMS, including any barriers to getting
prescribed medications when enrollees need them. Another commenter
urged CMS to commit to ongoing provider and hospital engagement as part
of a long-term monitoring and evaluation strategy for the Part D
redesign. The commenter noted that hospitals and frontline clinicians
are uniquely positioned to identify access barriers and unintended
consequences as they emerge and that their input should be
systematically incorporated into CMS oversight frameworks.
Response: We appreciate the commenters' recommendations. There are
multiple avenues through which beneficiaries, providers, and other
stakeholders may raise concerns regarding access to prescription drugs,
including through the grievance, coverage determination, or appeals
processes, consistent with the requirements outlined in 42 CFR part
423, subpart M. Beneficiaries may also submit inquiries, complaints,
grievances, appeals, and requests for information to the Medicare
Beneficiary Ombudsman and 1-800-MEDICARE. Additionally, we developed
the Complaint Tracking Module (CTM) in the Health Plan Management
System (HPMS) to track complaints received by CMS from beneficiaries,
providers, and their representatives regarding specific plans.
Complaints are recorded in the CTM and assigned to the appropriate plan
and, as required under the contract provisions established at Sec.
422.504(a)(15) and Sec. 423.505(b)(22), plans are required to address
and resolve the complaints received by CMS against them in the CTM.
Plans must also adhere to the timelines to resolve complaints in
compliance with Sec. 422.125 and Sec. 423.129. We will consider
additional opportunities to engage with stakeholders as part of our
ongoing oversight of the Part D program as appropriate.
Comment: A commenter who supported CMS's proposal to codify the
Part D benefit changes also expressed concerns about the unintended
consequences of the IRA's changes. The commenter stated that plans have
experienced higher-than-anticipated costs due to changes in plan
liability, higher utilization among beneficiaries reaching the out-of-
pocket cap, and continued growth in the prescription drug pipeline. The
commenter noted that if current utilization trends continue, there may
be additional pressure on bids in CY 2027.
The commenter expressed prior concerns related to premium increases
resulting from the Part D benefit redesign. They noted that they
appreciated CMS's voluntary Part D Premium Stabilization Demonstration
but indicated that additional policy changes are needed to assist Part
D plan sponsors in preserving the affordability historically associated
with Part D plans. Specifically, the commenter recommended
modifications to the RxHCC model, including incorporating Direct and
Indirect Remuneration (DIR) into the model and using drug utilization
to better account for variation in drug costs among beneficiaries.
The commenter also urged CMS to provide additional flexibility to
Part D plans to manage costs by streamlining regulations and reducing
administrative burdens.
Response: CMS acknowledges the commenter's concerns about balancing
changes in plan liability under the Part D redesign with a need to
preserve affordability for Part D enrollees. We will continue to
monitor impacts of the redesigned Part D benefit and seek to identify
opportunities to improve program efficiency and reduce unnecessary
administrative burden. We appreciate the commenter's recommendations on
streamlining regulations and reducing administrative burden and will
consider this feedback in future rulemaking as appropriate. However, we
note that changes to the RxHCC model are outside the scope of this
rulemaking.
After consideration of the public comments we received, we are
finalizing these proposals as proposed.
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-
[[Page 17393]]
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.
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.
As described further later, 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 the Contract Year 2027 proposed rule, we
proposed 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 proposed 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 proposed to correct this inadvertent
technical error.
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 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), 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 went 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 proposed to revise Sec. 423.104(d)(2)(iv)(B)(1) and (2)
by adding language to allow CMS to reduce the cost threshold under
certain circumstances. Specifically, in paragraph (B)(1) of this
section, we proposed to replace ``increase'' with ``modifies'' and add
``or below'' following ``10 percent above.'' In paragraph (B)(2), we
proposed 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
coinsurance for the beneficiary regardless of the plan deductible,
represented by the following equation:
[GRAPHIC] [TIFF OMITTED] TR06AP26.028
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:
[[Page 17394]]
[GRAPHIC] [TIFF OMITTED] TR06AP26.029
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, under statutory changes made by the IRA, 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 proposed 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 reflects the defined standard benefit, we
proposed 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 proposed 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 proposed 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] TR06AP26.030
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 2.
[GRAPHIC] [TIFF OMITTED] TR06AP26.031
[[Page 17395]]
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
proposed to codify this methodology for determining specialty-tier
coinsurance/deductible ranges. Thus, we proposed 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 proposed 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.
Comment: We received several comments that were supportive of our
proposal to allow for a decrease in the specialty-tier cost threshold
when market conditions might warrant such a change.
Response: We thank the commenters for their support of our
proposal.
Comment: Several commenters opposed our proposal to allow for a
decrease in the specialty-tier cost threshold when market conditions
might warrant such a change. These commenters stated that lowering the
specialty-tier cost threshold would expand the number of drugs eligible
for placement on the specialty tier and expose beneficiaries to higher
cost sharing. Commenters expressed concern that this would move drugs
from non-specialty tiers with fixed copayments or lower coinsurance
into the specialty tier, resulting in increased and less predictable
out-of-pocket (OOP) costs. A few commenters also noted that because
tiering or cost-sharing exception requests may be denied for specialty-
tier drugs, beneficiaries have no recourse to appeal their cost-sharing
liability, even when the drug is needed for clinical reasons and
expanding their specialty tier would exacerbate these issues.
Some commenters asserted that this proposal would undermine the
goals of the IRA's Part D redesign provisions and prevent beneficiaries
from benefitting from the IRA's affordability protections. Some
commenters further noted that Part D plans have increasingly shifted
from fixed copayments to coinsurance in response to IRA-related
changes, and they argued that allowing the specialty-tier cost
threshold to decrease would exacerbate these trends rather than limit
them.
Several commenters also raised concerns about beneficiary access to
prescription drugs. A few commenters stated that higher specialty-tier
cost sharing contributes to delayed initiation of therapy, treatment
disruptions, and prescription abandonment, particularly for
beneficiaries with serious or complex medical conditions who rely on
specialty drugs as well as those living in long-term care settings.
Additionally, some commenters expressed concern that decreasing the
specialty-tier cost threshold would lead to increased usage of
utilization management, including prior authorization and step therapy,
further limiting access to medically appropriate therapies.
A few commenters raised concerns that lowering the specialty-tier
cost threshold could also increase opportunities for vertically
integrated Pharmacy Benefit Managers (PBMs) to inappropriately steer
beneficiaries toward PBM-affiliated pharmacies or favor higher-cost
drugs on their formularies. These commenters recommended anti-steering
provisions, increased formulary oversight, and other guardrails.
Response: We appreciate the commenters' feedback on our proposal to
allow for a decrease in the specialty-tier cost threshold. We do not
agree that movement of drugs to the specialty tier will necessarily
result in increased beneficiary cost sharing. Under Sec.
423.104(d)(2)(iv)(D)(1) through (3), the maximum allowable cost sharing
for drugs on the specialty tier is set between 25 percent and 33
percent. In contrast, drugs placed on non-preferred tiers may be
subject to coinsurance rates that exceed these limits, up to 50
percent. Further, we do not agree that specialty-tier placement
uniformly increases beneficiary out-of-pocket costs.
As noted by many commentors, more plans are moving non-specialty
drug tiers from a copayment to a coinsurance cost-sharing structure, so
we do not agree that placement on the specialty tier will always result
in a change from a fixed copayment amount to a coinsurance. Placement
on the specialty tier may, in some cases, result in lower cost sharing
than placement on other formulary tiers.
We also note that the specialty-tier cost threshold is established
through a data-driven methodology that examines a year's worth of
prescription drug event (PDE) data to determine the dollar amount
associated with the top one percent of Part D drug claims. This
methodology is intended to ensure that the specialty tier remains
focused on the highest-cost drugs in the program. Historically, the
dollar amount associated with the top one percent of claims has
increased over time, and we do not anticipate that the specialty-tier
cost threshold will decrease in the near term. However, we believe it
is appropriate to maintain regulatory flexibility to account for future
market changes, including those that may result from the increasing
number of drugs subject to negotiation in the Medicare Drug Price
Negotiation Program.
We acknowledge the commenters' concerns regarding affordability and
access, including the interaction between specialty-tier placement,
cost sharing, and utilization management requirements. As discussed
earlier, Part D sponsors remain subject to existing requirements
related to formulary design, utilization management, pharmacy access,
and beneficiary protections. Given that the cost-sharing limits on the
specialty tier are intended to align with the defined standard benefit,
we do not consider placement on the specialty tier to be a cause for
concern regarding access and affordability. In addition, the redesigned
Part D benefit includes affordability protections, such as the reduced
annual out-of-pocket threshold, which will mitigate beneficiary
exposure to high prescription drug costs across the benefit.
Comment: A few commenters who opposed our proposal to allow for a
decrease in the specialty-tier cost threshold urged CMS to establish
clear guardrails before any downward adjustment is made in the future.
These commenters stated that such guardrails should include a
beneficiary impact analysis, advance notice, meaningful stakeholder
input, and strengthened affordability protections so beneficiaries do
not experience higher out-of-pocket costs. Another commenter
recommended that CMS conduct research on the effects of our proposed
regulatory change on patient out-of-pocket costs and health outcomes.
Response: We thank the commenters for their suggestions. We remain
committed to robust oversight and monitoring of Part D formularies and
utilization management practices. If future evidence indicates that
additional safeguards or refinements to our specialty-tier policies are
warranted, we may consider such adjustments in future rulemaking.
Comment: A commenter who supported our proposal to allow for a
decrease in the specialty-tier cost threshold recommended that CMS
establish clear guardrails to ensure that this bidirectional
flexibility does not inadvertently enable routine mid-year tiering
changes or create cost-sharing disruptions.
Response: We thank the commenter for their recommendation. We
clarify that specialty-tier cost threshold adjustments are effective at
the start of a contract year and should not result in mid-year
formulary changes. All
[[Page 17396]]
existing formulary change policies and protections remain in place. As
stated previously, if future evidence indicates that additional
safeguards or refinements to our specialty-tier policies are warranted,
we may consider such adjustments in future rulemaking.
Comment: A commenter requested that we explain why we are retaining
the 33 percent specialty-tier maximum allowable coinsurance when our
calculations show a maximum allowable coinsurance percentage of 32
percent. The commenter noted that CMS reports that this calculation,
using the CY 2025 values of $590 for the defined standard benefit
deductible and $2,000 for the out-of-pocket limit, results in an
effective coinsurance rate of 32.1 percent. The commenter also noted
that the same calculation, using the CY 2026 values of $615 for the
defined standard benefit deductible and $2,100 for the out-of-pocket
limit, results in an effective coinsurance rate of 32.0 percent. By
retaining the 33 percent maximum coinsurance percentage, the commenter
stated that enrollees in Part D plans with deductibles below that of
the defined standard benefit cost-sharing would be charged cost sharing
that is above the effective coinsurance rate, thus, reducing access to
covered Part D drugs and potentially leading to negative health
outcomes. The commenter recommended that CMS set the maximum allowable
coinsurance percentage for the specialty tier at 32 percent.
Response: To maintain continuity in transitioning our specialty-
tier calculation from the prior methodology to the updated methodology
reflecting the redesigned Part D benefit, CMS opted to maintain
consistency in the cost-sharing thresholds compared to the thresholds
prior to redesign. CMS agrees with the commenter's calculations of
effective coinsurance amount. When performing the annual calculation
using updated benefit parameters, we note that the effective
coinsurance amount calculated using the full deductible amount and 25
percent coinsurance results in a value that varies slightly from year
to year. For CY 2025, the calculation resulted in an effective
coinsurance of 32.10 percent compared to 32.04 percent for CY 2026. We
note that similar magnitudes of variance existed in the calculation of
this annual effective coinsurance even before the IRA's changes to the
Part D benefit design went into effect. An alternative approach to the
calculation could use this calculated value as the upper limit to the
specialty tier coinsurance; however CMS opted to use a single value
annually to maintain stability year-over-year. As such, the methodology
laid out in this final rule relies on the effective coinsurance value
of 33 percent as the basis for all calculations. We also note that this
is a mathematical equivalence calculation, for a hypothetical
beneficiary taking only specialty-tier drugs, and not intended to
reflect actuarial equivalence.
Comment: A commenter thanked CMS for the detailed illustrative
example of how the maximum coinsurance percentage would be calculated,
noting that it provides important clarity for plans.
Response: We thank the commenter for their support.
After consideration of the public comments we received, we are
finalizing our specialty-tier proposals as proposed.
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.
As discussed in the Contract Year 2027 proposed rule, section 11201
of 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.
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 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).
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.
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.
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.
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 the Contract Year 2027 proposed rule, we proposed 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
[[Page 17397]]
currently in effect for CY 2026. Specifically, we proposed 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 proposed
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 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.
Comment: Many commenters opposed CMS' proposal to codify the
inclusion of supplemental coverage provided by enhanced alternative
Part D plans in the calculation of TrOOP. Several commenters asserted
that Congress's intent in amending the definition of ``incurred costs''
under section 1860D-2(b)(4)(C)(iii)(II) of the Act was to address the
specific and unique situation of EGWP beneficiaries who faced higher
out-of-pocket costs and longer stays in the coverage gap due to their
supplemental coverage. These commenters asserted that if Congress
intended to include supplemental coverage provided by Part D enhanced
alternative plans in the definition of ``incurred costs,'' they would
have done so explicitly. Several commenters stated that the use of the
term ``insurance'' to describe costs that are included as incurred
costs and the use of the phrase ``coverage provided by a prescription
drug plan or an MA-PD plan'' to describe basic coverage that is not
included as incurred costs illustrates Congress's intent that
supplemental coverage provided by Part D plans should not be included
in TrOOP because Congress typically uses the latter language rather
than the term ``insurance'' to refer to costs incurred by Part D plans,
including supplemental coverage. Commenters suggested that the best
reading of the statutory text is that only ``wrap-around'' benefits
should be added to the definition of incurred costs, and that the
statute's reference to costs ``reimbursed'' through insurance implies a
focus on costs covered through other insurance rather than costs
covered directly by the Part D benefit. A commenter asserted that if
Congress intended to include basic Part D coverage in the scope of
``reimbursed by insurance,'' the same logic should apply to enhanced
alternative coverage, on the grounds that enhanced alternative coverage
is merely a variant design of the same underlying Part D benefit
structure.
Response: CMS thanks the commenters for their input. CMS disagrees
that enhanced alternative supplemental benefits are not included in the
calculation of TrOOP under section 1860D-2(b)(4)(C)(iii) of the Act.
The statute does not draw a distinction between non-Part D commercial
insurance and coverage under Part D when it uses the term ``reimbursed
through insurance' in this provision. 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 plain 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.'' If the provision only included EGWP
supplemental coverage in the definition of costs ``reimbursed through
insurance,'' the statutory text would have done so by explicitly
including EGWP supplemental coverage in the definition of ``costs
reimbursed through insurance'' and expanding the exclusion clause to
apply to both basic prescription drug coverage and enhanced alternative
supplemental coverage. However, the statute does not do so and instead
enacted a broader provision for which the plain text requires any costs
``reimbursed through insurance'' be treated as incurred unless such
costs constitute basic prescription drug coverage provided by a
prescription drug plan or an MA-PD plan. We disagree with the assertion
that if the statute were intended to exclude basic Part D coverage from
the scope of ``reimbursed through insurance,'' the same logic must
apply to enhanced alternative coverage, because the statute draws an
explicit, meaningful distinction between basic and enhanced alternative
coverage. The Part D statute and regulations repeatedly distinguish
between basic and enhanced benefits, given that enhanced alternative
coverage is optional and sponsor-specific.
Comment: Several commenters expressed concern that the inclusion of
supplemental benefits in TrOOP artificially accelerates beneficiaries
through benefit phases into catastrophic coverage, increasing plan,
federal, and manufacturer liability. These commenters asserted that
including supplemental benefits in TrOOP creates distortions in plan
design and undermines market stability. Specifically, a few commenters
suggested that the inclusion of enhanced alternative supplemental
benefits in TrOOP decreases plans' ability to manage beneficiary costs,
increases government spending, increases bid pressure, and may cause
plans to scale back supplemental benefits or exit the PDP market
entirely, ultimately undermining program sustainability.
Response: CMS thanks the commenters for their input. CMS
acknowledges that the inclusion of enhanced alternative supplemental
benefits in TrOOP may affect the incentives available to beneficiaries
enrolled in enhanced alternative plans, including the incentives for
beneficiaries to choose higher-cost drugs over lower-cost ones in
certain circumstances. When beneficiaries move through the benefit
phases more quickly, overall plan liability increases, which may
contribute to increased premium costs for enhanced alternative plans
and affect sponsors' decisions about enhanced alternative plan
offerings. While we cannot definitively attribute these changes to this
policy, as other elements of the Part D redesign may also be
contributing factors, we have seen a notable decline in standalone Part
D-only enhanced alternative plan offerings along with a broader shift
from copayments to coinsurance benefit design since the redesign was
implemented. CMS recognizes stakeholder concerns that the proposed
provision has the potential to increase Part D program costs and
government spending and reduce plan offerings. We note that only a
statutory change would allow CMS to exclude enhanced alternative
supplemental benefits from counting towards TrOOP.
Comment: A couple of commenters requested that CMS clarify whether
manufacturer copayment assistance or patient assistance programs are
considered to be ``certain other third-party payment arrangements''
included as incurred costs for the calculation as TrOOP.
Response: CMS clarifies that manufacturer copayment assistance and
[[Page 17398]]
patient assistance programs do not count as incurred costs for purposes
of TrOOP accumulation, as these programs operate outside of the Part D
benefit.
Comment: Several commenters requested that CMS clarify whether the
proposed provision changes the treatment of supplemental benefits
provided by Puerto Rico Platino plans for the purposes of calculating
TrOOP, and requested that CMS codify current guidance related to the
treatment of supplemental benefits provided by Platino plans in
regulation.
Response: CMS appreciates commenters' request for clarity regarding
the treatment of Puerto Rico Platino wrap-around coverage for purposes
of calculating TrOOP. The proposed changes do not alter the
longstanding treatment of Platino wrap-around coverage funded by the
Commonwealth of Puerto Rico. Platino plans continue to submit Part D
bids with only basic benefits. Under section 1860D-42(a) of the Act and
Sec. 423.859(c), which permits CMS to waive or modify applicable Part
D requirements if CMS determines that waiver or modification is
necessary to secure access to qualified prescription drug coverage for
Part D eligible individuals residing in the territories, Platino wrap-
around coverage count towards the beneficiary's TrOOP. Note that no
other Medicaid assistance counts towards TrOOP, only those payments for
residents of territories that substitute for low-income cost-sharing
subsidies in accordance with the statute. CMS believes that existing
statutory provisions and guidance provide sufficient clarity and
additional rulemaking to codify current guidance related to
supplemental benefits provided by Platino plans is not warranted given
the longstanding nature of the section 1860D-42(a) waiver in place for
Platino wrap-around coverage.
Comment: A few commenters disagreed with the proposal to codify the
exclusion of negative values in the field on the PDE representing
supplemental coverage from the calculation of TrOOP. A commenter stated
that disregarding negative PDE values overstates the value of
supplemental benefits. Another commenter suggested that it could lead
to beneficiary confusion.
Response: CMS thanks the commenters for their input. CMS
acknowledges 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 OOP threshold, which could also lead to beneficiary
confusion and could potentially violate the statutory requirement for
an enrollee to have $0 cost sharing once their incurred costs exceed
the OOP threshold.
Comment: Some commenters supported CMS' proposal to codify the
inclusion of supplemental coverage provided by enhanced alternative
Part D plans in the calculation of TrOOP. These commenters stated that
aligning the regulatory definition of incurred costs with the statutory
amendments provides needed clarity and consistency for beneficiaries,
plans, and other stakeholders.
Response: We thank the commenters for their support.
After considering the comments we received and for the reasons
outlined in the Contract Year 2027 proposed rule and our responses to
comments, we are finalizing the proposed amendments to Sec. Sec.
423.100 and 423.464 without modification.
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.
In the Contract Year 2027 proposed rule, we explained that
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.
We described the policy established in the Final CY 2025 Part D
Redesign Program Instructions for drugs not subject to the defined
standard deductible, which addresses situations where a beneficiary has
not satisfied their plan deductible but has incurred sufficient TrOOP-
eligible costs to satisfy the defined standard deductible, or
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. We
explained that, as established in the Final CY 2025 Part D Redesign
Program Instructions, manufacturer discounts are not available until
cumulative TrOOP-eligible costs meet the defined standard deductible.
Plans that offer a non-defined standard plan deductible are responsible
for the portion of costs that would otherwise be covered by the
discount when 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.
Additionally, we noted that in the Final CY 2026 Part D Redesign
Program Instructions, we stated that this policy also applied in CY
2026 and established that for CY 2026 the policy for drugs not subject
to the defined standard deductible also applies to the selected drug
subsidy
[[Page 17399]]
with respect to selected drugs during a price applicability period. In
the Contract Year 2027 proposed rule, we proposed 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
proposed to codify the policy for drugs not subject to defined standard
deductible at a new Sec. 423.104(j).
Comment: A commenter supported the proposal to codify the policies
outlined in the Final CY 2025 and CY 2026 Part D Redesign Program
Instructions regarding the application of the Manufacturer Discount
Program to drugs that are not subject to the defined standard
deductible. The commenter stated that codifying these policies ensures
clarity, consistency, and effective implementation.
Response: We thank the commenter for their support.
Comment: A commenter recommended that CMS use the beneficiary's
plan deductible as the threshold for becoming an applicable beneficiary
under the Manufacturer Discount Program to alleviate potential
beneficiary confusion, stating that the current approach favors some
beneficiaries over others and ignores plan terms.
Response: Section 1860D-14C(g)(1)(C) 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 Part D 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. As such, once
a beneficiary has incurred sufficient TrOOP-eligible costs to satisfy
the defined standard deductible, they will be an applicable beneficiary
under the Discount Program. Because the threshold for when a
beneficiary becomes an applicable beneficiary is defined in statute,
CMS cannot choose an alternative threshold.
After considering the comments received and for the reasons
outlined in the Contract Year 2027 proposed rule and our responses to
comments, we are finalizing the proposed amendments to Sec. 423.104
without modification.
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 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 accordance with the statute and corresponding regulation, the
following Part D benefit parameters are updated annually using the API:
the standard Part D benefit deductible, the initial coverage limit, the
OOP threshold, maximum copayments below the OOP threshold for low-
income full subsidy eligible enrollees with income less than 150
percent, but greater than 100 percent of Federal Poverty Level (FPL)
not including institutionalized individuals, the RDS cost threshold,
and the RDS cost limit. The CPI is used to update maximum copayments
below the OOP threshold for low-income full subsidy eligible enrollees
with income less than 100 percent of FPL.
In the Contract Year 2027 proposed rule, we explained that 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 the Contract Year 2027
proposed rule, we proposed to codify these methodologies in regulation.
Although we proposed to codify the calculation methodology for the API
and CPI, 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.
Calculation of the Annual Percentage Increase in Drug Expenditures
In the Contract Year 2027 proposed rule, we described the
calculation of the API for Part D as the product of the annual
percentage trend (APT), which is the year-over-year change in total per
capita Part D covered drug expenditures based on PDE data, and a
multiplicative update (MU) factor that incorporates updated data for
prior years into the calculation.
We proposed 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
In the Contract Year 2027 proposed rule, we described the
calculation of the annual percentage increase in the CPI as the product
of an annual percentage trend, which is a year-over-year comparison of
the CPI-U for all items, ending in September, and a multiplicative
update factor that incorporates revisions when estimated CPI values are
replaced with actual BLS data. We explained that this CPI-based update
applies to copayments for the lowest-income dually eligible
beneficiaries (with incomes not exceeding 100 percent of the FPL) to
preserve purchasing power relative to general inflation.
To implement the CPI calculation described previously in our
regulations, we proposed to revise Sec. 423.782(a)(2)(iii)(A) to
include a reference to a new paragraph (d), which we proposed to add at
the end of Sec. 423.782. New 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
[[Page 17400]]
Announcement process described in section 1853(b) of the Act.
Technical Changes
We also proposed two technical changes to Sec. 423.782(b).
Comment: A commenter expressed support for CMS' proposal to codify
the methodologies for calculating the API and CPI used to update Part D
benefit parameters. The commenter stated that the proposal ensures
uniform application of Part D parameter updates across plan sponsors
and benefit years.
Response: CMS thanks the commenter for their support.
After considering the comments we received, we are finalizing the
proposed provisions at Sec. Sec. 423.104 and 423.782 without
modification.
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 (GCPDC) and allowable reinsurance costs for the
purpose of describing the methodology for calculating the reinsurance
payment amount. In the Contract Year 2027 proposed rule, we explained
that GCPDC is defined as the costs incurred under a Part D plan,
excluding administrative costs but including deductible and dispensing-
related costs, regardless of payer, while allowable reinsurance costs
are limited to amounts actually paid net of discounts and rebates. We
further explained that consistent with the statutory and regulatory
definition of GCPDC, manufacturer discounts under the Coverage Gap
Discount Program were included in GCPDC, but the IRA amended the
statute to require inclusion of manufacturer discounts under the new
Manufacturer Discount Program in both GCPDC and allowable reinsurance
costs beginning in 2025. CMS implemented these statutory changes
through the Final CY 2025 Part D Redesign Program Instructions and
Final CY 2026 Part D Redesign Program Instructions.
In the Contract Year 2027 proposed rule, we proposed 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 proposed 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 proposed 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).''
We received no comments on this proposal and are finalizing the
proposed revision at Sec. 423.308 without modification.
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.
Beginning in 2025, the IRA reduced the reinsurance payment amount
for a Part D beneficiary from 80 percent to 20 percent for applicable
drugs or 40 percent for drugs that are not applicable drugs. As we
explained in the Contract Year 2027 proposed rule, we make reinsurance
payments to Part D plan sponsors based on the GCPDC that were actually
paid during the coverage year, meaning that the costs must be actually
incurred by the Part D sponsor and must be net of any direct and
indirect remuneration (DIR). In the Final CY 2025 Part D Redesign
Program Instructions, we established a methodology to calculate
reinsurance subsidies separately for applicable drugs 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. In the Final CY 2026 Part D Redesign Program
Instructions we updated the methodology to account for selected drugs,
which are grouped with non-applicable drugs for purposes of calculating
the reinsurance subsidy. We explained that the Final CY 2026 Part D
Redesign Program Instructions established the process for calculating
reinsurance separately for applicable and non-applicable or selected
drugs, allocating DIR based on each category's share of gross drug
costs in the catastrophic phase, and reconciling the adjusted
reinsurance amounts against prospective payments using NDC-level drug
classifications.
In the Contract Year 2027 proposed rule, we proposed 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 proposed
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.
We received no comments on this proposal and are finalizing the
proposed revisions to Sec. 423.329 without modification.
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. In
the Contract Year 2027 proposed rule, we described the selected drug
subsidy program, under which the Secretary provides Part D plan
sponsors with a subsidy equal to 10 percent of the negotiated price for
selected drugs during a price applicability period dispensed to
applicable beneficiaries below the annual out-of-pocket threshold after
the deductible is met. We further explained that because of the
intertwined structure and wording of the Manufacturer Discount Program
and selected drug subsidy program provisions in the Act, we proposed 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. Finally, we
described our proposal to make monthly prospective payments for the
selected drug subsidy program, based on Part D plan sponsors' estimates
of selected drug subsidy amounts submitted with their annual bids, and
reconciled using the actual selected drug subsidy amounts that Part D
plan sponsors report on PDE data.
In the Contract Year 2027 proposed rule, we proposed 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 proposed to codify at new Sec. 423.315(h)
that we would provide prospective selected drug subsidy payments on a
[[Page 17401]]
monthly basis. We also proposed to codify at new Sec. 423.329(e) the
determination of selected drug subsidy payments. Finally, we proposed
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.
We received no comments on this proposal and are finalizing the
proposed additions at Sec. Sec. 423.265, 423.315, 423.329, and 423.343
without modification.
10. Technical Correction--Retroactive Adjustments and Reconciliations
(Sec. Sec. 423.336 and 423.343)
In the Contract Year 2027 proposed rule, we noted the need for a
technical correction at Sec. 423.343(d)(2). The final sentence of this
paragraph is incorrectly placed in Sec. 423.343 and should instead be
placed in Sec. 423.336. Thus, we proposed to revise Sec. 423.343 to
remove this sentence and revise Sec. 423.336(c) to add this sentence
in its proper context.
We received no comments on this proposal and are finalizing the
proposed revisions at Sec. Sec. 423.336 and 423.343 without
modification.
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 Contract Year 2027 proposed rule, we explained that 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 Contract Year 2027 proposed rule, we proposed to codify the
statutory amendments to section 1860D-13(a) of the Act. Specifically,
we proposed 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).
We received no comments on this proposal and are finalizing the
proposed changes to Sec. 423.286 without modification.
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 Contract Year 2027 proposed rule, we proposed to 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
proposed 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 proposed 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.
Comment: A commenter expressed support for CMS's proposal to align
LIS eligibility criteria with the IRA by updating the FPL limit to 150
percent for plan years beginning January 1, 2024.
Response: CMS thanks the commenter for their support.
After considering the comments we received, we are finalizing the
proposed revisions to Sec. 423.782 without modification.
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 Contract Year 2027 proposed rule, we explained that,
although the IRA amended the parameters of the standard prescription
drug coverage and makes other changes to the Part D benefit, it did not
change the requirements for qualified retiree prescription drug plans.
Although the majority of the IRA policies in effect for CY 2027 and
subsequent years do not require updates to Subpart R, we explained in
the Contract Year 2027 proposed rule that there are certain conforming
edits required. Specifically, we proposed 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
proposed 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.''
We received no comments on this proposal and are finalizing the
proposed revisions to Sec. Sec. 423.882 and 423.884 without
modification.
14. Medical Loss Ratio (Sec. 423.2420)
In the Contract Year 2027 proposed rule, we explained that the
medical loss ratio (MLR) requirements established under section 1857(e)
of the Act require Part D contracts to report 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
[[Page 17402]]
other items such as administration, marketing, and profit is excluded
from the numerator of the MLR. We described longstanding policy that
pass-through payments for which plans retain no liability, such as low-
income cost-sharing subsidies and Coverage Gap Discount Program
payments, are excluded from both the numerator and denominator of the
MLR. We further explained that new federal payments created by the IRA,
including Manufacturer Discount Program payments, the Inflation
Reduction Act Subsidy Amount (IRASA), and the selected drug subsidy,
are treated similarly as pass-through amounts and therefore excluded
from the MLR calculation. This was established in the Final CY 2025
Part D Redesign Program Instructions and applied in CY 2026 through the
Final CY 2026 Part D Redesign Program Instructions.
In the Contract Year 2027 proposed rule, we proposed 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 proposed 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.
We received no comments on this proposal and are finalizing the
proposed revisions at Sec. 423.2420 without modification.
15. Severability
We proposed that the Medicare Part D redesign provisions finalized
herein would be separate and severable from one another. Further, we
proposed that if any of these provisions 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.
We received no comments on this proposal and are finalizing without
modification.
B. Medicare Coverage Gap Discount Program
Section 1860D-14A of the Act established the Medicare Coverage Gap
Discount Program, which began on January 1, 2011. Coverage Gap Discount
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 Inflation Reduction Act of 2022 (Pub. L. 117-169) (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 proposed 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 proposed 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
proposed to add the new text at Sec. 423.2300(b). We also proposed to
revise Sec. 423.2315(c)(2) to reflect the sunset of the Coverage Gap
Discount Program by 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
proposed to amend Sec. 423.2345 by adding a new paragraph (f) to
specify 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.
To address programmatic differences between the Coverage Gap
Discount Program and the Manufacturer Discount Program, which are
discussed in more detail in section II.C. of this final rule, we
proposed to revise Sec. 423.2305 to clarify that the definitions at
Sec. 423.2305 apply only for purposes of the Coverage Gap Discount
Program. Further, we proposed 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. Lastly, we proposed technical changes throughout
subpart W to replace the shorthand term ``Discount Program'' with
``Coverage Gap Discount Program.''
Comment: A few commenters were in support of the proposed changes.
Commenters acknowledged the proposals as important and consistent with
statutory requirements.
Response: We thank the commenters for their support and are
finalizing the changes to the subpart that were proposed.
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).\14\
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\14\ Available at: https://www.cms.gov/files/document/revised-manufacturer-discount-programfinal-guidance122024.pdf.
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In the proposed rule, we proposed to codify the Manufacturer
Discount Program Final Guidance, with limited refinements and changes,
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. 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 and adjusts the payments through an annual
reconciliation.
[[Page 17403]]
Discounts under the Manufacturer Discount Program generally reduce
the amount the Part D sponsor pays for the drug, 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. Discounts are 10 percent
of the negotiated price of the applicable drug in the initial coverage
phase and 20 percent in the catastrophic coverage phase, and 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 proposed to
codify 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.
Comment: We received several comments supportive of our proposal to
codify existing Manufacturer Discount Program policies. Commenters
appreciated that CMS implemented the Manufacturer Discount Program in a
manner similar to the former Coverage Gap Discount Program.
Response: We thank the commenters for their support. We are
finalizing the regulatory policies for the Manufacturer Discount
Program largely as proposed, with limited modifications, which are
described in greater detail below.
2. Basis and Scope (Sec. 423.2700)
We proposed 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 proposed a conforming change at Sec. 423.1 to incorporate
section 1860D-14C of the Act into the scope of part 423.
We received no comments on this section and we are finalizing Sec.
423.2700 as proposed.
3. Definitions (Sec. Sec. 423.100, 423.1002, and 423.2704)
We proposed 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 consistent with the policies we are finalizing in this
rule.
Several of these terms are also used for purposes of the Coverage
Gap Discount Program. Because some of the terms are applicable to both
subpart W and proposed subpart AA, we proposed 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 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 proposed to revise a number of existing
definitions as discussed below.
``Applicable beneficiary'';
We proposed 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.
``Applicable drug'';
We proposed 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 from the
definition. As stated in the proposed rule, this change would codify
both longstanding CMS policy under the Coverage Gap Discount Program as
well as policy established in section 40.1 of the Manufacturer Discount
Program Final Guidance. Whereas 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, because compounds as a whole
are not approved under a New Drug Application (NDA) or Biologic
Licensing Application (BLA), CMS has established that compounds do not
meet the definition of an applicable drug.
For the purposes of the Manufacturer Discount Program, we proposed
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. As
stated in the proposed rule, 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 proposed to specify
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 proposed to add definitions for the following terms at Sec.
423.100:
``Applicable discount'';
We proposed 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 proposed 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 proposed 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 proposed to remove the existing definition of ``date of
dispensing'' from Sec. 423.2305 and add it, with revisions, at Sec.
423.100. Specifically, we proposed 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.''
``Labeler code'';
We proposed to remove the existing definition of ``labeler code''
from Sec. 423.2305 and add it, with revisions, at Sec. 423.100.
Specifically, we proposed to remove the phrase ``Food and Drug
Administration.''
``Manufacturer'';
We proposed 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''.
``Manufacturer Discount Program'';
We proposed 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 proposed to define ``Manufacturer Discount Program agreement''
as the
[[Page 17404]]
agreement described at section 1860D-14C(b) of the Act.
``Medicare Coverage Gap Discount Program'';
We proposed 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 proposed 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 proposed 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''.
``Non-applicable drug'';
We proposed 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 proposed to define ``price applicability period'' as having the
meaning given such term in section 1191(b)(2) of the Act and any
applicable regulations and guidance.
``Selected drug''; and
We proposed to define ``selected drug'' as having the meaning given
such term in section 1192(c) of the Act and any applicable regulations
and guidance.
``Third Party Administrator (TPA)''.
We proposed to add at Sec. 423.100 the definition of ``Third Party
Administrator'' that we proposed to remove from Sec. 423.2305, with
revisions. Specifically, we proposed 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 proposed 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 proposed 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 proposed to remove the following definitions from Sec. 423.2305
because, as noted previously, we proposed 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 proposed to define the following terms for
purposes of proposed subpart AA and the Manufacturer Discount Program:
``Agreement holder'';
We proposed 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 proposed to define ``applicable discount'' as having the meaning
set forth at Sec. 423.2712.
``Applicable LIS percent'';
We proposed to define ``applicable LIS percent'' as having the
meaning set forth at Sec. 423.2712(d)(1).
``Applicable small manufacturer percent'';
We proposed to define ``applicable small manufacturer percent'' as
having the meaning set forth at Sec. 423.2712(d)(2).
``Covered Part D drug'';
We proposed to define ``covered Part D drug'' as having the meaning
set forth at Sec. 423.100.
``Dispute submission deadline'';
We proposed 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 proposed 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, the negotiated price includes
any dispensing fee and, if applicable, any vaccine administration fee
and sales tax.
``Network pharmacy'';
We proposed to define ``network pharmacy'' as having the meaning
set forth at Sec. 423.100.
``Part D drug'';
We proposed to define ``Part D drug'' as having the meaning set
forth at Sec. 423.100.
``Primary manufacturer'';
We proposed 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 proposed 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 proposed 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 proposed 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.
Comment: We received a few comments regarding our proposed
definitions, specifically in support of our proposed definitions of
``applicable drug'' and ``date of dispensing.'' Both commenters noted
that the proposed definitions will provide clarity for stakeholders,
including plans, pharmacies, enrollees, and manufacturers. A commenter
applauded CMS's recognition that transition fills and emergency
supplies are ``applicable drugs'' and may be necessary for long term
care residents to ensure uninterrupted access to medications that can
be lifesaving. Another commenter appreciated CMS ensuring that
definitions are consistent across the agency's guidance documents,
policies, and programs.
[[Page 17405]]
Response: We thank the commenters for their support and are
finalizing the proposals discussed in this section without modification
our proposed definitions at Sec. Sec. 423.100, 423.1002, 423.2305, and
423.2704.
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.
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 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.
At Sec. 423.2708(a), we proposed to codify existing Manufacturer
Discount Program policy 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 that chooses 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 did not propose to prohibit this
practice, provided all other requirements of the Manufacturer Discount
Program are met. As discussed in the preamble to the proposed rule, 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 proposed to codify this requirement at
Sec. 423.2708(b).
While a manufacturer may participate in the Manufacturer Discount
Program in accordance with proposed Sec. 423.2708(b)(2), 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
proposed 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 proposed 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.
At Sec. 423.2708(d), we proposed that non-applicable drugs, as we
proposed 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.
Comment: We received a comment on the proposals in this section.
The commenter expressed concern about limitations on enrollee access to
drugs of a manufacturer that does not participate in the Manufacturer
Discount Program, and recommended that CMS specify criteria for making
a determination that an applicable drug is essential to the health of
Part D enrollees.
Response: CMS appreciates and shares the commenter's concern about
[[Page 17406]]
enrollee access to applicable drugs of manufacturers that choose not to
participate in the Manufacturer Discount Program. However, we decline
to codify specifications for the exception provision at Sec.
423.2708(c) at this time. Based on experience under the Coverage Gap
Discount Program and the Manufacturer Discount Program to date, CMS
does not anticipate using this exception, which has not been used to
date under either program. We are concerned that proactive exemptions
for certain drugs, or categories and classes of drugs, from the
required conditions for Part D coverage would result in higher costs to
Part D sponsors, beneficiaries, and the government because
manufacturers of those drugs would have no incentive to participate in
the Manufacturer Discount Program. Manufacturers should not expect to
get their applicable drugs covered under Part D as a result of this
exception.
CMS is finalizing the regulation text at Sec. 423.2708 without
modification.
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
Consistent with the definition in Sec. 423.100 that we are
finalizing in this final rule, ``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 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
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 proposed 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 final 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 proposed to codify this policy at Sec. 423.2712(g).
In accordance with section 1860D-14C(c)(1)(C) of the Act, we
proposed 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 proposed 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--
[[Page 17407]]
++ 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 proposed 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 proposed 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 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 proposed to codify the policy for straddle claims at Sec.
423.2712(e).
d. Claims Not Subject to Discount
Since CMS is unable to ascertain from the PDE how much liability,
if any, the Part D sponsor has on Medicare Secondary Payer (MSP)
claims, we proposed to codify our policy under the Manufacturer
Discount Program that discounts are not applied to MSP claims. In
addition, since 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 proposed to codify our policy that discounts are not
paid on Medicaid subrogation claims involving an applicable drug. We
proposed to codify those policies at Sec. 423.2712(f)(1) and (2),
respectively.
We proposed 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.
Lastly, at Sec. 423.2712(f)(4) we proposed 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.
As discussed in section II.C.3. of this preamble, compounded drug
products are excluded from the definition of applicable drug that we
proposed to revise at Sec. 423.100; as such, claims for Part D
compounds are not subject to discounts under the Manufacturer Discount
Program.
CMS received no comments on proposed Sec. 423.2712 and we are
finalizing this provision without modification.
6. Phase-In of Applicable Discounts (Sec. Sec. 423.2716 Through
423.2728)
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.
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 proposed 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; \15\
---------------------------------------------------------------------------
\15\ 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 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.
We proposed to codify this eligibility criteria for specified
manufacturers at Sec. 423.2716(a).
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 final rule.
[[Page 17408]]
We proposed to codify the aggregation rule 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.
We proposed to codify this eligibility criteria for specified small
manufacturers at Sec. 423.2716(b).
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 final rule.
We proposed to codify the aggregation rule at Sec. 423.2716(c).
c. Determination of Phase-In Eligibility
As discussed in section 50.1 of the Manufacturer Discount Program
Final Guidance and the preamble to the proposed rule, 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. The methodology used by CMS 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
proposed to codify the methodology at Sec. 423.2720.
Specifically, we proposed 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 proposed 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 proposed 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 proposed 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.
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 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,\16\ 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
[[Page 17409]]
manufacturer's applicable drugs in step 3 below.
---------------------------------------------------------------------------
\16\ We use 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 this
calculation, 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 proposed to codify this part of the methodology at Sec.
423.2720(a)(2).
Next, CMS will determine 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 proposed to codify this part of the methodology at Sec.
423.2720(a)(3).
The last value that must be determined for each specified
manufacturer is the total expenditures under Part D for any one of the
manufacturer's specified drugs covered under a Coverage Gap Discount
Program agreement(s) for 2021, and covered under Part D in 2021. This
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
[[Page 17410]]
and the same holder of the NDA,\17\ 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,\18\ 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 \19\ 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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\17\ As described in section 505(c) of the FD&C Act.
\18\ As described in section 351(a) of the PHS Act.
\19\ As described in 21 CFR 300.50.
---------------------------------------------------------------------------
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 proposed to codify this part of the methodology at Sec.
423.2720(b).
Finally, at paragraph (c)(1) of Sec. 423.2720, we proposed 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 proposed 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 treats 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 proposed
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 acquisitions under the Manufacturer Discount
Program thus far, we proposed 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
[[Page 17411]]
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 proposed 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
proposed 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 proposed 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 proposed 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 proposed 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 proposed 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
proposed to codify this policy at Sec. 423.2728(c).
Finally, at Sec. 423.2728(d), we proposed 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.
CMS received two comments regarding the phase-in methodology and
summaries of the comments with our responses are below.
Comment: A commenter was opposed to aspects of our proposed
methodology to determine specified small manufacturer eligibility.
Specifically, the commenter objected to our proposal to calculate total
expenditures under Part D for each applicable drug of a manufacturer
based exclusively on PDE records and urged CMS to instead use PDE data
as prima facie evidence, rather than the sole determinant of Part D
total expenditures, and to consider, as part of CMS's recalculation
process, other sources of evidence for Part D total expenditures,
including data submitted to CMS by the manufacturer. The commenter
argued that CMS must include all costs directly related to the
dispensing of a covered drug when determining Part D total
expenditures, even if those costs are not included in the PDE data set.
The commenter also argued that, because of supposed flaws in the PDE
data set and because PDE data is not relied on exclusively in certain
other contexts, it cannot be relied on exclusively to determine the
Part D total expenditures for applicable drugs of a manufacturer.
Response: CMS acknowledges that certain aspects of our Manufacturer
Discount Program phase-in methodology as set forth in applicable
guidance are the subject of recent litigation, including Servier
Pharmaceuticals LLC v. Becerra, No. 1:24-cv-02664 (D.D.C.) and related
appeal Servier Pharmaceuticals LLC v. Kennedy, No. 25-5054 (D.C. Cir.)
(hereafter referred to as Servier) and PharmaEssentia USA Corp. v. HHS,
No. 1:24-cv-03346 (D.D.C.) (hereafter referred to as PharmaEssentia).
The district court in Servier upheld CMS's determination that Servier
fails to qualify as a specified small manufacturer. Servier appealed
the district court's decision, which appeal is pending in the U.S.
Court of Appeals for the D.C. Circuit. The district court in
PharmaEssentia vacated CMS's determination that PharmaEssentia failed
to qualify as a specified small manufacturer and remanded the matter
back to CMS after expressly recognizing that CMS might reach the same
conclusion after further proceedings.
CMS appreciates the comment, but we will continue to use PDE data
as the basis for calculating total expenditures under Part D because
PDEs are the
[[Page 17412]]
records used to capture Part D expenditures. CMS created the Medicare
Drug Data Processing System (DDPS) to collect and maintain records for
all Part D claims, and the agency requires Part D sponsors to submit a
PDE for every claim. The PDE contains information about payment
liability of the plan and the enrollee. As discussed in more detail in
section II.C.13 of this final rule, PDEs are subject to a robust
editing process to verify their accuracy. PDE records are used to pay
Part D sponsors for administering the prescription drug benefit and to
calculate manufacturer discounts under the Coverage Gap Discount
Program and the Manufacturer Discount Program. We note that while PDEs,
like any data set, may contain errors, Part D sponsors have significant
financial incentive to submit timely and accurate PDE records, in
addition to being legally required to do so. As a result, we continue
to believe that it is appropriate and consistent with the statute to
calculate Part D total expenditures based on PDE data when determining
a manufacturer's phase-in eligibility under the Manufacturer Discount
Program.
Nevertheless, consistent with the district court's opinion in
PharmaEssentia, we are clarifying that a manufacturer may provide
additional information, as part of a timely recalculation request under
the process described at Sec. 423.2728, that the manufacturer asserts
is evidence of Part D total expenditures that were not reported on
PDEs. CMS will evaluate the information to determine if it is
sufficient to merit consideration and what, if any, further
investigation of the information provided is necessary to determine if
there were actually paid Part D claims. If CMS determines based upon
the additional information, and any additional investigation, that
there were paid Part D claims that were not reported on PDEs that
constitute Part D total expenditures under section 1860D-14C(g)(4)(D)
of the Act, CMS will include those expenditures in the recalculation,
consistent with the requirements of this section.
For clarity and precision, we are making a minor change in the
regulation text at Sec. 423.2728(b) to specify that supporting
documentation for recalculation requests must be included with the
recalculation request.
Comment: Another commenter also opposed aspects of CMS's proposed
methodology for determining specified small manufacturer phase-in
eligibility. Specifically, the commenter disagreed with our proposal to
attribute 2021 total expenditures under Part D to a manufacturer based
on the labeler code for purposes of identifying each specified drug of
a manufacturer and calculating the Part D total expenditures for such
drugs under Sec. 423.2720(b). Instead, the commenter recommended that
CMS attribute total expenditures for a drug to the holder of the New
Drug Application (NDA) for that drug. The commenter stated that in
other CMS programs that utilize similar statutory definitions of
manufacturer as the definition found in section 1860D-14C(g)(5) of the
Act, the NDA holder is identified as a manufacturer. The commenter
further recommended that even if CMS were not to attribute expenditures
based on the entity that holds the NDA for the applicable drug, the
agency should consider evidence in addition to the labeler code when
attributing total expenditures. The commenter stated that, while the
labeler code may accurately reflect the manufacturer in many cases and
can be used as a first step, the agency should consider additional
evidence where appropriate to identify the manufacturer.
The commenter also opined that, if CMS alters the methodology used
to determine phase-in eligibility, the changes should be applied
retroactively to phase-in determinations made for manufacturers that
have already entered into agreements to participate in the Manufacturer
Discount Program or at least to those phase-in determinations that
manufacturers have previously challenged as erroneous. Relatedly, the
commenter further recommends that CMS establish a mechanism to adjust
manufacturer liability on previously invoiced discount amounts of a
manufacturer affected by an erroneous determination that the
manufacturer is not a specified small manufacturer, and suggests that
the dispute resolution framework at Sec. 423.2764 should be used for
this purpose.
Response: While we recognize that the statutory definition of
manufacturer at section 1860D-14C(g)(5) of the Act may be similar to
the statutory definition of manufacturer used in other programs, we
decline to adopt the commenter's suggestion that such similarities in
manufacturer definitions indicate that for purposes of the Manufacturer
Discount Program, CMS should attribute Part D expenditures for a
specified drug to the entity that holds the NDA of such drug. We
continue to believe that the labeler code provides the most appropriate
basis by which to attribute Part D expenditures to a manufacturer for
purposes of making phase-in eligibility determinations under the
Manufacturer Discount Program and that this methodology is consistent
with section 1860D-14C of the Act, including CMS's longstanding
practices of entering into the agreement for participation in the
Coverage Gap Discount Program and Manufacturer Discount Program with
the entity that meets the statutory definition of manufacturer based on
such entity being the holder of the FDA-assigned labeler code(s) for
the applicable drugs to which the agreement will apply.\20\ As
explained in the Manufacturer Discount Program Methodology, CMS
identifies each Part D expenditure for a drug using the unique NDC
reported on the PDE record for the expenditure and attributes that
expenditure to the one manufacturer uniquely assigned the labeler code
for that drug as reflected in the first five digits of the NDC.
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\20\ As discussed earlier, such agreements may also include the
labeler codes assigned by the FDA to another manufacturer, but only
when such manufacturers have entered into an arrangement whereby the
agreement holder lists such labeler codes on its agreement and all
other applicable requirements are met.
---------------------------------------------------------------------------
CMS agrees with the commenter's recommendation that there should be
a mechanism to adjust previously invoiced discounts of a manufacturer
impacted by an erroneous determination about the manufacturer's phase-
in eligibility. Prior to any correction of PDE records or discounts, a
determination would have to be made that the phase-in eligibility
status was incorrect. The process established in the Manufacturer
Discount Program Final Guidance and codified at Sec. 423.2728 for
requesting such corrections is the recalculation process. CMS has also
made a small number of corrections to manufacturer phase-in status in
the first year of the program through own-motion review.
Retrospective adjustment of previously invoiced discounts or
previously submitted PDE records can occur for reasons not limited to a
retrospective change to or correction of a manufacturer's phase-in
status. While retrospective application of a correction would depend on
the specific situation, and may involve adjustments of overpayments or
underpayments by a manufacturer, CMS has already established a process
for adjusting previously invoiced manufacturer discounts, which is the
PDE outlier process described in the January 17, 2025 HPMS memorandum,
Prescription Drug Event (PDE) Analysis website for CMS Data Quality
Review Outliers, Withheld and Invoiced Outliers, and Reviews of
Invoiced Data Disputed by Manufacturers.
After consideration of the comments received on these sections of
our
[[Page 17413]]
proposal, and for the reasons described, we are finalizing the
regulation text at Sec. Sec. 423.2716 through 423.2728 as proposed,
with minor modifications at Sec. 423.2728(b) to further clarify our
expectation that such supporting documentation must be included with
the timely recalculation request.
7. Use of a Third Party Administrator (Sec. 423.2732)
We proposed to codify the agency's engagement of a TPA at Sec.
423.2732. Specifically, we proposed at Sec. 423.2732(a) that CMS will
engage a TPA to assist in the administration of the Manufacturer
Discount Program, which may include and is not limited to facilitating
Manufacturer Discount Program invoicing, the receipt and distribution
of funds of a manufacturer, and the dispute resolution process
described in Sec. 423.2764.
We proposed at Sec. 423.2732(b)(1) that agreement 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 further proposed
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.
We received no comments on proposed Sec. 423.2732 and are
finalizing this provision as proposed.
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. We
proposed 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, which we are finalizing in
this final rule).
Part D regulations at part 423 subpart K set forth the requirements
for Part D contracts between Part D sponsors and CMS. We proposed 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 proposed codifying
this policy at Sec. 423.2736(b). As we explained in the proposed rule,
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.
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
proposed 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 claim for reimbursement.
d. Prescription Drug Event Requirements
We proposed to codify at Sec. 423.2736(d) a requirement 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. We explained that this information is
later 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 proposed to codify
this policy at Sec. 423.2736(e).
Comment: We received a comment in support of our proposal at Sec.
423.505 to require Part D sponsors to provide applicable discounts on
applicable drugs at the point of sale on behalf of the manufacturer, in
alignment with the process that has been used under the Coverage Gap
Discount Program since 2011.
Response: CMS appreciates the commenter's support.
Comment: We received several supportive comments on our proposal at
Sec. 423.2736(c) to require Part D sponsors to reimburse a network
pharmacy the amount of the applicable discount no later than the
applicable number of calendar days after the date of dispensing of an
applicable drug. These commenters stated that clear prompt payment
requirements promote consistent administration of the Manufacturer
Discount Program, reduce payment delays that can create operational
burdens at the pharmacy counter, support continuity of care for Part D
enrollees, and strengthen the integrity of the redesigned Part D
benefit.
Response: We thank the commenters for their support of our prompt
payment proposals.
Comment: A commenter requested that CMS ensure Manufacturer
Discount Program discounts are applied correctly at the point of sale
so that increased out-of-pocket costs do not result in access
disruptions. Another commenter recommended that enrollees be provided
with real-time data regarding the impact of discounts under the
Manufacturer Discount Program on the enrollee's progress toward the
Part D out-of-pocket maximum.
Response: We thank the commenters for their feedback but decline to
make the requested changes. Because manufacturer discounts generally do
not impact the amount of enrollee cost sharing, are applied at the
point of sale, and reduce plan liability for the cost of Part D drugs,
we do not expect the
[[Page 17414]]
Manufacturer Discount Program to have any negative impact on enrollee
access or out-of-pocket costs. As noted in section II.C.15 of this
final rule, beneficiary protections established under subpart M of part
423 continue to apply and are separate from the Manufacturer Discount
Program. Enrollees maintain the right to request a coverage
determination from their plan or file a grievance.
Consistent with section 1860D-14C(g)(4) of the Act, applicable
discounts under the Manufacturer Discount Program are not counted
toward an enrollee's incurred costs. Thus, while we agree that it is
important to provide enrollees with accurate and timely information
about their benefits and liabilities with respect to their Part D
coverage, we are not making any changes to existing policies related to
enrollee notification requirements. Part D enrollees will continue to
receive information about Part D coverage of their medications through
existing vehicles, including the Part D explanation of benefits as
required under Sec. 423.128(e).
Comment: A commenter requested that CMS establish timing
requirements for plans to submit PDE records.
Response: CMS established deadlines for the timely submission of
PDE records at the start of the Part D program, which were recently
codified at 42 CFR 423.325. We are finalizing changes to those
requirements that are unrelated to the Manufacturer Discount Program in
this final rule, which are described in section IV.K.
Comment: A commenter noted the unique integrated financing
structure of PACE and urged CMS to monitor implementation of the
Manufacturer Discount Program carefully to ensure PACE organizations
have the technical support and guidance needed to administer
manufacturer discounts.
Response: We appreciate the commenter's feedback and agree that it
is important for CMS to monitor implementation of the Manufacturer
Discount Program and provide guidance and technical support to PACE
organizations. Recognizing that implementation of the Manufacturer
Discount Program necessitated significant operational changes for PACE
organizations, including reporting an expanded set of data elements on
PDE submissions and understanding and developing capabilities related
to the dispute resolution process for the Manufacturer Discount
Program, CMS issued guidance specific to PACE organizations in HPMS
memoranda, titled ``PACE Participation in the Manufacturer Discount
Program beginning January 1, 2025,'' issued on January 26, 2024, and
``2025 Prescription Drug Event (PDE) File Layout Updates for all Part D
Plan Sponsors, and Additional 2025 Changes to PDE Reporting for PACE
Organizations'' issued on March 8, 2024. In addition, CMS held multiple
technical assistance and training sessions to help PACE organizations
prepare for changes related to implementation of the Manufacturer
Discount Program.\21\
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\21\ CMS provided training sessions for PACE Organizations at
two User Group Calls held on February 14, 2024 and May 22, 2024, and
also provided training via a presentation and question and answer
session at the National PACE Association Spring Policy Forum, on
March 11, 2024.
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We will continue to issue guidance and support, as needed,
regarding the Manufacturer Discount Program, and we encourage
interested parties to monitor for additional guidance or information
issued through HPMS or posted on our Manufacturer Discount Program web
page at https://www.cms.gov/medicare/coverage/prescription-drug-coverage/part-d-information-pharmaceutical-manufacturers. Part D
sponsors with questions regarding the Manufacturer Discount Program can
reach out to their CMS account manager or submit questions to
[email protected].
After consideration of the public comments we received on this
section, we are finalizing without modification our proposals at
Sec. Sec. 423.505 and 423.2736.
9. Negative Invoice Payment Process for Part D Sponsors (Sec.
423.2740)
In certain instances in the quarterly Manufacturer Discount Program
invoicing process (described in section II.C.13.a of this preamble) 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
the PDE adjustment or deletion. We proposed at Sec. 423.2740 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 received no comments on this section of our proposal. We are
finalizing Sec. 423.2740 as proposed.
10. Prospective Payments to Part D Sponsors (Sec. 423.2744)
a. General Rule
As discussed in more detail in the preamble to the proposed rule,
at Sec. 423.2744(a), CMS proposed to codify existing policies to
provide monthly prospective Manufacturer Discount Program payments to
Part D sponsors so that sponsors can advance applicable discounts at
the point of sale under Sec. 423.2736(a) and reimburse network
pharmacies within the timeframe required under Sec. 423.2736(c).
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
proposed 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 proposed 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.
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
[[Page 17415]]
pay all invoiced amounts due under the requirements of proposed Sec.
423.2756(a), we proposed 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 proposed 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.
Comment: We received a comment on our proposals regarding
prospective payments to Part D sponsors. The commenter requested
additional guidance on the prospective payment process and the related
documentation plans should maintain for tracking, submission for
payment, and potential reconciliation. In addition, the commenter
encouraged CMS to consider the potential impact of these requirements
and stated that it is critical for plan sponsors to receive clear
guidance to minimize administrative burden and ensure EGWPs remain a
viable option for plan sponsors.
Response: CMS thanks the commenter for their feedback. As described
in our proposed rule, prospective Manufacturer Discount Program
payments to Part D sponsors will be based on the projections included
in each plan's bid and on 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. As we
explained in the proposed rule, 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. Document retention requirements for Part D sponsors
are specified at Sec. 423.505(d) and described in section IV.D. of
this final rule. At this time, we do not believe additional CMS
guidance is necessary. We encourage interested parties to monitor for
additional guidance or information issued through HPMS or posted on our
Manufacturer Discount Program web page at https://www.cms.gov/medicare/coverage/prescription-drug-coverage/part-d-information-pharmaceutical-manufacturers. Part D sponsors with questions regarding the
Manufacturer Discount Program can reach out to their CMS account
manager or submit questions to
[email protected].
CMS acknowledges the commenter's concern regarding the impact of
requirements on Part D sponsors generally and EGWPs more specifically.
With respect to prospective Manufacturer Discount Program payments and
the exception for EGWPs, because EGWPs are not subject to typical Part
D bidding requirements due to a longstanding waiver by CMS, they do not
submit Part D bids. As such, CMS lacks the information necessary to
estimate the cost of applicable discounts for these plans.
After consideration of the comments received, we are finalizing
proposed Sec. 423.2744 without modification.
11. Requirement To Use the Health Plan Management System (Sec.
423.2748)
At Sec. 423.2748, we proposed to codify requirements related to
use of the Health Plan Management System (HPMS) that were included in
the Manufacturer Discount Program Final Guidance. Specifically, we
proposed that agreement holders are required to maintain HPMS access
and 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.
We did not receive any comments regarding this section of our
proposal. We are finalizing Sec. 423.2748 without modification.
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.
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) through December 31, 2028. We proposed to codify
the requirements for the Manufacturer Discount Program agreement at
Sec. 423.2752.
a. Requirements of Agreement
As discussed in more detail in section II.C.4. of this preamble,
CMS is finalizing at Sec. 423.2708(b) the requirement 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, 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. As discussed in the preamble to the proposed rule, 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 proposed 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 proposed at Sec. 423.2752(a) 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
[[Page 17416]]
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.
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 final rule.
Consistent with the policies CMS established in the Manufacturer
Discount Program Final Guidance, we proposed to codify the requirements
related to 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 proposed 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,\22\ a manufacturer that is a primary manufacturer,
as defined 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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\22\ 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.\23\ CMS also will terminate coverage for all of the drugs
of the
[[Page 17417]]
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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\23\ 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 proposed 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 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's
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 proposed
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 proposed 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 under this provision 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 proposed to codify this
requirement at Sec. 423.2752(c)(1)(v)(A)(2).
At Sec. 423.2752(c)(1)(v)(B), we proposed 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.
We proposed to codify these existing policies 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 proposed 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 proposed to codify this policy at Sec. 423.2752(c)(4).
(5) Automatic Assignment Upon Change of Ownership
At Sec. 423.2752(d) we proposed 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
[[Page 17418]]
unless terminated in accordance with requirements at Sec. 423.2752(c).
Further, we proposed 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.
CMS did not receive any comments on our proposals in this section.
We are finalizing the provisions of Sec. 423.2752 with a minor
clarifying change at paragraph (c)(1)(v)(A)(2) to clarify that the
termination of coverage described in paragraph (c)(1)(v)(A)(2) is
specific to the termination of coverage ``under paragraph (2)''.
13. Manufacturer Requirements (Sec. 423.2756)
We proposed that manufacturers that are agreement holders, as
defined at Sec. 423.2704, must comply with all requirements at Sec.
423.2756.
a. Manufacturer Invoicing
At Sec. 423.2756(a), CMS proposed that we 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 an agreement holder's Manufacturer Discount Program
agreement and will invoice the agreement holder quarterly. We also
proposed that CMS will invoice manufacturer discount amounts from
accepted PDE data for 37 months following the end of the benefit year.
As we explained in the preamble to the proposed rule, 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
At Sec. 423.2756(b) CMS proposed to codify the requirements for
timely payment of manufacturer discounts. Specifically, at Sec.
423.2756(b)(1) we proposed that agreement holders must pay each Part D
sponsor invoiced amounts no later than 38 calendar days from receipt of
the relevant invoice, with limited exceptions in proposed paragraphs
(b)(2) and (b)(3). At Sec. 423.2756(b)(2), we proposed 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 proposed 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. We further proposed that 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.
As discussed in the preamble to the proposed rule, 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 strikes 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 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 proposed 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 proposed 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.
At Sec. 423.2756(c)(2), we proposed requirements related to
providing information to CMS about manufacturer ownership.
Specifically, at paragraph (c)(2)(i), we proposed 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 proposed to codify at Sec. 423.2716. Likewise, at
paragraph (c)(2)(iii), we proposed 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.
As we explained in the proposed rule, it is also imperative that
CMS be notified promptly of any ownership changes of a manufacturer
participating in the Manufacturer Discount Program so that we 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 proposed to codify our
longstanding policy that agreement holders notify us 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 proposed 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
[[Page 17419]]
notify us 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 proposed requirements related to
labeler codes. Consistent with the Manufacturer Discount Program Final
Guidance, section 80.5.2, we proposed 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
proposed 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 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 proposed that agreement holders must provide to CMS and maintain
all required labeler code information as instructed by CMS.
Specifically, we proposed 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 proposed 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 proposed 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 proposed 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 proposed 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.
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 proposed 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. This includes 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 proposed 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 proposed 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. As
explained in the proposed rule, 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 Discount Program
requirements with respect to the transferred labeler code(s).
Manufacturer Discount Program invoices to the receiving agreement
holder 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
[[Page 17420]]
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.
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.
Comment: We received a few comments regarding the data elements CMS
provides on Manufacturer Discount Program invoices. The commenters
thanked CMS for expanding the data provided to manufacturers compared
to what was provided under the Coverage Gap Discount Program. A few
commenters supported codifying the Manufacturer Discount Program
invoice data elements.
The commenters also recommended that CMS expand the set of data
elements currently provided on manufacturer invoices, arguing that
additional data fields are necessary for manufacturers to accurately
verify Manufacturer Discount Program discounts. In combination, these
commenters asked that CMS add the following additional data elements to
Manufacturer Discount Program invoices: Part D contract and Part D plan
benefit package identifiers; a de-identified Part D beneficiary
identifier; the prescriber's National Provider Identifier; the date the
Part D plan paid the pharmacy; claim status (i.e., whether the claim
was paid or reversed); a Medicare Prescription Payment Plan
participation identifier; information about the indication for which
the drug was prescribed; and various cost accumulator fields to
identify an enrollee's actual out-of-pocket costs and where the
enrollee falls in the phases of the Part D benefit.
Response: We appreciate the commenters' support and acknowledgement
of CMS's decision at the start of the Manufacturer Discount Program to
include additional data elements on manufacturer invoices. As
commenters recognized, the current data elements included on invoices
provide manufacturers with more data than they received on invoices
under the Coverage Gap Discount Program. However, we disagree with the
commenters that additional data elements are necessary or would be
beneficial. We are not persuaded by the comments to add any of the
additional data elements requested. We believe the current data
elements included on invoices appropriately balance important
beneficiary privacy protection and sufficient information for agreement
holders to meet their statutory obligation to provide discounted prices
for applicable drugs under section 1860D-14C(b)(1)(A) of the Act. We
further clarify that we did not propose to enumerate in the regulation
text which specific data elements are included on Manufacturer Discount
Program invoices.
As discussed in the Manufacturer Discount Program Final Guidance
and the preamble to the proposed rule, in providing the invoice data,
CMS seeks to limit the disclosure of claim-level information to the
minimum necessary for an agreement holder to verify payment. Pursuant
to section II(l) and section (b)(1) of Exhibit C of the Manufacturer
Discount Program agreement, information sent from CMS or the TPA to the
agreement holder with each quarterly invoice may be used only for
evaluating the accuracy of the invoiced discounts and resolving
disputes concerning the manufacturer's payment obligations under the
Manufacturer Discount Program.
Manufacturers should consider that prior to invoicing under the
Manufacturer Discount Program, CMS performs extensive editing on PDE
records and conducts outlier analyses to check for duplicate claims,
applicable national drug codes (NDCs), and incorrect discount
calculations, among other checks. Detailed information on the PDE
submission process, including on CMS's robust PDE editing process, can
be found on the Customer Service and Support Center (CSSC) website.\24\
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After consideration of the comments received, we are finalizing
Sec. 423.2756 as proposed.
14. Audits (Sec. 423.2760)
We proposed to codify at Sec. 423.2760 the Manufacturer Discount
Program audit processes established in section 90 of the Manufacturer
Discount Program Final Guidance.
Regarding manufacturer audits of TPA data, we proposed 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.
We proposed at Sec. 423.2760(a)(2) that 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.
As discussed in the preamble to the proposed rule, 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.
We proposed limits on audits of TPA data and information at Sec.
423.2760(a)(3). Specifically, we proposed 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. At Sec. 423.2760(a)(3)(ii),
we proposed 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.
At Sec. 423.2760(a)(3)(iii), we proposed that audits must occur on
site at a location specified by the TPA, and with the exception of work
papers, audit data cannot be removed from the audit site. Additionally,
we proposed 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 proposed 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
proposed at Sec. 423.2760(b)(2) that CMS must provide agreement
holders with 60
[[Page 17421]]
calendar days' notice of the reasonable basis for the audit and a
description of the information required for the audit. We further
proposed 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.
Comment: A commenter requested that CMS remove the requirement that
audits be conducted on site only, because the requirement imposes a
significant burden on the manufacturer, including travel time and
expenses. The commenter suggested that CMS allow manufacturers to
access audit data through a secure online portal overseen by the TPA.
Response: We thank the commenter for their feedback. Regarding
allowing manufacturer audits of TPA data to be conducted remotely, CMS
intends to continue exploring with the TPA ways in which remote audits
might be conducted in the future. While we do not expect remote
auditing of the TPA to be in place by CY 2027, in order to allow for
the possibility of remote audits in the future, we are striking the
words ``on site'' and ``the audit site'' from the proposed regulation
text at Sec. 423.2760(a)(3)(iii) that specified that audits must occur
on site at a location specified by the TPA and that data cannot be
removed from the audit site. As modified, the regulatory text requires
that audits must occur at ``a location specified by the TPA'' and that
data cannot be removed from ``such specified location''. CMS and the
TPA may specify through future guidance whether an audit will be
conducted on site or remotely at a virtual location. Until CMS
establishes and operationalizes a secure method for allowing
manufacturers to conduct remote audits of TPA data, audits will
continue to occur on site at a physical location specified by the TPA.
Comment: The same commenter urged CMS to clarify the limitation on
an auditor sharing information beyond its opinion of the audit results
with its client and specifically permit the manufacturer to review all
data underlying an audit conducted on its behalf. The commenter also
requested that CMS permit manufacturers to audit CMS records and the
records of Part D sponsors beyond the data provided to the TPA,
including any data CMS would use to audit the selected drug subsidy
under proposed Sec. 423.329(e) .
Response: We disagree with these comments. As previously noted, CMS
believes that the limitations on distribution of audit data strike the
appropriate balance between supporting beneficiary privacy and ensuring
manufacturer access to data relevant to the calculation of discounts.
Regarding manufacturer audits of information beyond the data
provided to the TPA, we note that section 1860D-14A(d)(3)(D) of the Act
permitted manufacturers to conduct periodic audits ``of the data and
information used by the third party to determine discounts'' under the
Coverage Gap Discount Program. There is no statutory requirement under
the Manufacturer Discount Program to permit manufacturers to audit any
data or information used to determine discounts. We chose to carry over
this policy because we continue to utilize a TPA to facilitate
administration of the program. While manufacturers can dispute invoiced
discounts through the process described at Sec. 423.2764, which may
involve CMS review of data beyond what is provided by the TPA,
including consultation with Part D sponsors, we believe that data
available to manufacturers under our proposed rule is sufficient for
manufacturers to validate invoiced discounts. We decline to permit
manufacturers to audit information beyond the data provided to the TPA.
After consideration of the comments received, we are finalizing
Sec. 423.2760 with modification, as described in our response to
comments. Specifically, we are striking the words ``on site,''
``such,'' and ``the audit site'' from the proposed regulation text at
Sec. 423.2760(a)(3)(iii), and we are modifying the regulatory text to
specify that ``audit'' data cannot be removed from ``such specified
location''. We are also adding the word ``calendar'' to convey 60
calendar days at Sec. 423.2760(a)(2), which was inadvertently left out
of the regulation text in the proposed rule.
15. Dispute Resolution (Sec. 423.2764)
At Sec. 423.2764, CMS proposed a 3-level dispute resolution
framework through which agreement holders can dispute applicable
discounts that they were invoiced via the invoicing process at Sec.
423.2756(a). Specifically, we proposed 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.
We proposed at Sec. 423.2764(a)(1) that the initial dispute must be
filed in the manner specified by CMS no later than the dispute
submission deadline, which is defined 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 proposed at Sec.
423.2764(a)(2) that CMS will issue a written determination on such
initial dispute no later than 60 calendar days from the dispute
submission deadline.
At Sec. 423.2764(b), we proposed 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. We proposed 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 proposed 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 sources.
We proposed at Sec. 423.2764(b)(3) that the IRE will issue a
written decision to the agreement holder and to CMS no later than 90
calendar days from receipt of the request. At Sec. 423.2764(b)(4), we
proposed that 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. At
Sec. 423.2764(b)(5), we proposed that 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 proposed that an agreement holder or
CMS may
[[Page 17422]]
request review by the CMS Administrator following receipt of an
unfavorable determination from the IRE. We proposed at Sec.
423.2764(c)(2) that such request must be filed in the manner specified
by CMS, no later than 30 calendar days from the date of the IRE
decision. We proposed at Sec. 423.2764(c)(3) that after completing the
review and making a decision, the CMS Administrator will issue a
written decision to both parties. Such decision by the CMS
Administrator is final and binding under proposed Sec. 423.2764(c)(4).
At Sec. 423.2764(d), we proposed that CMS will adjust future invoices,
or implement an alternative reimbursement process if determined
necessary, if a dispute is resolved in favor of the agreement holder.
We further proposed 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).
We proposed at Sec. 423.2764(e) that 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. 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).
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.
We received no comments on this section and are finalizing Sec.
423.2764 as proposed.
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 proposed codifying this
general rule at Sec. 423.2768(a), in alignment with processes
established in section 120 of the Manufacturer Discount Program Final
Guidance.
CMS proposed at Sec. 423.2756(b)(1) to require agreement holders
to 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, with limited exceptions as proposed at Sec.
423.2756(b)(2) and (b)(3). As we stated in the proposed rule, 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 proposed 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), and that the agreement
holder has 5 business days to respond to CMS.
Consistent with section 1860D-14C(e)(1) of the Act, we proposed 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. We stated in the proposed
rule that 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 proposed 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 proposed at Sec.
423.2768(e) to apply existing appeal procedures for CMPs in 42 CFR part
423, subpart T to agreement holders appealing a CMP imposed under the
Manufacturer Discount Program. Specifically, we proposed to amend
paragraph Sec. 423.1000(a)(3) by replacing it with new paragraphs
(a)(3)(i) and (a)(3)(ii) to codify 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 proposed conforming changes to the definition of ``affected
party'' at Sec. 423.1002 to revise the definition to refer to ``for
purposes of the Coverage Gap Discount Program, any manufacturer (as
defined in Sec. 423.100)'' and ``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 proposed 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 proposed 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 proposed at
[[Page 17423]]
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
proposed 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 proposed 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 proposed to codify this requirement at Sec. 423.2768(g).
At Sec. 423.2768(h), we proposed 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.
Comment: We received a comment on our proposed regulations related
to CMPs. The commenter argued that the language in our proposed CMP
regulation fails to recognize the agency's flexibility and enforcement
discretion. Pointing to language in proposed Sec. 423.2768, which
states that CMS ``must impose a civil money penalty,'' the commenter
asserted that CMS's proposed regulation does not take into account
factors in section 1128A(d) of the Act when determining the scope or
amount of CMP. The commenter also stated that CMS procedures should
allow for discussion and explanation between CMS and the manufacturer
and should include an opportunity for the manufacturers to confer with
the agency prior to imposition of CMPs and without requiring a
manufacturer to request a formal hearing. The commenter stated
generally that this would be consistent with government agencies
issuing pre-enforcement notification letters or pursuing other informal
means to give regulated parties an opportunity to respond before the
agency initiates formal proceedings.
Response: We appreciate the commenter's feedback on the proposed
CMP regulations. We believe our proposed CMP regulations at Sec. Sec.
423.1000, 423.1002, and 423.2768 are consistent with statutory
requirements under the Manufacturer Discount Program, and that the
clarity provided in our CMP regulation text is important for
enforcement purposes. Section 1860D-14C(e) of the Act states that if a
manufacturer fails to provide discounted prices for applicable drugs of
the manufacturer dispensed to applicable beneficiaries in accordance
with the Manufacturer Discount Program agreement in effect, such
manufacturer ``shall'' be subject to a CMP for each such failure.
Further, section 1860D-14C(e) of the Act explicitly provides the
formula that must be used to determine the amount of such CMP.
We agree with the commenter that CMS may exercise enforcement
discretion in our imposition of CMPs. Our proposed regulation text does
not preclude the agency from exercising discretion and allows an
opportunity for dialogue prior to the agency making a determination to
impose a CMP under the Manufacturer Discount Program, using the same
process used under the Coverage Gap Discount Program. Proposed Sec.
423.2768(b) provides that 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, and the agreement holder will have five business days
from the date of the notice to respond to CMS. As we stated in response
to similar comments in the Manufacturer Discount Program Final Guidance
and in the preamble to the proposed rule, this gives the agreement
holder an opportunity to provide additional context, evidence refuting
the violation, or other factors CMS may consider when determining
whether to impose a CMP. Part D sponsors advance applicable discounts
at the point of sale on behalf of manufacturers, and it is essential
that manufacturers, in turn, provide timely reimbursement. Accordingly,
such discretion is generally limited to a situation where the
manufacturer demonstrates that the non-compliance is due to a technical
or other reason beyond the manufacturer's control.
After consideration of the public comments we received, we are
finalizing without modification our proposals at Sec. Sec. 423.1000,
423.1002, and 423.2768.
17. Severability
We proposed that the Manufacturer Discount Program provisions
finalized herein would be separate and severable from one another.
Further, we proposed that if any of these provisions 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.
We received no comments on this section of our proposal and are
finalizing without modification.
D. Definition of Creditable Coverage
Section 1860D-13(b) of the Act contains provisions related to late
enrollment penalties (LEPs), which are 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.\25\ 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
[[Page 17424]]
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.
---------------------------------------------------------------------------
\25\ 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 \26\ 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:
---------------------------------------------------------------------------
\26\ 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.
++ 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 prescription drug 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 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 for CY 2025 to continue to permit use of the
creditable coverage simplified determination methodology, without
modification to the existing parameters, 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
[[Page 17425]]
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.
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. 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 for 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
proposed 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
proposed 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
proposed 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 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
[[Page 17426]]
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 stabilizing
thereafter. Accordingly, we proposed a minimum of 73 percent instead of
72 percent for 2027. We further proposed that we would 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. We intend to update the percentage 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 Part D bid
submission deadline for non-RDS group health plans to take into account
as they prepare for the following year.
As described previously, the proposed changes to Sec. 423.56 would
retire the simplified approach presented in the ``Updated Creditable
Coverage Guidance'' that we released on September 18, 2009, and
generally proposed 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.
Comment: Several commenters stated their support for the proposed
creditable coverage methodology, citing that it appropriately balances
a few considerations: the need to have standards that accurately
capture the value of Part D coverage; the need to let patients make
informed decisions about whether they have adequate prescription drug
coverage; the need to minimize paperwork burdens on non-Medicare plans;
and the need to protect taxpayers from the increase in the cost of
Medicare Part D that would occur if eligible individuals were able to
wait to enroll until they had high prescription drug expenses without
any penalty.
Response: We thank commenters for their support.
Comment: A commenter asked whether we account for the selected drug
subsidies under section 1860D-14D of the Act and federal reinsurance
under 1860D-15(b)(1)(B) of the Act with respect to selected drugs in
the determination of creditable coverage. They requested that CMS treat
selected drug subsidies under sections 1860D-14D of the Act and federal
reinsurance under 1860D-15(b)(1)(B) with respect to selected drugs
analogously to manufacturer discounts under section 1860D-14C and
exclude them from the creditable coverage methodology. The commenter
stated that excluding these amounts from the creditable coverage
methodology would be consistent with the approach established for the
Manufacturer Discount Program and help employer-sponsored group health
plans continue to provide creditable prescription drug coverage,
including retiree drug coverage through the Retiree Drug Subsidy (RDS)
program, as more drugs become selected over time.
Response: CMS thanks the commenter for their input. As stated in
the Final CY 2025 Part D Redesign Program Instructions, CMS determines
actuarial equivalence based on plan liability and does not include
subsidies such as low income cost sharing (LICS). Consistent with the
existing policy, federal reinsurance in the catastrophic phase is
included in the plan paid amount. The value of any selected drug
subsidy under section 1860D-14D of the Act is not included in the
determination of actuarial value.
To clarify the existing policy that the selected drug subsidy is
excluded from the determination of actuarial equivalence, we have
revised Sec. 423.56(a) to state that the actuarial value of creditable
prescription drug 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 or of any selected
drug subsidy under section 1860D-14D of the Act'' (bold indicates new
text).
Comment: A few commenters were supportive of codifying the revised
simplified determination methodology but requested a delay in moving to
the 73 percent of prescription drug costs that a plan must cover for it
to be considered creditable. A couple commenters requested a 1-year
delay and another commenter suggested starting to phase in 66 percent
of prescription drug expenses in 2027 and move to 73 percent in 2028.
The commenter questioned if CMS does not adopt a phase-in approach, to
allow a 1-year grace period of allowing plans to continue to use the
existing simplified determination methodology.
Response: We appreciate the support of codifying the revised
simplified determination methodology and do not believe that further
delay or grace periods for adopting this methodology are justified at
this time. In the Final CY 2026 Part D Redesign Program Instructions,
we provided a grace period that permitted non-RDS group health plans to
use either the existing simplified determination methodology or the
revised simplified determination methodology to determine whether their
prescription drug coverage is creditable. In those instructions, we
emphasized that the grace period was for CY 2026 only and that for CY
2027 and subsequent years, CMS intended to propose to no longer permit
use of the existing simplified determination methodology. As explained
in the Final CY 2025 Part D Redesign Program Instructions and Final CY
2026 Part D Redesign Program Instructions, there were significant
changes to the Part D program that took effect in those years under the
IRA's Part D redesign that warranted a transitional delay to a revised
simplified determination methodology. We believe that plans now have
adequate experience under the new benefit design to incorporate the
changes we proposed and are finalizing in this rulemaking.
Additionally, as discussed above, plans have been on notice that we
intended to retire the existing simplified determination methodology in
favor of transitioning to one that more accurately reflects the
actuarial value of a defined standard Part D plan in accordance with
section 1860D-13(b)(5) of the Act. For 2027, we are finalizing the
percent value at 73 percent. For 2028 and going forward, we will
release the percentage of prescription drug costs to use in the
creditable coverage methodology with enough time for group health plans
to take into account when designing their plan benefits.
Comment: A commenter highlighted the timing of releasing guidance
in future years that would, as needed, update the percentage value of
prescription drug expenses and requested that it be released in a
timely manner--ideally at the same time the
[[Page 17427]]
Part D Defined Standard benefit parameters are released.
Response: We thank the commenter and agree. We would release this
guidance in advance of the yearly bid submission deadline for Part D
plan sponsors so that they may consider the guidance as they prepare
their bids and group health plans to design their plan benefits. This
timing would align with the release of the Part D Defined Standard
benefit parameters as the commenter suggests.
We appreciate all of the comments on this proposal and are largely
finalizing this provision as proposed, with one modification to specify
in Sec. 423.56(a) that the value of any selected drug subsidy under
section 1860D-14D of the Act is not included in the determination of
actuarial value.
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 proposed 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 proposed and sought public comment on what criteria
should apply for designation as a persistent outlier prescriber of
opioids. We proposed to establish a threshold to identify persistent
outlier prescribers of opioids as those outlier prescribers who receive
three consecutive outlier prescriber notifications from us 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 sought comments on
this threshold.
Specifically, we proposed 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 proposed 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.
We received public comments on these provisions in the proposed
rule. The following is a summary of the comments we received and our
responses.
Comment: Several commenters suggested that the statistical
identification of outlier prescribers may disproportionately affect
those prescribers that treat patients with chronic pain or complex
diagnoses and ultimately affect proper pain management and palliative
care of beneficiaries. A commenter suggested that the use of a
statistical methodology could identify prescribers whose prescribing is
clinically appropriate and suggests identifying outliers by considering
beneficiary specific clinical factors, comorbidities, and treatment
history.
Response: CMS appreciates the commenters' insights and
considerations for the prescribers of our beneficiaries with chronic
pain and complex care. CMS agrees with commenters that statistical
analyses may identify outlier prescribers that care for patients with
unique circumstances that result in prescribing patterns that vary from
the norm, yet are still clinically appropriate. As such, CMS
acknowledges this point in the annual outlier prescriber notifications
and encourages prescribers to utilize the information to review their
current prescribing habits and take advantage of educational resources
and programs to remain current on treatment guidelines. While CMS notes
that utilizing
[[Page 17428]]
beneficiary specific clinical factors, comorbidities, and treatment
history would allow for a robust review of individual prescriber
habits, it is unrealistic for CMS to do that on a broad scale for all
prescribers as part of an educational analysis and would require the
review of medical records. CMS would encourage prescribers notified as
outliers to internally review their medical records to ensure that they
are prescribing appropriately based on their patients' individual
health and care plans.
Comment: Several commenters supported the current excluded patient
groups within CMS's methodology. Some commenters suggested that
beneficiaries in palliative care should be excluded. Another commenter
recommended that in addition to beneficiaries with cancer pain, those
beneficiaries with cancer treatment related pain should also be
excluded.
Response: CMS, beginning with the 2027 letters is aligning the
exclusion criteria for beneficiaries with other CMS initiatives and the
definition of an exempted beneficiary at Sec. 423.100, including
beneficiaries in hospice or receiving palliative or end of life care;
residing in a long-term care facility; being treated for cancer-related
pain; or with sickle cell disease. Of note, in a CMS final rule (89 FR
30448) the definition at Sec. 423.100 shifted the terminology from
`active cancer-related pain' to `cancer-related pain' effective January
1, 2025. CMS currently utilizes a year look-back period to identify
beneficiaries with past cancer treatment.
Comment: Several commenters recommended maintaining a standardized
statistical methodology to improve transparency and prevent variation,
in addition to a standardized notification letter and prescriber
education materials. These commenters recommended CMS refine the
methodology to keep up with changing opioid practice and consider
accounting for intermittent benzodiazepine use.
Response: CMS currently maintains both a methodology and aggregate
data summary for public consumption found at https://www.cms.gov/about-cms/story-page/prescribing-opioids. The methodology and aggregate data
are updated annually to align with the latest outlier prescriber
notifications. CMS does refine the methodology regularly and considers
changes to guidelines and will continue to do so going forward,
including appropriate thresholds for being identified as an outlier.
Annually, in each notification to prescribers identified as an outlier,
CMS provides standardized language, including educational resources for
the prescriber to reference for up-to-date opioid prescribing best
practices. In identifying outlier prescribers, CMS currently only
considers beneficiaries receiving a benzodiazepine that overlaps with
an opioid for a consecutive 30 days but thanks the commenters for their
suggestion and will continue to refine the methodology, as necessary.
Comment: Commenters noted that guidelines no longer set thresholds
as these limited access to care for beneficiaries in the high-risk
groups. A commenter recommended CMS limit the prescribing threshold to
the top 5 or 10 percent as a 25 percent threshold is overly-broad.
Response: CMS acknowledges the Centers for Disease Control and
Prevention (CDC) 2022 opioid guideline update and shift from morphine
milliequivalent (MME) thresholds. CMS does not utilize a single MME
threshold for this analysis but rather uses a comparative analysis of
prescriber habits according to specialty and state to determine outlier
prescribers of opioids. CMS also notes that the annual outlier
prescriber letters are based on a statistical methodology, and CMS
clearly recognizes that an outlier may be prescribing within clinical
norms for certain patient populations and still be identified as an
outlier. CMS does refine the methodology regularly and considers
changes to guidelines and will continue to do so going forward,
including appropriate thresholds for being identified as an outlier.
Comment: A commenter also recommended that CMS establish an appeals
process for being identified as an outlier.
Response: CMS takes no administrative action based on the outlier
prescriber identification. These letters are solely an identification
that the identified prescribers are statistically different than other
prescribers in their same specialty and state in an effort to provide
education on prescribing practices. As such, no appeals process is
necessary.
Comment: Several other commentors were in support of the proposals
and definitions for identifying outliers and persistent outliers but a
commenter expressed that CMS's support is critical as plan sponsors may
not have all information necessary to identify potential outliers on a
provider and beneficiary level. It was recommended that CMS continue to
release the methodologies and updates on the website.
Response: CMS thanks the commenters for their support and will
continue to release the methodologies and updates on the website,
https://www.cms.gov/about-cms/story-page/prescribing-opioids.
Comment: A few commenters questioned the utilization of NPPES for
prescriber specialty as it is dependent on a prescriber updating their
taxonomy and using an appropriate taxonomy code. A commenter suggested
CMS consider the order of taxonomy codes in NPPES. A few commenters
recommended the need for consideration of subspecialties as some
complex patients are treated by physicians of a subspecialty under a
more general primary specialty. A commenter recommended that CMS
consider different thresholds for different specialties.
Response: CMS thanks the commenters for their suggestions on
further refining the taxonomy of a prescriber by subspecialty. CMS will
consider this going forward. CMS encourages prescribers to update NPPES
accordingly when taxonomy changes occur to ensure they are up to date
and accurate.
Comment: A commenter opposed CMS's proposed methodology and
recommended that CMS work collaboratively with physician groups and
other stakeholders to develop alternative approaches that ensure
continued access to care, eliminate arbitrary prescribing thresholds,
and avoid targeting physicians treating complex patients. A commenter
suggested that the proposal to report persistent outliers would lead
Part D plan sponsors to refuse patient prescriptions from the
prescribers and lead to patient harm. Additionally, a commenter
suggested that CMS clarify what the Part D plan sponsors' expectations
were for the information received on persistent outliers. Another
commenter suggested that CMS provide plan sponsors with flexibility in
overseeing the appropriate use of opioid therapies and to collaborate
with plan sponsors. One commenter suggested that CMS and plan sponsors
review for outlier prescribers prescribing based on specialty-specific
norms and allow for clinical review before adverse actions are imposed.
Response: Section 6065 of the SUPPORT Act requires CMS to identify
outlier prescribers of opioids based on specialty and geographic area
and provide notification annually to such providers. CMS collaborated
with external stakeholders to establish the thresholds CMS utilizes to
determine a prescriber is an outlier and continuously works with plan
sponsors and other stakeholders to ensure oversight of the Part D
program and provide the best outcomes for Medicare
[[Page 17429]]
beneficiaries. Consistent with section 1860D-4(c)(4)(D)(v) of the Act,
CMS will issue a persistent outlier prescriber report to plan sponsors
in an effort for increased transparency and provide investigative
leads. CMS understands the concerns from commenters regarding the
potential for unsubstantiated penalties on the prescribers identified
as persistent outliers; however, this report will identify outliers
across the Medicare Part D program and assist plan sponsors that may
have limited views of trends and schemes within their own data. CMS
will direct plan sponsors to not act solely on the information in the
report without performing their own internal fraud, waste, and abuse
efforts that substantiate their actions, thereby allowing plan sponsors
to maintain autonomy to review any persistent outliers for specialty
norms and conduct clinical review in accordance with their
organizations policies and procedures. CMS will continue to clarify in
each outlier prescriber notification letter that each prescriber's
unique circumstances may result in prescribing patterns that vary from
the norm yet are still clinically appropriate.
Comment: A few commenters recommended CMS identify persistent
outliers more frequently than annually to ensure proper oversight.
Another commenter suggested that CMS provide a list of all outliers to
Part D plan sponsors, not just those that are classified as persistent.
One commenter recommended reviewing outlier prescribing behavior every
6 months to not only identify prescribers by statistical comparison but
also percent increase in their prescribing. Additionally, a commenter
recommended CMS look at prescribing trends.
Response: CMS appreciates the feedback and clarifies that
alternative options have been considered. Providing persistent outlier
letters more frequently than annually is allowable in accordance with
section 1860D-4(c)(4)(D)(v) of the Act; however, CMS believes
prescribers should have the opportunity to make prescribing
adjustments, if necessary, prior to being identified as an outlier on
subsequent notification. Annual outlier notifications allow prescribers
identified as an outlier to have approximately 6 months of time to make
prescribing changes after receiving the outlier letter. CMS also
disagrees with releasing all outlier prescribers to plan sponsors
annually as the statutory requirement, section 1860D-4(c)(4)(D)(v) of
the Act, applies to only those outliers identified as persistent. CMS
believes that one annual identification does not establish a pattern of
behavior. In response to a commenter recommending that CMS look at
prescriber trends, CMS does evaluate trends internally and externally
posts a data summary chart for outliers identified by state each year
on the CMS website.\27\
---------------------------------------------------------------------------
\27\ See: https://www.cms.gov/files/document/opioid-benzodiazepine-prescribing-patterns.pdf.
---------------------------------------------------------------------------
Comment: A commenter suggested that plan sponsors have additional
requirements to offer education, peer consultation, pain management,
and addiction specialists, as well ensure beneficiaries have access to
medication-assisted therapy and a variety of counseling options.
Another commenter recommends CMS consider additional steps to deter
persistent outlier prescriber behavior beyond technical assistance and
Medicare provider enrollment.
Response: CMS appreciates the suggestion to have plan sponsors
provide additional education and services to both outlier providers and
their beneficiaries. CMS will consider recommending to plan sponsors
that they offer services that align with their current organization's
contracts with both prescribers and beneficiaries in their networks.
CMS will also continue to review and assess other steps that can be
taken to address outlier prescribers.
After consideration of the public comments we received, we are
finalizing the provisions as proposed. Section 6065 of the SUPPORT Act
(Pub. L. 115-271) and section 1860D-4(c)(4)(D)(v) of the Act requires
CMS to notify outlier prescribers based on specialty and state and
provide information about persistent outliers to plan sponsors
annually. While CMS received comments and feedback on specific
methodology considerations, CMS is not adopting these comments in this
final rule. Considerations and recommendations for exclusion criteria,
thresholds, postings of methodology and other documents, and frequency
of reporting will all be considered by CMS annually through program
instruction or otherwise as we continue to refine the methodology and
enhance our oversight of the Medicare Part D program.
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 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.\28\ 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 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.
---------------------------------------------------------------------------
\28\ 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).
---------------------------------------------------------------------------
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 proposed to amend
Sec. 423.308 to add the definition of Inflation Reduction Act Subsidy
Amount (IRASA).
We proposed 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 proposed to update the
existing regulation concerning the reopening of final payment
determinations and the existing payment appeals regulation by
[[Page 17430]]
adding the Manufacturer Discount Program reconciliation, selected drug
subsidy reconciliation, and IRASA reconciliation payment
determinations. We also proposed 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 proposed 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.
We did not receive comments on this section of the proposed rule
and are finalizing the definition of Inflation Reduction Act Subsidy
Amount (IRASA) at Sec. 423.308 as proposed.
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, 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 established the
reopening provision at Sec. 423.346, which allows CMS, at its
discretion, to reopen and revise initial or reconsidered specified
payment determinations. Section 423.346(a) 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 7936), we added the Coverage
Gap Discount Program reconciliation payment to the list of payment
determinations that we may reopen and revise.
We proposed 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 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.\29\ 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.
---------------------------------------------------------------------------
\29\ 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.
---------------------------------------------------------------------------
We did not receive comments on this section of the proposed rule
and are finalizing the amendments to Sec. 423.346(a) as proposed.
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 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
[[Page 17431]]
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 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 proposed 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.\30\ We proposed 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.
---------------------------------------------------------------------------
\30\ 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).
---------------------------------------------------------------------------
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 proposed 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 proposed 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 submission of information necessary to determine
that payment determination.
We did not receive comments on this section of the proposed rule
and are finalizing the amendments to Payment appeals at Sec.
423.350(a)(1) and (a)(2) as proposed.
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 proposed two amendments to Sec. 423.350(b)(1) to reflect
actual practice. First, we proposed to amend 15 days to 15 calendar
days. Second, we proposed 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 proposed 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.
We did not receive comments on this section of the proposed rule
and are finalizing the amendments to payment appeals at Sec.
423.350(b)(1) as proposed.
The provisions described in this section of the final rule are
consistent with our current guidance and requirements. The changes are
updates that do not place additional requirements on Part D sponsors,
nor do they 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.
We did not receive comments on this proposal and are finalizing
this provision without modification.
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 \31\), added a definition
of ``hemp'' to the Agricultural Marketing Act of 1946. Under this
definition, ``[t]he term
[[Page 17432]]
`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.\32\
The Continuing Appropriations, Agriculture, Legislative Branch,
Military Construction and Veterans Affairs, and Extensions Act, 2026,
amended 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 under
current law as of the time of this rulemaking. 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 proposed 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.
---------------------------------------------------------------------------
\31\ Agriculture Improvement Act of 2018, H.R.2, 115th Congress
(2018). https://www.congress.gov/bill/115th-congress/house-bill/2.
\32\ Defining Hemp: A Fact Sheet. https://www.congress.gov/crs-
product/
R44742#:~:text=The%202018%20farm%20bill%20further,regulations%2C%20an
d%20applicable%20state%20regulations.
---------------------------------------------------------------------------
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.\33\ 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.\34\ CMS also noted in the Contract Year 2027
proposed rule \35\ (90 FR 54940) that while the prescription drug
Epidiolex meets the definition of hemp under the 2018 Farm Bill,
because it is covered under Medicare Part D, it would not be permitted
to be offered as a Part C supplemental benefit.
---------------------------------------------------------------------------
\33\ https://www.fda.gov/food/hfp-constituent-updates/fda-responds-three-gras-notices-hemp-seed-derived-ingredients-use-human-food.
\34\ https://www.fda.gov/food/food-ingredients-packaging/generally-recognized-safe-gras.
\35\ Medicare Program; Contract Year 2027 Policy and Technical
Changes to the Medicare Advantage Program, Medicare Prescription
Drug Benefit Program, and Medicare Cost Plan Program (90 FR 54894).
---------------------------------------------------------------------------
Therefore, this regulation will 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 the time of
this rulemaking, 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. Barring subsequent legal
changes, 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 substance and therefore will be illegal under federal law
\36\ and subject to CMS's prohibition.
---------------------------------------------------------------------------
\36\ 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).
---------------------------------------------------------------------------
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.\37\ 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 should 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 Sec. 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.
---------------------------------------------------------------------------
\37\ https://www.sciencedirect.com/science/article/pii/S221345302200235X.
---------------------------------------------------------------------------
The 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.
CMS solicited comment on the proposed amendments and thanks
commenters for their input. In the following section, CMS describes the
comments received and CMS's corresponding responses.
Comment: Several commenters expressed support for the proposal.
Response: CMS appreciates this support of the proposal.
Comment: Many commenters found the proposal to be overly
restrictive. Several commenters urged CMS to allow plans to cover all
hemp-derived THC or CBD products that meet federal hemp standards under
the 2018 Farm Bill (0.3 percent delta-9 THC dry-weight threshold),
while others expressed concern that overly restrictive THC limits would
eliminate full-spectrum products. Commenters also requested CMS
distinguish between non-psychoactive industrial hemp grain products and
hemp-derived cannabinoid products, noting that the proposed 0.4 mg per-
container THC threshold was operationally unworkable for bulk
agricultural commodities.
Response: CMS appreciates commenters' feedback and would like to
take this opportunity to provide additional clarification regarding
certain aspects of the proposal, including CMS's role in the regulation
of cannabis-derived products. CMS's authority does not extend to the
direct regulation of cannabis-derived products. Moreover, given the
regulation of cannabis-derived products is relatively nascent at both
the federal and state levels, CMS does not address the specific
technical applications of such laws directly in the regulation text to
provide maximum flexibility for MA plans to be able to adapt their
SSBCI offerings as the legal landscape changes.
[[Page 17433]]
As outlined in the Contract Year 2027 proposed rule and this final
rule, current regulations prohibit all cannabis products from being
offered as SSBCI. Here, CMS acknowledges that not all cannabis products
are illegal under federal law and is amending the regulation to
accurately reflect this distinction. At the time of this rulemaking,
there are only three products that are permissible under applicable
state and federal law and therefore may be covered as SSBCI. Those
products are hulled hemp seed, hemp seed protein powder, and hemp seed
oil. However, should additional products become allowable as the law
continues to evolve, this regulation would allow MA plans in a
subsequent plan year the option to increase their offerings without
requiring additional rulemaking from CMS. Therefore, should other
cannabis-derived products become allowable as SSBCI due to changes in
state or federal law, MA plans must wait until their next bid
submission for the following plan year to add these items to their list
of covered SSBCI.
CMS notes that the reference to the FFDCA in the text of the
regulation is not necessary because the regulation's reference to
current applicable federal law includes the FFDCA. Therefore, CMS is
finalizing the regulation with a modification to read as follows,
``Cannabis products that are illegal under applicable State or Federal
law.''
Comment: Multiple commenters emphasized the therapeutic benefits of
hemp-derived CBD and other cannabinoid products for various medical
conditions including chronic pain, cancer, and dementia. Some
commenters argued that further investment in cannabinoid products could
improve health outcomes and reduce healthcare costs. Others indicated a
need for further research.
Response: CMS appreciates these recommendations, however given that
CMS does not regulate cannabis and hemp-derived cannabis products, many
of these comments were outside the scope of this proposal. CMS would
like to note that while the current list of products that are available
to be offered as SSBCI is limited, should additional products become
allowable in the future CMS will accept a variety of evidence from MA
plans to meet the bibliography requirement set forth at 42 CFR
422.102(f)(3), including randomized control trials, case studies or
internal analyses to demonstrate that the proposed benefits meet the
``reasonable expectation'' that the benefit improves or maintains the
overall health or function of the enrollee. CMS encourages MA plans
that wish to offer these products as SSBCI to monitor emerging studies
regarding the efficacy of these products.
Comment: A commenter recommended that CMS conduct a cost-benefit
analysis of hemp coverage, specifically examining potential Medicare
savings from reduced hospitalizations and emergency room visits if hemp
were covered by MA plans.
Response: CMS thanks the commenter for their input, however this
comment is outside the scope of this proposal. The amendment to the
regulation text is meant to ensure conformity with federal and state
law. CMS did not propose to evaluate the clinical benefit or cost of
hemp coverage in MA but will consider it as laws evolve.
Comment: Another commenter recommended that CMS clarify how its
proposals regarding treatment of cannabis and hemp products as SSBCI
would apply if the Administration finalizes policies to reschedule
marijuana from Schedule I to Schedule III of the Controlled Substances
Act.
Response: CMS appreciates this comment and the opportunity to
clarify, especially in light of Executive Order (E.O.) 14370,
``Increasing Medical Marijuana and Cannabidiol Research,'' which was
issued on December 18, 2025. The E.O. directs the Attorney General to
expedite the rulemaking process to reschedule marijuana from Schedule I
to Schedule III under the Controlled Substances Act, among other
things. Should cannabis be rescheduled to Schedule III, this would
change its status under the Controlled Substance Act. However,
rescheduling alone would not automatically make cannabis products
allowable SSBCI unless the relevant products also meet other applicable
State and Federal laws, including the FFDCA.
Comment: Another commenter noted that in light of possible changes
to acceptable SSBCI benefits, CMS should have a clear process and
timeline to solicit feedback and receive public input on permissible
SSBCI and ensure that plans have sufficient time to analyze this
information for their advanced planning for annual submissions of bid
and benefit packages.
Response: CMS appreciates this comment, and as CMS did here, any
changes to SSBCI requirements will be made by requesting public comment
on a proposed regulation through a Notice of Proposed Rulemaking
(NPRM). However, CMS regulations do not include an exhaustive list of
every qualifying item or service that meets the requirements for CMS
approval as SSBCI. CMS will ensure that updates to bid instructions and
other relevant sub-regulatory guidance are timely and provide
sufficient advance notice to MA plans. As a reminder, CMS releases
guidance every spring regarding standards for bid review and evaluation
prior to the bid submission. In these memos and other guidance, CMS
includes references to resource mailboxes for MA benefit questions and
MA policy questions. These mailboxes are open year-round for plans and
other stakeholders to submit questions, including questions regarding
supplemental benefits. MA organizations that are looking to cover new
or novel benefits are strongly encouraged to raise those to CMS well in
advance of bid submission to allow ample time for the MA organization
to provide, and for CMS to review, information explaining how the
applicable statutory and regulatory standards are met for the proposed
benefits without the time pressures of the bid review process. This is
especially true regarding cannabis and cannabidiol products, as the
legal landscape continues to quickly evolve.
CMS notes that MA plans are prohibited from making mid-year benefit
changes pursuant to 42 CFR 422.254(a)(5), which prohibits MA plans from
changing benefits, cost-sharing and premiums for an MA plan after they
begin marketing for the prospective plan year. Therefore, should other
cannabis-derived products become allowable as SSBCI due to changes in
state or federal law, MA plans must wait to add these items to their
list of covered SSBCI in their next bid submission for the following
plan year.
CMS appreciates commenters' input in this area and is finalizing
the proposed amendment to regulation text with a modification. CMS is
finalizing that 42 CFR 422.102(f)(1)(iii)(G) be amended as follows:
``Cannabis products that are illegal under applicable State or Federal
law.''
A. 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
[[Page 17434]]
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 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)) provide 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 proposed 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 proposed 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 proposed 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.
We proposed to 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));
[[Page 17435]]
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 were proposed to be codified at Sec. Sec.
422.62(b)(3), (b)(5), (b)(20), (b)(23), (b)(27), and 423.38(c)(2),
(c)(8), (c)(12), and (c)(36). Language was added to each SEP we
proposed to limit to require CMS approval. The language indicates that
CMS approval is required and references how CMS approval will 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 proposed 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 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, in the
Contract Year 2027 proposed rule, we concluded that the changes to the
regulatory text would not adversely impact plan sponsors, individuals,
or agents/brokers, nor would the changes have any impact on the
Medicare Trust Funds or result in a paperwork burden. We also stated
that 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 solicited comments on this proposal as well as comments on how
these SEPs can be further improved for beneficiaries. The following is
a summary of the comments we received and our responses.
Comment: Many commenters expressed support for the proposal to
codify limits to certain SEPs that would require prior CMS approval,
via receipt of a notice or election through a CMS-operated mechanism.
Response: We thank the commenters for their support.
Comment: A commenter opposed this proposal and recommended CMS
allow agents and brokers to assist individuals to enroll directly with
a new election mechanism instead of limiting elections to existing CMS-
operated mechanisms.
Response: We thank the commenters for their suggestion to create a
new election mechanism that would allow agents and brokers to assist
individuals more directly. However, we disagree that a new mechanism is
necessary to maintain the ability for agents and brokers to assist
individuals. As we stated in the proposal, agents and brokers are still
able to assist individuals making elections using these SEPs and have
their involvement captured by 1-800-MEDICARE and the OEC by providing
their National Producer Number, which is transmitted to the plan along
with the enrollment request. We believe that the existing process
allows agents and brokers to actively guide individuals with their plan
options and during their election request and results in no additional
burden to the plan.
Comment: A commenter opposed this proposal and stated that these
SEPs are not used regularly but broadening the SEPs could lead to more
churn. The commenter also suggested that educational materials on these
SEPs be updated and designed with the reader's health literacy level in
mind.
Response: We thank the commenter for their suggestion to improve
educational materials and will bear in mind the readability of
materials when updating guidance and education materials regarding
codification of this proposal. We disagree with the commenter's
statement that these SEPs are being broadened by the proposed changes
and could lead to enrollment churn. This proposal codifies existing
restrictions on these SEPs, which puts guardrails on them, and does not
broaden their availability. Therefore, codifying these requirements is
likely to result in no change or reduce enrollment churn.
Comment: A commenter opposed the inclusion of the SEP for other
exceptional circumstances in this proposal. The commenter stated that
requiring CMS approval would place an undue burden on beneficiaries
wishing to make an election, particularly for individuals looking to
enroll in a C-SNP.
Response: We thank the commenter for this perspective on how the
SEP for other exceptional circumstances might be used by individuals
wishing to enroll in a C-SNP. However, we disagree with the suggestion
that the SEP for other exceptional circumstances not be limited to
situations in which CMS approval is provided via notice or use of a
CMS-operated election mechanism. As stated previously, we proposed to
codify these limitations in order to better oversee the use of SEPs
that may not be appropriate for plans to use without prior CMS
eligibility determination and approval. This is especially true for the
SEP for other exceptional circumstances, which covers situations not
otherwise captured in the SEPs in regulation and is determined on a
case-by-case basis. We believe that CMS is the only party that
[[Page 17436]]
can reasonably make these SEP determinations. We remind the commenter
that this limitation does not apply to an SEP that is relevant to
enrollment in a C-SNP, the SEP for individuals who are eligible or are
found ineligible to enroll in a C-SNP (Sec. 422.62(b)(13)), which is
designed to allow for an enrollment in a C-SNP that serves individuals
with specific severe or disabling chronic conditions.
Comment: A commenter opposed this proposal and stated that the
change would have significant operational impacts on plans.
Additionally, the comment stated that beneficiaries may not understand
the enrollment process through CMS-operated mechanisms, which may delay
enrollments and result in continuity of care issues. The commenter
stated that plans would need to implement systems changes to validate
these SEPs, update workflows, and train staff and agents to prevent
enrollment errors.
Response: We appreciate the commenter's perspective on potential
impacts of this proposal. However, we disagree that this change would
result in additional burden. As stated previously, the limitation on
these SEPs is already implemented and long-standing. Additionally, the
procedural steps plans must take to receive and process election
requests and its impacts have already been accounted for in existing
burden calculations and plans should not need to make procedural
changes in response to this proposal if they are currently following
long-standing enrollment guidance.
Comment: A commenter in support of this proposal also suggested
that CMS similarly limit the SEP for individuals affected by a
government-entity declared disaster or other emergency to only CMS-
operated election mechanisms.
Response: We thank the commenter for their support and their
suggestion. We will consider limiting the SEP for individuals affected
by a government-entity declared disaster or other emergency to only
CMS-operated election mechanisms in future rulemaking.
Comment: Several commenters in support of this proposal requested
clarification on whether individuals will be expected to provide a copy
of a notice of SEP eligibility or otherwise provide documentation to
prove their eligibility for these SEPs. The commenters also recommended
that the availability of State Health Insurance Assistance Programs
(SHIPs) should be promoted whenever individuals need assistance with
the SEPs.
Response: We thank the commenters for their requests for
clarification and recommendations. Individuals will not be expected to
provide a copy of a notice of SEP eligibility when enrolling through a
CMS-operated mechanism, or other mechanism when allowed. Currently,
only the SEP for individuals who disenroll in connection with CMS
sanction requires receipt of a notice for SEP eligibility, in which
case they will not be expected to provide the notice or other
documentation to establish eligibility, they must only attest that they
received the notice about SEP eligibility; the other SEPs are approved
through the use of a CMS-operated mechanism, eligibility in these cases
is established through attestations made to CMS during the election,
such as verbal attestations of the conditions of eligibility made to a
1-800-MEDICARE customer service representative. We will consider the
commenters' suggestions about referring individuals to SHIPs when
developing guidance and educational materials for these SEPs.
Comment: A commenter in support of this proposal recommended that
CMS improve existing guidance and educational materials on these SEPs
and mention the availability of agent/broker assistance.
Response: We thank the commenter for their support and
recommendations. We will update our guidance and educational materials
to reflect the codification of this proposal and explain the
availability of agent/broker assistance where appropriate.
Comment: A commenter asked for clarification on whether current
regulations allow CMS to create SEPs in response to plans providing
false information related to provider networks.
Response: This comment is outside of the scope of the final rule as
this proposal did not discuss creating new SEPs.
After consideration of the public comments we received, we are
finalizing this proposal without modification.
B. 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 more than 50 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, and
reduce waste. The changes to the use and release regulations described
in section IV.C of the proposed rule 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
[[Page 17437]]
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, hereafter referred to as Original Medicare (OM)
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.\38\ \39\ Both encounter
data and RAPS data submissions include beneficiary diagnoses.
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\38\ Refer to the CSSC Operations website for information about
the submission of encounter data and RAPS data.
\39\ 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 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,\40\ 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 regulatory 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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\40\ 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
[[Page 17438]]
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 OM utilization data, to support the administration of the
Medicare program and to more 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 proposed 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 OM 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 OM 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
required to be established between CMS and the requesters prior to
disclosing the data. Data sharing agreements include, but are not
limited to, information exchange agreements (IEA),\41\ memoranda of
understanding (MOU), and data use agreements (DUAs),\42\ 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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\41\ 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.
\42\ 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
[[Page 17439]]
improve health care delivery. As outlined in section IV.C of the
proposed rule, we 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 will 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 will 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 OM claims. The 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.
3. Broadening of the Use and Release of Risk Adjustment Data
CMS proposed 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 OM 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 OM 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 proposed 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 updates provide for the
stipulation that this regulation does not limit CMS disclosure of data
as authorized under separate statutory authority.\43\ We proposed to
repeal the nine specified uses currently listed in Sec. 422.310(f)(1)
that would be encompassed under the revised paragraph (f) text. We also
proposed 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 data necessary and on the
release of dollar amounts at the encounter level, which were moved to
Sec. 422.310(f). We noted in the proposed rule, however, that
protections to the beneficiary identifying information would be
encompassed under the data sharing procedures in the revised paragraph
(f) text.
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\43\ 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 proposed 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.
In the Contract Year 2027 proposed rule, CMS discussed 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
[[Page 17440]]
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. In the Contract Year 2027
proposed rule, CMS stated it was 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 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 in the Contract Year 2027 proposed rule, this change 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.\44\ Consistent with our proposed changes to remove the list
of permissible uses and conditions for release of risk adjustment data,
CMS also proposed to remove the detailed list of exceptions for release
of risk adjustment data prior to reconciliation in paragraph (f)(3).
The 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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\44\ Sec. 422.310(f)(3)(ii) through (f)(3)(v).
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As discussed previously in section IV.C of the proposed rule,
because MA plans have a window of time in which they should submit data
corrections for a given payment year (typically January 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 update allows 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 will 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 updates 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 sought 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. Summaries of and
responses to the public comments on CMS's proposal to revise Sec.
422.310(f) are presented below.
Comment: The majority of commenters supported CMS's proposal to
revise 42 CFR 422.310(f) to ease restrictions on the use and release of
MA risk adjustment data. These commenters emphasized that increased
transparency is necessary given the continued growth of the MA program
and that the proposed revisions would better align MA risk adjustment
data availability with OM data, noting that current regulations
constrained research, oversight, and program evaluation. Commenters
asserted that broader access to MA risk adjustment data would result in
greater transparency and support improved program integrity, research,
innovation, and accountability, including analyses of coding practices,
care delivery, and utilization trends.
Response: CMS thanks the commenters for their support.
Comment: Many commenters supported the flexibility provided with
the proposed regulatory revision to relax restrictions regarding the
timing of release of MA risk adjustment data. Some commenters noted
that delays and gaps in MA data have limited timely evaluation of MA
program impacts on patient outcomes and costs, and emphasized that,
given the growth of MA enrollment, MA data should more closely match OM
data in timeliness, completeness, and quality. Several commenters urged
CMS to ensure the data released is accurate and complete, requesting
that CMS improve the completeness of encounter data to prevent
inaccurate or misleading conclusions. A couple of commenters opposed
the release of pre-reconciled data or urged CMS to maintain
restrictions on pre-reconciled data, warning that incomplete or
unvalidated data could be misinterpreted and result in inaccurate
analysis.
Response: CMS appreciates the thoughtful comments and acknowledges
the concerns raised regarding timeliness and completeness of MA risk
adjustment data. While the proposed revision allows for release of MA
risk adjustment data prior to reconciliation more broadly, CMS
understands that it is not always necessary or appropriate for risk
adjustment data to be used or released prior to the final risk
adjustment data submission deadline, which is when data are considered
reconciled for payment purposes for a given payment year. However, over
time and as encounter data has matured, the
[[Page 17441]]
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. As reflected in the recent changes to Sec.
422.310(f)(3), CMS has identified purposes for which use of the data
prior to reconciliation may be appropriate, such as emergency
preparedness and care coordination, and CMS believes other purposes may
include those for program integrity, emerging health situations, to
support beneficiaries in managing their health by allowing them to
access and share their current data, for example, through the CMS Blue
Button 2.0 Application Programming Interface (API), or for research
initiatives that necessitate timelier data. Having flexibility to
release risk adjustment data prior to reconciliation when necessary and
appropriate reduces regulatory burden and removes barriers that slow
progress and limit opportunities to effectively and efficiently
administer, oversee, and improve Federal programs.
CMS will continue to review requests for pre-reconciled MA risk
adjustment data to ensure that pre-reconciled data are necessary and
appropriate for the requester's purpose. The completeness and validity
of the data will be considered during the review process. An example of
a necessary and appropriate use of pre-reconciled data would be for the
care coordination of beneficiaries participating in State Medicaid
programs. However, since plans have at least 13 months after the end of
the service year to submit diagnoses for payment, relying on diagnosis
information for research or program operations may not always be
appropriate before the final risk adjustment data submission deadline.
CMS continues to employ a range of activities aimed at improving
the completeness and validity of encounter data including submission
outreach, technical assistance, data analysis, and monitoring. These
activities continue to improve the completeness and validity of
encounter data. CMS continues to see evidence in the data that the
efforts by the agency and MA organizations to improve accuracy and
completeness of encounter data have been effective. Specifically, CMS's
analysis conducted in 2023 found that the utilization data are complete
in a similar time frame as OM claims. Further, a recent CMS analysis of
encounter data records with 2021 dates of services submitted for
payment year 2022 found that 97.7 percent of all encounter data records
submitted by the risk adjustment reconciliation deadline (July 31,
2023) had been submitted by August 2022--8 months after the end of the
service year.
Comment: Several commenters stressed the importance of maintaining
appropriate beneficiary privacy protections and enforcing robust
safeguards through data sharing agreements and privacy and security
requirements with expanded data sharing to ensure confidentiality and
compliance with applicable Federal laws. A couple of commenters called
for additional privacy protections, de-identification standards, and
controlled-access environments.
Response: As noted in the proposed rule, CMS will maintain existing
guardrails that protect beneficiary information in accordance with
applicable Federal laws such as the Privacy Act of 1974, section
1106(a) of the Act, and CMS information disclosure regulations at 42
CFR part 401, subpart B. CMS will be able to release an individual's
risk adjustment data when authorized by that individual. For other
kinds of requests for release of MA risk adjustment data, CMS will
release such information in accordance with CMS data sharing procedures
that reflect applicable Federal laws and agency privacy and security
policies, 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 CMS data and enters
into data sharing agreements with data requesters for disclosures of MA
risk adjustment data to ensure that data requesters agree to comply
with CMS privacy and security requirements and data release policies.
CMS maintains that this process contains the necessary checks and
safeguards to appropriately protect beneficiary identifying
information.
Comment: Some commenters requested transparency and clarity on what
MA data fields are available for release and when data would be
released, including requests for publication of a comprehensive data-
element inventory, release cadence, and context notes to avoid
misinterpretation or inaccurate analysis given the complexity of MA
risk adjustment data. A few commenters requested clarity on which
external entities or third parties may receive access to the data,
under what terms or agreements and for what purposes. A commenter
requested CMS retain explicit regulatory language noting that MA risk
adjustment data may be released to States to avoid implying that CMS
might bypass longstanding state partnerships as it broadens authority
for external releases.
Response: MA risk adjustment data can be requested by external
stakeholders, such as an individual, a group, an organization, a State,
or Federal Agency, for a variety of purposes including, for example,
for program administration and oversight, care coordination, research
initiatives, public health preparedness, program integrity, and quality
improvement. CMS does not intend to bypass longstanding state
partnerships as it broadens authority for external releases.
As discussed in the proposed rule, CMS has long-standing data
sharing procedures and pathways for entities to request and obtain
approval for access to CMS data, including risk adjustment data. This
includes an evaluation by CMS to ensure that data requests comply with
applicable Federal laws, regulations, and CMS data sharing policies. 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 that
documents the terms and conditions under which CMS data may be released
and used to ensure that data requesters agree to comply with CMS
privacy and security requirements and data release policies, including
safeguards to protect beneficiary identifying information and
confidentiality. In addition, data sharing agreements provide for
potential enforcement mechanisms and penalties. Requesters of CMS data
are responsible for abiding by applicable federal and state law, as
well as the policies and restrictions of the data sharing agreements.
General information on data products and data files available to
external stakeholders can be found at the following link: https://www.cms.gov/data-research/cms-data/learn-more-about-cms-data. Detailed
information on research requests, including the Research Data Use
Agreement (DUA) and datafiles (including variables) available for
request can be found at: https://resdac.org/.
Comment: Several commenters appreciated that CMS maintained the
regulatory language restricting the release of plan-submitted dollar
amounts, with a few of those commenters stating that this restriction
preserves safeguards on commercially sensitive information and
minimizes the risk of potentially anticompetitive harm. A few
commenters urged CMS to expand transparency by releasing the plan-
submitted dollar amounts at the encounter level, arguing that the
[[Page 17442]]
continued restriction on dollar amounts limits the ability to evaluate
MA spending, provider payment methodologies, and enrollee cost-sharing,
and is inconsistent with broader federal price transparency
initiatives. These commenters asserted that increased disclosure could
improve understanding of MA program performance, value of care, and
benefit beneficiaries without causing competitive harm.
Response: CMS thanks commenters for their comments and acknowledges
concerns regarding the restriction of plan-submitted payment data. At
this time, CMS will maintain the restrictions that currently exist such
that we will not release plan-submitted dollar amounts associated with
the items or services for which data is submitted to CMS pursuant to
Sec. 422.310(b) to 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, 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 at the level of the encounter record without
taking steps to protect the information through aggregation. While
changes in federal laws and regulations, such as the Transparency in
Coverage Final Rule (CMS-9915-F), and Executive Order 14221 ``Making
America Healthy Again by Empowering Patients With Clear, Accurate, and
Actionable Healthcare Pricing Information'' (February 25, 2025) are
making plan pricing information for specific services more widely
available in the group and individual health insurance markets, CMS
believes the dollar amounts plans report at the encounter data record
level are not ready for release at this time. CMS has not provided
extensive guidance for the wide range of payment scenarios that exist
in the MA program. As a result, plan practices for reporting service
level payment amounts vary widely. CMS's research suggests that the
data are a valid representation of MA spending on services in
aggregate, but more research and guidance is needed before more
detailed data can be made available. Consequently, CMS is maintaining
the guardrails for payment data at the level of the encounter as they
were originally finalized in the August 2014 final rule, with the
inclusion of language to clarify that, as stated previously, these
updates do not limit or supersede separate statutory authority that
requires CMS disclosure of the data. We look forward to working with
stakeholders to continue improving the reliability of plan-submitted
payment data and may consider reassessing the restriction on its
release in the future.
Comment: A commenter raised concerns about commercial use of MA
risk adjustment data, particularly with AI/machine learning companies,
and urged CMS to limit or prohibit ``profit-driven'' reuse of such risk
adjustment data.
Response: In the August 2014 final rule CMS stated our intention to
have consistent policies for the release of data across the OM (Parts A
and B) program, the Part D prescription drug program, and the Part C
Medicare Advantage program. We noted that in the event policy regarding
the release of Parts A, B, and D data for commercial purposes were to
change, we would also revise our Part C risk adjustment data sharing
policies to be consistent with that change. Since 2014, CMS has
established an innovator research program that allows a researcher
associated with a for-profit organization to request data for research,
or anyone to conduct research with the intent to create a product or
tool to be sold. For example, an innovator could use CMS data to
develop care management or predictive modeling tools. There are a
number of additional protections in place to access data through the
innovator research program. First, innovators provide information on
the research that will be conducted. This is reviewed and approved by
the CMS Privacy Board.\45\ Second, innovators are required to provide
information on the product, tool, or analyses that will be created
using the CMS data. This information undergoes an extensive review to
ensure that the data is not used to exploit beneficiaries or to create
fraud or abuse in the CMS programs. CMS data cannot be used for
marketing purposes. Finally, innovators are only permitted to access
CMS data that are approved for their research protocol within the CMS
Chronic Condition Warehouse Virtual Research Data Center (CCW VRDC).
The CCW VRDC is a virtual research environment for securely accessing
and analyzing CMS data. All individual-level data are stored in the CCW
VRDC and cannot be downloaded. Innovators only have the ability to
download aggregated and de-identified reports and results to their own
personal workstation. CMS maintains that these protections provide
sufficient safeguards on the commercial use of MA risk adjustment data.
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\45\ The CMS Privacy Board is an internal CMS panel that reviews
research requests for compliance with CMS data policies, but does
not act as a HIPAA Privacy Board.
---------------------------------------------------------------------------
Comment: We received some comments that were out of the scope of
this regulation including broader transparency for MA data beyond risk
adjustment data such as plan-level metrics, the cost of MA encounter
data, more timely reporting requirements, additional reporting
requirements, updates to the Part C and Part D risk adjustment models,
and improvements to condition specific data. Additionally, some
commenters requested CMS ensure plans receive risk adjustment data as
early as possible for beneficiaries that move into their plan and
others voiced concern regarding plan-initiated medical record requests.
Response: We thank the commenters for their feedback; however, we
note that these comments are out of scope for the changes proposed to
Sec. 422.310(f). This provision concerns the use and release of the
risk adjustment data MA organizations are required to submit to CMS.
This provision does not address arrangements between plans and
providers, risk adjustment methodology, or plan submission
requirements.
After consideration of the public comments we received, we are
finalizing the provisions at Sec. 422.310(f) as proposed.
C. 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.
[[Page 17443]]
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.\46\ 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).\47\
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\46\ 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).
\47\ 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 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. Provisions
We proposed standardized, detailed documentation requirements for
coverage determinations and POS claim adjudications, used for purposes
of determining coverage under the Part D benefit. We proposed
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,
[[Page 17444]]
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 proposed 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 requirement to make available the records containing
information used to make the coverage determination or POS claim
adjudication.
We received public comments on these provisions in the proposed
rule. The following is a summary of the comments we received and our
responses.
Comment: Numerous commenters were in support of the proposed
provision to require standard documentation for coverage determinations
and POS edits that determine coverage. Of note, commenters acknowledged
this was critical to effective auditing, promoting compliance,
improving consistency, enhancing beneficiary understanding of coverage,
reducing administrative burden, and enhancing program integrity. One
commenter also expressed support for the provision as it levels the
playing field for smaller health plans and increases transparency for
health plans that are vertically integrated. In addition, a few
commenters noted that they are in support of documentation standards as
long as they avoid duplicative and prescriptive requirements, and one
commenter suggested providing documentation templates.
Response: CMS appreciates commenters' support on its efforts to
strengthen program integrity. It is CMS's intention to standardize
documentation standards for all Part D plan sponsors to ensure proper
oversight of the program while not increasing burden for plan sponsors.
CMS understands the commenter request for documentation templates;
however, given the vast array of systems and flexibilities for plan
sponsors and the varying information needed for different requests, CMS
cannot create one singular template that would be applicable
universally.
Comment: A few commenters requested clarification on the meaning
and intent of ``original format documentation,'' particularly as it
pertained to audio recordings. Commenters expressed concern for the
administrative and financial burden of maintaining audio recordings,
especially on small health plans. Another commenter requested examples
of original format documentation and if call notes or transcripts would
suffice. It was further recommended that retention of transcripts be
permitted in lieu of recordings. A few commenters suggested it would
create a great burden especially for plan sponsors to obtain
communications between pharmacists, prescribers, enrollees, or other
stakeholders that plan sponsors do not currently collect or have direct
access to, such as pharmacies that cannot transmit their internal call
notes to plans. One commenter recommended that CMS clarify if scanned
or digitized copies of documents are considered original records for
purposes of compliance.
In addition, a commenter expressed concern that this requirement
may read as retention beyond the 10-year standard, effectively
increasing costs, annual coverage determinations and burden. It was
noted by another commenter that CMS already can request the original
coverage determination documentation during audit and that no new
documentation requirement is needed.
Another commenter supported the requirement for plan sponsors to
maintain original format documentation.
Response: CMS understands the commenters' concerns and requests for
clarification surrounding ``original format documentation.'' In regard
to audio recordings, we do not expect the retention of the actual audio
recording; a transcript or call note(s) of the call will be sufficient
documentation. The maintenance of transcripts or call notes should not
increase burden on plan sponsors because this information should
already be maintained. However, the information in a transcript or call
note(s) of an audio recording must include sufficient information to
allow CMS to fully evaluate the appropriateness of coverage under the
Part D program in accordance with Sec. 423.505(d)(ii). Additionally, a
scanned or digitized copy of a request will be considered original
format documentation.
Regarding the comments about obtaining communications between
pharmacists, prescribers, enrollees, or other stakeholders and the
worry that plan sponsors do not have access to those calls or
communications, CMS agrees with the commenters' concerns and did not
intend to suggest that those communications be collected. Rather, the
proposed provisions related to
[[Page 17445]]
expectations of Part D plan sponsors, including that plan sponsors
maintain communications that they have with these different entities,
not communications that those entities have with one another. CMS is
therefore modifying the language of the proposed rule to clarify that
the communications that must be maintained are between the plan sponsor
and those entities.
Plan sponsors must have documentation to support Part D coverage
determinations and POS edits that determine coverage, including when an
authorization is reauthorized for an extended period or original
approved for a timeframe greater than 10 years. If the authorization is
still ongoing, documentation must be available to support it.
CMS agrees that original coverage determination documentation is
already expected upon audit; however, we disagree with the commenter
that no new documentation standards are necessary. As stated in the
proposed rule, the documentation CMS receives during an audit varies
greatly among plan sponsors. An example would be a call note stating
``approved Part D'' instead of documentation reflecting the questions
asked and answers provided during the call. For this reason, CMS
believes it is imperative to establish standards for strengthening
oversight and ensuring all plan sponsors are being held to the same
standards.
Comment: A few commenters requested clarification on what is meant
by both the ``entity who submitted the request'' and the ``name and
title (as applicable) of the individual the Part D plan sponsor
contacted to verify the request,'' including what is meant by ``verify
the request.'' One commenter questioned how the name and title of the
requester applied to a POS claim. A few commenters requested that CMS
clarify the expectation for handling requests when information is
unavailable to the plan sponsor, including the expectation for
documenting the name and title of an individual when additional
information is not required to verify a request. It was also noted that
plan sponsors, especially PDPs, do not have contracts with the
providers and cannot enforce the information being provided. A
commenter also questioned the ability of plan sponsors to obtain this
information, especially from large provider groups. Additionally, a
commenter noted that these requirements will extend adjudication
processing time to ensure documentation retrospectively while not
providing any real-time clinical decision-making benefit, while another
noted that the requirements proposed goes far beyond what is reasonable
or necessary for effective program oversight.
A few commenters expressed concern over providing the information
CMS proposed to require, as the NCPDP standard for coverage
determinations does not allow for the collection of this information. A
commenter noted that plan sponsors often have no mechanism to capture
this information, especially the identity of the individual submitting
the pharmacy claim and verbal discussions between the prescriber,
pharmacist and patient. Another commenter noted that plans are
prohibited from requiring submission(s) on a specific form and must
accept any format.
Another commenter supported the requirement to document the
identity and title of the individual submitting a coverage
determination or POS request, as well as the individual contacted to
verify it as it establishes accountability, improves the accuracy and
efficiency of follow-up when documentation is incomplete or
inconsistent, enables identification of aberrant or high-risk
submission patterns, and supports CMS's ability to validate that drugs
were paid for medically accepted indications (MAIs).
Response: The ``entity who submitted a request'' refers to the
person who submitted the coverage determination request. CMS's Part C &
D Enrollee Grievances, Organization/Coverage Determinations, and
Appeals Guidance \48\ states that an individual or entity authorized to
request a coverage determination include: (1) enrollee, (2) enrollee's
appointed representative, (3) prescribing physician or other
prescriber, or (4) any individual representative authorized under state
or other applicable law. This information is important to CMS for
determining that an appropriate entity requested the coverage
determination and allows CMS to monitor for potential fraud, waste, and
abuse in instances where an entity is requesting determinations on
their own behalf to increase utilization and payment.
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\48\ Parts C & D Enrollee Grievances, Organization/Coverage
Determinations, and Appeals Guidance, (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).
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In regard to the ``name and title (as applicable) of the individual
the Part D plan sponsor contacted to verify the request,'' CMS is
referring to those situations in which plan sponsors conduct further
follow up with an individual or entity to clarify a coverage
determination. For example, in the case of conflicting or missing
information needed to approve coverage, CMS would want to ensure that
the individual contacted would be able to provide the information
necessary to determine coverage. For instance, a beneficiary may not
have the necessary information to determine if a drug or service was
covered by Medicare. CMS believes this information is still relevant,
when available, for a POS edit that determines coverage. In accordance
with the Prescription Drug Benefit Manual (PDBM), a plan sponsor that
approves or denies a drug through application of a POS edit has made a
coverage determination and is subject to all applicable coverage
determination standards, timelines, and requirements. As such, plan
sponsors maintain some level of information or automation that allowed
the POS edit to make an appropriate coverage determination. In these
instances, CMS would expect to see what in their system determined that
the drug was covered under the Part D program and make that information
available to CMS upon audit.
However, CMS does understand that this information may not be
available in all instances and/or may be unobtainable by the plan
sponsors within authorization timeframes due to a variety of reasons,
such as unresponsive entities or format of the coverage determination,
including the NCPDP standard. CMS did not intend to require plan
sponsors to reject a claim based on the lack of this information, but
to include it when reasonable and obtainable. CMS does not expect plan
sponsors to perform additional outreach if the information available to
the plan sponsor clearly illustrates how a decision for Part D coverage
was made.
Based on the comments received, CMS is modifying the proposed
regulatory text to make it clear for plan sponsors that the identity of
the individual requiring the coverage determination be provided when
available. CMS already had proposed ``as applicable'' language for the
name and title of the individual the plan contacted to verify the
request, but is modifying the proposed language to better clarify that
the identity of the individual the plan contacted to verify the request
refers to who was contacted in instances when additional information is
needed to complete a request.
Comment: A few commenters questioned the need for a diagnosis code
to establish a MAI, as this information is captured in different
manners, such as ICD-10 codes, provider attestations and medical record
review. Other
[[Page 17446]]
commenters questioned if widespread Part D coverage of drugs is a
significant driver of improper payments, especially in cancer
treatments and questioned if gathering the MAI at the POS is warranted
given risks of imperfect, insufficient, or delayed coding especially in
oncology and ultra rare disease. A commenter suggested that CMS clarify
how a plan sponsor should adjudicate and document coverage
determinations, including when both coverable and non-coverable
diagnoses are listed and clarification cannot be obtained within
adjudication timeframes.
Response: CMS appreciates the commenters' discussion on the
requirement to provide a diagnosis code for coverage determinations
reviewing for a MAI. CMS agrees that a diagnosis code itself may be
limiting in some instances as suggested by commenters in oncology or
rare disease, and CMS is modifying the language in the proposed rule to
remove the terminology ``code.'' This will provide the plan sponsors
with flexibility in instances where the diagnosis is provided by ICD-10
code, prescriber attestations, or medical records.
CMS does expect plan sponsors to ensure that drugs are only covered
under the Medicare Part D program when they are prescribed and
dispensed or administered for an MAI in accordance with the section
1860D-(2)(e)(4) of the Act. CMS does recognize that not all drugs can
be monitored for MAI at the POS, specifically as it relates to routine
drugs. However, plan sponsors do make formulary decisions for their
organization as it relates to coverage determinations, such as prior
authorization, for drugs that have a high likelihood of being utilized
for a non-MAI. In these instances, CMS expects that plan sponsors
document a diagnosis used by the plan sponsor in making a coverage
determination under the Part D benefit. In instances where there is
conflicting information, CMS expects plan sponsors to make a reasonable
determination within the adjudication timeframes but notes that plan
sponsors should retrospectively be getting clarification to ensure
proper coverage for the drug.
Under the rule as proposed, plan sponsors would be required to
supply a diagnosis on any coverage determination or POS edit that
determines coverage for only those coverage determinations reviewing a
drug for a MAI. Based on the commenters' feedback, CMS is modifying the
proposed language to clarify and be more explicit that the requirement
for a diagnosis is only for those reviews of a MAI.
Comment: A commenter noted that plan sponsors may feel compelled to
require a diagnosis on all prescriptions for a likelihood of non-Part D
covered uses, even though CMS does not explicitly propose this. The
commenter further noted that prescribers are not required to include
diagnosis codes on all scripts and NCPDP standards do not require
pharmacies to submit them.
Additionally, a commenter noted that CMS should establish that
coverage determinations made via ePA transactions conforming to adopted
standards (for example, NCPDP SCRIPT or successor standards) are
compliant with documentation requirements when the structured
transaction data is retained, as this includes clinical criteria
responses, attestations, and decision outcomes.
Response: CMS agrees with the commenter that requiring a diagnosis
on all prescriptions was not proposed by CMS and is, therefore, outside
the scope of this provision.
Further, CMS disagrees with the commenter that CMS should establish
that coverage determinations made via an adopted standard are compliant
with the documentation standards. CMS recognizes that different
authorizations require different information, and CMS cannot state that
any one standard will fulfill all requirements of all request types.
Comment: A commenter supported CMS's proposal for standardization
but suggested that CMS coordinate audit methodologies and create
standard requirements and protocols across Centers for consistency, to
minimize duplication and improve understanding and compliance. The
commenter noted that the proposal only affects CMS Part D Self-Audits,
which would cause misalignment between auditing programs and increase
burden. It was also noted by a commenter that currently, plan sponsors
are not told why a PDE failed and not offered the opportunity to rebut,
which is inconsistent with other program audits in CMS. A few
commenters questioned the interplay between CMS's expectations for plan
sponsors to approve coverage determinations timely and utilize
information available while also expecting detailed documentation
retrospectively.
Response: CMS thanks the commenters for their feedback. CMS
currently coordinates internally on upcoming audits and methodologies.
CMS will continue to work internally to enhance program auditing by
reducing any audit duplication, minimizing burden for plan sponsors,
and creating consistency when able. CMS also clarifies that these
requirements would apply to any program integrity PDE record review
audit, which currently would include CMS's Part D Self-Audits and
National Audits. CMS believes that these proposed standards will
streamline auditing and ultimately make it easier for plan sponsors to
provide case files upon audit, as well as create consistency across
plan sponsors. CMS appreciates the commenters' concern for the current
audit methodology in which plan sponsors are not provided why a
specific PDE record failed and subsequently no mechanism to appeal. The
audit methodology, including determination rationale, is not a part of
this rule and is outside the scope of this specific provision; however,
CMS will take this comment into consideration for audit enhancements.
In addition, CMS notes that it proposed to create a mechanism for
appeal elsewhere in the proposed rule, which is being finalized at 42
CFR part 423 subpart Z (90 FR 54962). CMS also recognizes that plan
sponsors have expectations to approve or deny determinations within
adjudication timeframes set by CMS using the best available
information. However, if a plan sponsor utilizes the best information
available and knows that information was missing or conflicting, plan
sponsors should be retrospectively performing outreach to ensure
appropriate coverage of its drugs, items or services.
Comment: Several commenters supported the proposed documentation
standards but noted that CMS's formulary oversight lacks transparency.
Of note, stakeholders have limited insight into how CMS evaluates
submissions and utilization management criteria. Specific criteria to
increase transparency were recommended including quarterly or annual
summaries of Part D formulary review, structured process for
stakeholder input, standardized reporting and transparency for a
variety of indicators such as coverage determinations by drug category,
approval and denial rates, average turnaround times and the clinical
criteria applied, and auditing to identify patterns of inappropriate
denials and denial appeals.
Response: CMS thanks the commenters for their concerns over CMS's
formulary oversight; however, that subject is outside the scope of the
proposed provisions.
Comment: A few commenters noted that there is no differentiation
between coverage determinations and POS
[[Page 17447]]
determinations. One commenter expressed that POS decisions are not
coverage determinations and should be exempted from the more extensive
documentation CMS is proposing, as at the pharmacy level it could
disrupt efficient real-time coverage authorization processes.
Response: CMS agrees with the commenters that not all POS decisions
are coverage determinations, such as those triggered based on an
approved formulary criteria such as quantity limits. However, in
accordance with the PDBM, a plan sponsor that approves or denies a drug
through application of a POS edit has made a coverage determination and
is subject to all applicable coverage determination standards,
timelines, and requirements. As such, plan sponsors maintain some level
of information or automation that allowed the POS edit to make an
appropriate coverage determination. In these instances, CMS would
expect to see what in their system determined that the drug was covered
under the Part D program and make that information available to CMS
upon audit. For these reasons, CMS proposed that only coverage
determination and those POS edits utilized to determine coverage are
subject to these requirements.
Comment: A few commenters expressed concerns over the implications
for pharmacies and pharmacists. It was noted that pharmacists work in
fast-paced environments and verbal exchanges are not recorded, and
therefore, mandating capture would disrupt workflow, reduce patient
care time, and add administrative burden. A commenter suggests that CMS
ensure Part D plan sponsors are solely responsible for recording these
interactions.
Response: CMS clarifies that pharmacists and pharmacies are not
subject to the requirements proposed at Sec. 423.505 and would not be
held accountable for capturing exchanges with the plan sponsors. The
requirements proposed are applicable to the plan sponsors contracted by
CMS and subject to the requirements at Sec. 423.505.
Comment: A few commenters expressed concern over PDE records, upon
audit, being subject to deletion for not having all information
documented and the implications it could have on timely decision
making, conflicting with CMS's beneficiary-first approach to coverage
determinations. It was noted that plan sponsors may hesitate to approve
coverage for high-cost drugs, impose stricter internal evidence
requirements than medically necessary, or require additional
documentation slowing access. Another commenter expressed that the
requirement to maintain ``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'' is broad
and unclear especially when tied to PDE record deletion upon audit.
Commenters recommended that CMS provide alternative oversight
approaches that leverage existing documentation requirements and
improved audit methodologies. Alternatively, another commenter
recommended that CMS soften the terminology from ``will'' to ``may'' in
regard to marking a PDE record as improper.
Response: CMS, through previous comment responses, clarifies that
not all information in the documentation standards is required for
every coverage determination and POS edit that determines coverage. For
CMS to provide oversight and ensure that plan sponsors are meeting
their requirements to only provide coverage for Part D when it meets
the definition of a Part D drug, CMS must be able to review the
information utilized by the plan sponsor. When not documented
sufficiently, CMS is unable to determine that it was appropriately
covered under Medicare Part D, which may lead to an audit finding that
the PDE was improper. CMS has modified the proposed regulatory text to
clarify that not all requirements are expected for every determination,
as not every determination is evaluating the same criteria. The
language modifications clarify that some requirements are only
necessary when applicable or available, while others like the questions
asked and responses received that led to coverage under Part D are
required for documentation to be considered sufficient for CMS to
evaluate appropriateness. Therefore, documentation provided to CMS upon
audit that does not contain each proposed requirement will not
automatically mean that a PDE records is deemed improper.
Comment: A commenter recommended that CMS adopt an audit approach
to focus on enhanced documentation review on coverage determinations
with elevated program integrity risk, drugs with Part B/D coverage, or
drugs with unknown fraud or abuse patterns. It was noted that this
approach targets resources without imposing uniform burden across all
coverage determinations. Another commenter suggested adopting a risk-
based audit approach, where plans with strong compliance histories or
those in the upper performance quartile are audited less frequently.
Response: CMS clarifies that the program integrity PDE record
review audits currently focus on enhanced documentation review for
coverage determinations and POS edits that determine coverage,
specifically for drugs, items, or services that have a high likelihood
that, (1) coverage is available under Parts A or B, (2) the drug is
excluded from coverage or otherwise restricted under Part D, or (3) the
drug is used for non-medically accepted indications
Comment: A commenter expressed that these requirements may slow
prior authorization and coverage determination processes that are in
opposition to CMS's efforts to streamline administrative requirements.
It was suggested that these requirements could hinder the industry's
progress toward automation and electronic prior authorization and could
unintentionally undermine both beneficiary access and the modernization
goals shared by CMS and plan sponsors. It was recommended that CMS
consider not finalizing the proposed documentation language and instead
work with plans to develop documentation standards that support program
integrity without creating operational inefficiencies or impeding
automation efforts.
Response: CMS thanks the commenter for the suggestions. CMS's
intent is not to change the current process for prior authorization and
coverage determinations, but rather to have the plan sponsors document
the information they are already collecting to determine coverage under
Medicare Part D when approving coverage determinations or POS edits
that determine coverage. CMS is modifying the proposed language to
clarify not all information is required in all situations to address
concerns about increasing administrative burden to gather the
information proposed.
Comment: Several commenters opposed CMS's provision to standardize
documentation requirements. Overall concerns expressed pertain to
unintended consequences for beneficiary access, increased
administrative burdens, and financial risk.
Response: CMS thanks the commenters for sharing their concerns
regarding the proposed provisions. Many of the specific concerns voiced
by these commenters that led to the consequences of beneficiary access,
increased administrative burdens, and financial risk were addressed in
other comments. CMS believes that modifications to the regulatory
language
[[Page 17448]]
proposed will mitigate many of the commenters' concerns. For example,
adding that some of the requirements are ``as applicable'' allows plan
sponsors discretion in the documentation required based on the specific
evaluation criteria for each coverage determination and when the
information is not obtainable due to outreach going unanswered. CMS
does not expect plan sponsors to do additional outreach for coverage
determinations but does expect plan sponsors to provide sufficient and
clear documentation that shows how a coverage determination or POS edit
that determines coverage led to Medicare Part D approval. CMS believes
the burden is minimal and the benefits of program oversight and
beneficiary safety vastly outweigh the perceived burden by plan
sponsors.
After consideration of the public comments we received, we are
finalizing the proposal as modified.
D. 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 TPMO 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 proposed 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,
[[Page 17449]]
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 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. When proposing these changes,
CMS solicited comment on how the Agency should identify when a
``discussion of benefits'' occurs.
In the Contract Year 2027 proposed rule, CMS only proposed changes
to the TPMO disclaimer provision at Sec. Sec. 422.2267(e)(41)(ii) and
423.2267(e)(41)(ii). Thus, the proposal did 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 also proposed to remove SHIPs as a source of information from
the disclaimer. CMS recognized 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 for
beneficiaries. SHIP volunteers may not always have the expertise to
help beneficiaries navigate increasingly complex MA and Part D
programs. CMS stated 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. CMS also recognized 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 stated 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.
In summary, and for reasons previously discussed, CMS proposed to
revise introductory text in 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 proposed 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 solicited comments on this proposal and appreciates
stakeholders' input on the proposed changes. The Agency received the
following comments and provided responses as follows:
Comment: CMS received several comments supporting the proposal to
adjust the timing of when TPMOs are required to verbally convey the
disclaimer during a call. A few commenters noted that the first minute
of the sales call is not the most effective place to present the TPMO
disclaimer. These commenters agreed that conveying the disclaimer
before benefits are discussed ensures beneficiaries understand the role
and affiliation of the marketing organization before receiving
substantive information that could influence decision-making.
Additionally, some commenters noted that relaxing the existing
requirement for the disclaimer to be conveyed within the first minute
of the call is a common-sense change that would retain important
beneficiary safeguards and reduce confusion while preserving disclosure
objectives.
Response: CMS thanks commenters for supporting this proposal.
Comment: CMS received several comments disagreeing with the
proposal to adjust the timing of when TPMOs are required to verbally
convey the disclaimer during a call. A commenter expressed concerns
that delaying the disclaimer would permit TPMOs to harvest personal
information from callers who would not share their information if they
knew the limits of the plans the TPMO offers. Others were concerned
that beneficiaries would not have immediate awareness of the scope of
the conversation they are having before being lured into any kind of
discussion about plan choices, and that beneficiaries largely do not
understand how MA plans' networks work, so it is essential to
immediately provide the disclaimer. A commenter also noted that
maintaining the current requirement would maintain transparency and
consistency in MA plan marketing.
Response: CMS appreciates the concerns raised by commenters. The
Agency is committed to ensuring the protection of beneficiaries'
personal data. However, CMS respectfully disagrees with the assertion
that altering the requirements for when TPMOs verbally convey the
disclaimer puts beneficiaries' personal information at risk. There are
other data-focused beneficiary protections still in place to prevent
the unauthorized sharing of beneficiary information, such as those
found under Sec. Sec. 422.2274(g)(4) and 423.2274(g)(4) that prohibit
personal beneficiary data collected by TPMOs for marketing or enrolling
a beneficiary into an MA or Part D plan to be shared with other TPMOs,
unless prior express written consent is given by the beneficiary.
CMS also disagrees that this change would diminish beneficiaries'
understanding of the call's scope or impact transparency and
consistency in MA plan marketing. As previously discussed in this
preamble, CMS has determined that many calls typically begin with the
TPMO obtaining basic demographic information from the beneficiary. As
such, it is CMS' position that the change to the timing of the
disclaimer will enhance the effectiveness of the disclaimer. The Agency
also believes that conveying the disclaimer before a discussion of
benefits occurs will promote clear communication with the beneficiary
and mitigate beneficiary confusion. CMS does not anticipate that
changing the timing of when the disclaimer is verbally conveyed will
have a negative impact on the transparency and consistency of MA plan
marketing.
Comment: CMS received several comments about how the Agency
[[Page 17450]]
should identify when a ``discussion of benefits'' occurs to mitigate
any confusion over when the disclaimer should be read and to ensure
consistency in interpretation. Commenters suggested that a ``discussion
of benefits'' occurs when the specificity of benefits is being
discussed with the intent to draw a beneficiary's attention to an MA or
Part D plan or to influence a beneficiary's decision-making process,
when discussing plan options, or whenever a TPMO representative begins
to discuss unique benefits, premiums, or cost sharing of a particular
MA or Part D plan. Another commenter urged CMS to align ``discussion of
benefits'' with the current regulatory definition of marketing.
Response: CMS appreciates these recommendations. As previously
discussed in this preamble, 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), 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, consistent with 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 might work given a plan's benefit structure and the
beneficiary's previous health care experience or needs. Thus, the
Agency agrees that a ``discussion of benefits'' can align with the
definition of marketing in Sec. Sec. 422.2260 and 423.2260.
Additionally, the examples previously provided establish a framework
that agents and brokers can use to judge when the disclaimer should be
read. In addition, as this final rule is implemented, CMS will continue
to gauge industry's need for more examples or other means of
operational guidance for these requirements.
Comment: CMS received numerous comments from stakeholders who
submitted similar, and in some cases identical, comments regarding the
TPMO disclaimer. The commenters asserted that the TPMO disclaimer, as
currently framed, forces independent agents to make statements that are
untrue and confuses beneficiaries. The comments included that the
disclaimer operates under the flawed assumption that insurance agents,
particularly independent ones, do not or cannot represent all plans
available in a given area. The commenters further stated that it is
common for experienced independent agents, especially in less saturated
markets or those committed to extensive certifications, to represent
every single plan available to a beneficiary. These commenters further
urged CMS to eliminate the entire TPMO disclaimer requirement.
Response: CMS disagrees with the commenters' assertion that the
disclaimer requires them to make statements that are untrue or
confusing to the beneficiary. The current disclaimer already addresses
the commenters' concerns and provides disclaimer language for instances
where the agent offers all plans in a service area. Additionally, the
TPMO disclaimer is currently designed to ensure that agents provide
beneficiaries information about the scope of plans that they represent,
inform beneficiaries that there are a variety of plans in their service
area to consider when picking a plan, and provide beneficiaries with
additional resources for information. The modifications to the current
requirements in this final rule are a practical step in refining the
rules around the disclaimer to alleviate TPMO burden without a negative
impact to the beneficiary. While the elimination of the TPMO disclaimer
was not proposed, and hence this comment is out of scope, CMS
appreciates these commenters' input and will take it under advisement.
Comment: CMS received several comments strongly disagreeing with
the proposal to remove SHIPs from the TPMO disclaimer. These commenters
asserted that SHIPs are the only federally-funded source of
independent, individual-level counseling available to Medicare
beneficiaries and are a critical source of unbiased information for
Medicare beneficiaries. Commenters also noted that 1-800-MEDICARE
customer service representatives often refer to SHIPs because SHIPs
have expertise in state programs, can meet with people in person, and
provide a higher level of advocacy and assistance than 1-800-MEDICARE.
Response: CMS agrees that SHIPs can be a source of unbiased
information about plan choices. For the purpose of the of the TPMO
disclaimer, CMS prefers that TPMOs direct beneficiaries to 1-800-
MEDICARE. As previously mentioned in this preamble, this is based on
the fact that 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. When appropriate, 1-800-MEDICARE representatives may refer
beneficiaries to their local SHIP.
Comment: Some commenters acknowledged the complexity of the MA and
Part D programs and suggested that, instead of removing the SHIPs from
the TPMO disclaimer, SHIPs should be provided with additional
resources. Other commenters noted that increased support for SHIPs,
both from a staffing and training perspective, and receiving similar
training to 1-800-MEDICARE staff, could help SHIP volunteers better
navigate the MA and Part D programs.
Response: While out of scope to this provision, CMS appreciates
these comments and will take them under advisement.
After consideration of the public comments CMS received, CMS is
finalizing as proposed revisions to the introductory text of Sec. Sec.
422.2267(e)(41) and 423.2267(e)(41) and revisions to Sec. Sec.
422.2267(e)(41)(ii) and 423.2267(e)(41)(ii).
E. 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 Medicare Advantage (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
[[Page 17451]]
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 final 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 the Contract Year 2027 proposed rule, CMS proposed several
changes to requirements regarding the time and manner of plans'
outreach to beneficiaries. The primary proposals included 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 proposed a few other
regulatory changes to add specificity and clarify policy. As CMS stated
in the Contract Year 2027 proposed rule, in total, these proposals and
clarifications were 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, CMS noted that these proposals align with
the January 31, 2025, Executive Order 14192, ``Unleashing Prosperity
Through Deregulation'' (hereinafter referred to as E.O. 14192).\49\
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 proposed are deregulatory and therefore support the
Administration's policy goals.
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\49\ https://www.whitehouse.gov/presidential-actions/2025/01/unleashing-prosperity-through-deregulation/.
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CMS solicited comment on the proposed changes to 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), including on the accuracy
of CMS's assumptions regarding information collection requirements. CMS
did not receive comment on the information collection requirements. CMS
thanks commenters for their input on the proposed amendments and
removal of rules regarding time and manner of beneficiary outreach. In
the following sections, CMS describes each proposal, along with the
comments received and CMS's corresponding responses.
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
[[Page 17452]]
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. Thus, CMS proposed that plans and agents/
brokers should be able to hold an educational event and a marketing
event back-to-back and in the same location.
For these reasons, in the Contract Year 2027 proposed rule, CMS
proposed 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 aligned 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. CMS also
noted that this proposal, permitting marketing events to follow
educational events, provided there is an appropriate break, is
consistent with the statutory requirement. CMS proposed 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.
CMS provided examples of appropriate beneficiary notification, such as
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 proposed 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. CMS noted that 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. CMS stated in the Contract Year 2027 proposed rule
that this deregulatory change is expected to significantly reduce
burden and cost for plans and agents/brokers in terms of event
planning, and it would also likely ease burden on beneficiaries when
they attend an educational event and subsequently want to obtain more
plan-specific information at a marketing event. CMS underscored that,
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, CMS expressed in the Contract Year 2027 proposed rule that this
proposal would provide greater convenience for beneficiaries and
enhance the beneficiary experience in shopping for a plan.
CMS received the following comments on this proposal, and CMS's
response follows:
Comment: Many commenters supported eliminating the 12-hour delay
between an educational event and a marketing event, viewing it as
overburdensome and confusing. They noted that beneficiaries attending
educational events often wanted immediate personalized guidance and
that forcing them to wait disrupted natural inquiry flow, leading to
disengagement or frustration. Commenters viewed the delay as serving no
protective purpose when beneficiaries actively requested assistance. In
addition, commenters emphasized that agents/brokers should be empowered
to respond to beneficiary-initiated questions without fear of
regulatory violation.
Response: CMS appreciates the support for this proposal and agrees
with commenters' sentiments regarding potential implications of the 12-
hour delay on beneficiaries and agents/brokers.
Comment: Some commenters highlighted practical benefits of CMS
permitting marketing events to follow educational events, noting that
the change would reduce transportation burdens (especially for dually
eligible individuals), allow multiple meetings in a single day,
increase outreach efficiency, and better utilize limited staffing
resources, which is particularly important for smaller plans serving
geographically dispersed populations. Commenters also stated the change
would reduce unnecessary delays and administrative burden while
preserving beneficiary protections. The proposal was viewed as a
practical, beneficiary-friendly improvement that promoted timely access
to information, reduced confusion, and improved the beneficiary
experience while maintaining appropriate safeguards.
Response: CMS agrees that there are many practical benefits to
allowing marketing events to follow educational events, including those
related to transportation and administrative burden relief, time
saving, and efficiency. CMS also agrees that this proposal would help
beneficiaries while also preserving safeguards.
Comment: A commenter stated that the proposal would allow plans and
agents/brokers to provide education followed by enrollment at the same
event, enabling in-person discussion of unique situations. A commenter
noted that the change would allow tailored outreach aligned with
beneficiary preferences, enable quicker and more responsive
communication, and result in better beneficiary experiences and
improved health outcomes.
Response: CMS appreciates commenters' support for the promotion of
in-person, tailored beneficiary communications that this provision
invites. CMS also believes that the provision may improve
beneficiaries' experiences and ultimately health outcomes in the long
run.
Comment: Other commenters opposed eliminating the 12-hour delay,
warning it would merge educational and marketing events into sales
seminars that pressure beneficiaries into hasty decisions. Commenters
claimed a brief restroom or snack break was inadequate separation
between the two event types. These commenters described the waiting
period as essential for beneficiaries to digest information, access
SHIP resources, conduct research, discuss with families, and make
informed choices. Commenters believed that without meaningful
separation, the statutory prohibition against sales activities at
educational events would become meaningless, particularly given the
vulnerabilities of the Medicare-eligible population.
Response: CMS disagrees with commenters that eliminating the 12-
hour delay would result in beneficiary pressure. As discussed in the
Contract Year 2027 proposed rule, CMS believes that beneficiaries'
support from caregivers is a built-in layer of added protection from
any potential undue pressure, coupled with other various beneficiary
protections, such as potential SEPs, including retrospective
enrollments, if warranted. CMS notes that the provision includes the
[[Page 17453]]
important requirement that plans and agents/brokers notify the
beneficiary that the educational event is ending and a marketing event
will begin shortly. CMS disagrees with commenters and believes that a
brief restroom or snack break is indeed an adequate separation between
the two types of events. Furthermore, in response to the comment about
the statutory prohibition against sales activities at educational
events, CMS notes, as stated in the Contract Year 2027 proposed rule,
that section 1851(j)(1)(D)(ii) of the Act does in fact prohibit sales
and marketing activities at educational events but does not require a
specific timeframe between an educational event and a marketing event.
Comment: In other comments opposing this provision, commenters
cited extensive experiences with unwitting enrollments, including
beneficiaries who did not consent, thought they were enrolling in
dental/vision only, did not understand network limitations, or had
dementia and were enrolled without family present. Commenters mentioned
low-income individuals who were pushed into plans without adequate
discussion. The commenters described plan marketing violations and
suggested that, if finalized, the rule would foster problematic
behaviors in an increasingly commission-based market.
Response: CMS understands commenters' concerns but reiterates that
beneficiaries are able to take advantage of certain important
beneficiary protections such as potential SEPs, including retrospective
enrollments, when appropriate, if a beneficiary makes an adverse
enrollment decision based on misrepresentation or otherwise non-
compliant sales tactics. However, CMS believes that such instances of
plan marketing violations and negative beneficiary enrollment
experiences that commenters describe are rare, as CMS does not often
receive reports or complaints in this area. Additionally, CMS routinely
monitors compliance with MA marketing rules and may take compliance
action if CMS determines that a plan or agent/broker is out of
compliance with these rules.
Comment: Several commenters believed the proposed changes could
increase confusion and high-pressure interactions, especially for
beneficiaries with complex medication needs, limited health literacy,
cognitive impairment, or limited English proficiency. Commenters stated
that relying on family presence or SEPs as safeguards is inadequate
because caregivers may not help beneficiaries discern where education
stops and marketing starts, and that no one is immune from Medicare
system confusion. Commenters asserted that relying on SEPs after
misleading enrollment was unacceptable because these remedies were
exceedingly difficult to use, and many beneficiaries did not seek help
until well after problems emerged (e.g., discovering out-of-network
providers). Also, commenters stated that beneficiaries might not
successfully obtain SEPs due to lack of knowledge about how to access
them, leaving them without options once enrolled.
Response: CMS respectfully disagrees. The various beneficiary
protections mentioned have previously served as more than sufficient
safeguards to potential beneficiary confusion and pressure during both
educational and marketing events, as well as during other enrollment
processes. This includes the possibility of CMS processing a
retrospective enrollment if warranted. As noted previously, CMS
routinely monitors compliance with MA marketing rules and may take
compliance action if CMS determines that a plan or agent/broker is out
of compliance with these rules, including in instances where plans or
agents/brokers engage in high-pressure interactions with and possibly
confuse vulnerable beneficiaries with complex medication needs, limited
health literacy, cognitive impairment, or limited English proficiency.
Comment: A commenter stated that the change could result in
educational presentations being less complete and built solely to
support subsequent sales activities.
Response: CMS appreciates the commenter's concern but views this as
a hypothetical scenario that is unlikely to occur. Specifically, CMS
expects relevant safeguards--such as existing requirements for
educational events--will protect beneficiaries from being exposed to
partial educational presentations that are designed solely to support
subsequent sales activities. For example, Sec. Sec. 422.2264(c) and
423.2264(c) prohibit plans and agents/brokers from marketing specific
plans or benefits and from conducting sales or marketing presentations
at educational events. CMS also notes that plans and agents/brokers
have the freedom to design educational presentations as they choose,
provided that they remain in compliance with CMS's marketing and
communication requirements at 42 CFR part 422, subpart V, and 42 CFR
part 423, subpart V.
Comment: Some commenters believed the proposed changes would remove
beneficiary protections without replacement, and that each time federal
protections were removed, states had to navigate the new landscape or
create their own rules. They asserted that state staff spent
significant time addressing problematic plan growth rather than
advancing integration, MA was described as ``the wild west,'' and these
rules were necessary to prevent vulnerable populations from being
pressured into unsuitable products.
Response: CMS thanks commenters for offering this information
regarding the state perspective. However, CMS disagrees that the
proposed changes would remove beneficiary protections without
replacement; rather, CMS is simply amending the existing beneficiary
protections. Furthermore, in response to the reference to states
creating their own rules, CMS reminds all parties of the statutory and
regulatory framework applicable to MA, and that standards established
under federal law preempt state law, other than state licensing laws or
state laws relating to plan solvency, with respect to MA plans. These
federal standards include communications and marketing standards set
forth in 42 CFR part 422, subpart V, and 42 CFR part 423, subpart V.
Section 1856(b)(3) of the Act states the following: ``Relation to state
laws. The standards established under this part shall supersede any
State law or regulation (other than State licensing laws or State laws
relating to plan solvency) with respect to MA plans which are offered
by MA organizations under this part.'' In turn, CMS's regulation, under
Sec. 422.402, closely mirrors this statutory language regarding
federal preemption. CMS does note that for D-SNPs, state Medicaid
agencies may include communications and marketing requirements in state
Medicaid agency contracts as long as the requirements do not conflict
with federal requirements.
Comment: Commenters urged CMS to protect PACE enrollments from
aggressive MA marketing that might not clearly communicate differences
between MA plans and the PACE program, as PACE participants were
particularly vulnerable.
Response: While out of scope of the requirements in this final
rule, CMS will take this into consideration when evaluating both MA and
PACE marketing rules and beneficiary protection rules in the future.
Comment: A commenter asserted that plans, rather than
beneficiaries, would benefit from the proposed change and took issue
with CMS's reliance on undefined stakeholder input, the presence of
others at events, and the availability of corrective measures to
support the change.
[[Page 17454]]
Response: As previously explained, CMS has received stakeholder
input that the 12-hour delay requirement between an educational event
and a marketing event makes it difficult for beneficiaries who live far
from the events or who lack transportation to access important MA and
Part D information. CMS agrees that this input raises legitimate
concerns about access challenges. CMS reiterates its stance on the
sufficiency of existing beneficiary protections in place and the
likelihood of support from beneficiaries' family, friends, and
caregivers during education, marketing, and enrollment experiences. CMS
believes that eliminating the 12-hour delay between an educational
event and a marketing event will foster a better, more convenient plan
shopping experience for beneficiaries. For these and other reasons
stated in the Contract Year 2027 proposed rule, CMS stands by its
reasoning for this change.
Comment: A commenter supported a tailored approach--supporting the
change for dually eligible individuals but expressing concern that
other MA beneficiaries could be pressured into real-time coverage
decisions. Commenters also expressed concerns about potential
``unintentional non-compliance.''
Response: CMS thanks the commenter for the idea, but unfortunately
such a tailored approach is not feasible because educational and
marketing events are attended by a wide range of beneficiaries,
including both dually eligible and non-dually eligible individuals. CMS
does not believe it would be practical for the 12-hour delay between
events to be eliminated for some attendees and not others. CMS is
unclear on what the commenter meant by ``unintentional non-
compliance.'' CMS notes that plans are responsible for ensuring
compliance with CMS regulations.
Comment: Some commenters recommended that if CMS proceeded with the
proposal, it should replace timing guardrails with clear, enforceable
standards preventing immediate transitions and ensuring clear
beneficiary consent. They suggested, at minimum, there should be
sufficient time (30-60 minutes) and space between events so individuals
could affirmatively choose whether to attend the marketing event.
Response: CMS appreciates this input and believes that a brief
restroom or snack break is a sufficient opportunity for all
beneficiaries, including those with mobility concerns, to leave the
facility if they wish prior to the beginning of a marketing event.
Comment: Another commenter recommended that if this proposal were
finalized, CMS should provide a dedicated office to receive referrals
from state departments and SHIP offices, take swift enforcement action,
and share complaints with states to enable compliance with state
licensing laws.
Response: CMS thanks the commenter for these recommendations. If
states or SHIP offices encounter any issues or have questions related
to this regulation, they may contact CMS directly through already
established channels, including the use of the Complaints Tracking
Module and sharing of information as outlined in existing memorandums
of understanding (MOUs) that CMS has with states.
After considering all the comments received on allowing marketing
events to directly follow educational events in the same location, CMS
is finalizing the proposal 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, as long as plans and agents/
brokers notify the beneficiary that the educational event is ending and
a marketing event will begin shortly and also give the beneficiary a
sufficient opportunity to leave the educational event prior to the
start of the marketing event.
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.\50\
[[Page 17455]]
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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\50\ 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, in the Contract Year 2027 proposed rule, CMS proposed
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. CMS noted
that 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. CMS also stressed that 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. CMS acknowledged in the Contract Year 2027 proposed rule that,
if finalized, it would still require an advance agreement, as
statutorily required, but without a specified timeframe, as
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 also
proposed a minor technical correction in Sec. 422.2264(c)(3)(i) to add
the missing word ``appointment'' after ``marketing.''
In the Contract Year 2027 proposed rule, CMS explained that
eliminating the 48-hour SOA rule would benefit all parties, especially
beneficiaries, by allowing for a discussion of plan products on the
beneficiary's schedule. CMS also stated that, 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, CMS noted that
it does not account for other interactions that may take place between
the beneficiary and a plan or an agent/broker. In the Contract Year
2027 proposed rule, CMS provided the example of 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, who would be
required to come back no less than 48 hours later to meet with that
plan or agent/broker again.
CMS acknowledged 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, in the Contract Year 2027
proposed rule, CMS asserted that a different approach may be
appropriate now for a similar reason as mentioned for the proposal to
eliminate the 12-hour delay requirement. CMS stated that 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. In the Contract Year 2027 proposed rule,
CMS stated that the Agency 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, 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 led 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, as stated
in the Contract Year 2027 proposed rule, the proposal CMS put forth
would also reduce the burden on plans and agents/brokers in addition to
beneficiaries and their representatives.
Furthermore, CMS explained that 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 stated that the
Agency 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 also proposed a few additional associated regulation changes and
[[Page 17456]]
clarified 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 so in the Contract
Year 2027 proposed rule, CMS deemed these proposed regulation changes
and policy clarifications as necessary and responsive to those
questions. CMS requested that plans and agents/brokers review the
following information carefully and provide feedback through the
comment process. CMS also noted that, if this portion of the rule is
finalized as proposed, the SOA policy clarifications contained herein
will supersede any existing SOA guidance.
First, CMS proposed 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 proposed 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
also clarified in the Contract Year 2027 proposed rule 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, CMS clarified that another example
would be a parent and child who are both Medicare-eligible. CMS also
explained that 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,
CMS noted that 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, in
the Contract Year 2027 proposed rule, CMS reminded 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 proposed 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 proposed 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
explained that these regulatory text changes were necessary to avoid
ambiguity and prevent misinterpretation.
CMS stated in the Contract Year 2027 proposed rule that, if
finalized as proposed, CMS's removal of the word ``scheduled'' would
mean that an SOA would be required for all appointments that meet the
definition of personal marketing appointments. As an example, CMS
stated that 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, in the Contract Year 2027
proposed rule, CMS stressed that 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 proposed 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).
CMS pointed out that 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 proposed 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 also clarified 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. In the Contract Year 2027 proposed rule,
CMS listed instances in which SOAs may be accepted or collected,
including: (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--in the case where the proposed changes to Sec. Sec.
422.2264(c)(1)(ii)(D) and 423.2264(c)(1)(ii)(D) would be finalized as
proposed. CMS also listed instances in which SOAs may not be accepted
or collected, including: (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 clarified in the Contract
Year 2027 proposed rule 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
[[Page 17457]]
type of product(s) to be discussed. CMS asserted that this aligns with
section 1851(j)(2)(A) of the Act's reference to ``the scope of the
marketing appointment'' and provided the following non-exhaustive list
of examples of types of products to be discussed: MA plans, MA-PD
plans, and standalone PDPs. As a best practice, in addition to the type
of product(s) to be discussed, CMS encouraged plans to also include
other pertinent information in the SOA, such as the date of the
appointment and beneficiary contact information. In addition, CMS
stated that 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. As
explained in the Contract Year 2027 proposed rule, 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 clarified 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 noted that the Agency currently does not provide a model document
for SOAs.
Lastly, in the Contract Year 2027 proposed rule, CMS reminded plans
and agents/brokers of and clarified 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. CMS clarified that
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, CMS noted that the signed
SOA can be used for multiple telephonic or in-person contacts or
appointments. With that said, a plan or agent/broker must respect a
beneficiary's request to no longer be contacted, even if that
additional contact takes place within the 12-month window.
CMS received the following comments on this proposal, and CMS's
response follows:
Comment: The majority of commenters strongly supported eliminating
the 48-hour waiting period between obtaining an SOA and conducting a
personal marketing appointment. Commenters characterized the
requirement as creating unnecessary delays, administrative burden, and
paperwork without providing meaningful beneficiary protection. The
waiting period was described as preventing timely assistance,
particularly for beneficiaries with urgent needs or limited
availability, and taking valuable time away from agents/brokers during
the short open enrollment window. Commenters believed the 48-hour SOA
rule created situations where beneficiaries were available, agents/
brokers were available, and questions were time-sensitive, yet agents/
brokers could not answer questions, provide quotes, or explain benefits
for 48 hours. This was viewed as dismissive, confusing, bureaucratic,
and distrust-inducing from the beneficiary perspective. Commenters
noted that by the time 48 hours passed, many beneficiaries contacted
someone else, enrolled immediately without the help of an agent/broker,
or worked with individuals who did not follow the rules.
Response: CMS appreciates the strong support for this proposal and
agrees with commenters' sentiments regarding potential implications of
the 48-hour SOA rule on the interactions between beneficiaries and
agents/brokers.
Comment: Some commenters suggested that the SOA often confused
beneficiaries who were eager to understand their options and created
unnecessary barriers to access. Commenters believed the cooling-off
period assumption that beneficiaries were incapable of requesting
information responsibly was both inaccurate and disrespectful.
Eliminating the waiting period, commenters believed, would allow
beneficiaries to engage with knowledgeable, trained advisors on a
timeline that worked best for them and enable same-day appointments.
Response: CMS understands that the SOA could potentially be
confusing to beneficiaries or present a barrier to access, and CMS
appreciates the commenters' support for removing the 48-hour waiting
period.
Comment: A few commenters characterized the 48-hour SOA requirement
as a unique administrative burden imposed specifically on agents/
brokers that did not apply to other enrollment channels. They stated
that this disparity created an uneven playing field and introduced
unnecessary friction into the enrollment process.
Response: CMS acknowledges the commenters' implication that they
are pleased with CMS's proposal to eliminate the 48-hour SOA
requirement to give agents/brokers selling MA and Part D products a
more even playing field as compared to agents/brokers selling other
insurance products. CMS appreciates this observation and the support
for this proposal expressed by commenters.
Comment: Some commenters recommended eliminating the SOA
requirement entirely and implementing a uniform post-enrollment
rescission period applicable to all channels. They suggested that this
would allow beneficiaries a designated timeframe after enrollment to
review their decisions and change their minds if necessary, providing
more robust and beneficiary-centric safeguards. If CMS retained the SOA
requirement, commenters suggested allowing one universal SOA at first
contact, permitting immediate discussion of benefits once completed,
eliminating the 48-hour waiting period, and allowing SOAs to remain
valid for ongoing discussions.
Response: CMS is not eliminating the SOA requirement entirely, as
it is a statutory requirement under section 1851(j)(2)(A) of the Act,
as well as out of the scope of CMS's proposal. The concept of a uniform
post-enrollment recission period is also outside of the scope of what
CMS proposed, but CMS may take this suggestion under consideration for
future rulemaking. However, there are various existing beneficiary
safeguards already in place, as previously mentioned, such as potential
SEPs, including retrospective enrollments, if warranted. Finally,
regarding the suggestion to allow one universal SOA at first contact,
CMS is not in favor of this approach because requiring a new SOA for
each appointment is an important beneficiary protection that ensures
common agreement and clarity regarding the intended scope of each
individual personal marketing appointment prior to the appointment
taking place.
Comment: Several commenters opposed eliminating the 48-hour waiting
period and urged CMS to retain it. Commenters stated that the waiting
period was designed to protect
[[Page 17458]]
beneficiaries from high-pressure sales tactics and provide time for
them to consult with family or caregivers before making enrollment
decisions, and that removing this safeguard would increase the risk of
rushed and uninformed enrollments, further undermining trust in the
Medicare enrollment process. Some commenters believed the 48-hour
cooling-off period already struck the appropriate balance by reducing
the likelihood that beneficiaries would be subject to undue pressure
and giving beneficiaries the opportunity to consider their options
fully before making key decisions. Regarding other safeguards that CMS
identified in the Contract Year 2027 proposed rule, such as potential
availability of assistance from family and availability of SEPs in the
event of certain marketing or enrollment improprieties, some commenters
deemed these as inadequate on their own to ensure beneficiaries had the
opportunity to engage in well-informed decision-making during
enrollment.
Response: CMS acknowledges commenters' concerns with eliminating
the 48-hour waiting period before a beneficiary's personal marketing
appointment. However, as stated in the Contract Year 2027 proposed
rule, 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. In the time since the 48-hour delay went into
effect, CMS has received multiple email inquiries from agents/brokers
who have provided real-world examples of how this rule has had
unintended negative consequences for the beneficiary. For example, if a
beneficiary calls an agent to discuss MA plan options but does not
immediately connect and instead leaves a message for the agent to call
back, when the agent does call back, the agent must complete the SOA
with the beneficiary, and then inform the beneficiary that they are
unable to discuss MA plan options until 48 hours later. Another example
is a beneficiary completes an SOA to discuss Part D options, meets with
an agent, and during the conversation, the beneficiary asks about MA.
In this scenario, the agent must complete a new SOA, but based on the
current regulation, must then wait an additional 48 hours before the
discussion about MA options can continue. In eliminating such a delay,
CMS is enabling beneficiaries to learn about plan products in real
time, rather than having to come back for a personal marketing
appointment 48 hours later. Additionally, CMS reiterates its stance on
the sufficiency of existing beneficiary protections in place and the
likelihood of support from beneficiaries' family, friends, and
caregivers during education, marketing, and enrollment experiences. CMS
believes such safeguards offer appropriate beneficiary protection in
the absence of the 48-hour SOA rule.
Comment: Commenters believed that having no waiting period
presented the possibility of agents/brokers pressuring beneficiaries to
sign an SOA directly before an appointment. Commenters asserted that
this would be wholly inappropriate in light of ongoing pressure tactics
deployed in MA marketing. Commenters urged CMS to, at a minimum,
prohibit the SOA from being signed simultaneously with the beginning of
a personal marketing appointment.
Response: Any pressure tactics deployed during MA marketing events
would be considered non-compliant and subject to potential compliance
or enforcement action by CMS. Moreover, concerns about potential
pressure tactics could be mitigated by existing beneficiary safeguards
already in place, as previously mentioned, such as potential
beneficiary support from caregivers and potential SEPs, including
retrospective enrollments, if warranted. Such safeguards offer
appropriate and sufficient beneficiary protection in the absence of the
48-hour SOA rule. Plans and agents/brokers will still be required to
complete an advance agreement (an SOA form) as statutorily required,
just without a specified timeframe, giving beneficiaries the
flexibility to fill out an SOA just prior to discussing plan products
or in advance of a future personal marketing appointment.
Comment: A commenter expressed that community health centers
routinely assisted patients who later discovered high-cost sharing,
restrictive networks, or prior authorization barriers, with no recourse
until the next enrollment period. Thus, in this commenter's opinion,
removing the 48-hour SOA safeguard would increase rushed and uninformed
enrollments.
Response: CMS thanks the commenter for sharing these unfortunate
beneficiary experiences at community health centers. CMS notes that
beneficiaries are always encouraged to contact 1-800-MEDICARE if they
believe that they have been misled or steered into a plan that does not
meet their needs as a result of plans or agents/brokers engaging in
misrepresentation or otherwise non-compliant sales tactics. As
previously noted, CMS has the ability to grant SEPs, when warranted,
including the potential for retrospective enrollments. Finally, CMS
takes such beneficiary complaints seriously and will take compliance or
enforcement actions as appropriate, including in such cases of rushed
and uninformed enrollments per the commenter's concerns.
Comment: Commenters encouraged CMS to prioritize protecting
beneficiaries from abusive marketing practices over the interests of
marketing and brokerage firms or MA plans. Commenters characterized the
proposal as primarily benefiting agents/brokers rather than
beneficiaries, despite CMS's stated rationale. Commenters stated that
the proposed change seemed to remove guardrails previously put in place
to protect beneficiaries.
Response: CMS agrees with commenters' sentiment that protecting
beneficiaries from abusive marketing practices is of utmost importance.
CMS assures commenters that the Agency is committed to ensuring
existing important beneficiary protections remain in place. As
previously mentioned, there are a range of such beneficiary
protections, and CMS engages in active oversight of plans, holding
plans accountable for complying with CMS rules and ensuring that their
contracted agents/brokers also comply. In light of the beneficiary
safeguards outlined here, CMS does not believe the 48-hour SOA
guardrail is necessary. In instances of beneficiary harm, CMS will take
compliance or enforcement actions as appropriate.
Comment: A few commenters supported eliminating the 48-hour waiting
period after signing an SOA but emphasized it was critical that CMS
maintain strong structural safeguards. For example, commenters believed
that SOAs must still be required before any personal marketing
discussion, clear definitions around what constituted a personal
marketing appointment were helpful, and consistency across guidance was
essential. Commenters also noted that simplification was beneficial,
but any relaxation of oversight would inevitably be exploited by bad
actors. Commenters recommended that CMS should streamline the process
but not weaken the protections that kept beneficiaries safe. While not
opposed to administrative simplification and finding the right ways to
safeguard and protect beneficiaries in a competitive landscape,
commenters stated that they would have liked to see new or different
proposals rather than simply removing existing protections.
Response: SOAs are still required before personal marketing
appointments. CMS's removal of the
[[Page 17459]]
word ``scheduled'' means that an SOA will be required for all
appointments that meet the definition of personal marketing
appointments. As an example, an SOA will 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 for purposes of discussing marketing topics. To be
clear, this means that an SOA is required regardless of whether the
personal marketing appointment is initiated by the plan, an agent/
broker, or the beneficiary. CMS thanks commenters for their praise of
the clear definition, simplification, and streamlining the process. CMS
also agrees on the importance of consistency across guidance,
oversight, and beneficiary protections, as stated previously. Regarding
the recommendation for new or different proposals, CMS will consider
new ideas for future rulemaking in this area.
After considering all the comments received on the timing of a
personal marketing appointment after SOA completion, CMS is finalizing
the proposal to eliminate the 48-hour waiting period required between
the SOA completion and a personal marketing appointment, as well as
eliminating the two corresponding exceptions to the 48-hour SOA rule.
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.
In the Contract Year 2027 proposed rule, CMS proposed 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. As CMS noted in the Contract
Year 2027 proposed rule, 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. CMS also
pointed out that if plans and agents/brokers are allowed to collect
SOAs at educational events, then it decreases the likelihood that
beneficiaries might face 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.
In the Contract Year 2027 proposed rule, CMS acknowledged 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, in the Contract
Year 2027 proposed rule, CMS recognized 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, CMS
highlighted that 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 proposed 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 proposed 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
noted 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.
CMS received the following comments on this proposal, and CMS's
response follows:
Comment: Many commenters supported CMS's proposal to allow the
collection of SOA forms at educational events. They noted that current
restrictions create unnecessary barriers preventing beneficiaries from
receiving timely assistance, as beneficiaries often attend these events
seeking help understanding how information applies to their situations
and requesting next steps. Commenters believed the change would improve
the beneficiary experience by reducing confusion, improving access to
guidance, alleviating transportation burdens, streamlining processes,
enabling quicker and more responsive communication, and providing
greater flexibility for decision-making at convenient times.
Response: CMS appreciates the support for this proposal and agrees
with commenters' sentiments regarding the benefits, including improving
the beneficiary experience and communication, alleviating
transportation burdens, and providing flexibility.
Comment: Commenters also highlighted that the change would enhance
workflow efficiency for plans and agents/brokers, modernize Medicare
outreach rules, reduce administrative burden, lower costs, and improve
resource allocation. Commenters characterized the change as practical,
consumer-friendly, and balanced, stating it would support informed
decision-making while preserving beneficiary protections.
Response: CMS agrees that this change will result in administrative
efficiencies, reduce burden, and result in practical improvements to
the beneficiary decision-making process.
Comment: Some commenters opposed CMS's proposal, emphasizing that
existing rules protect vulnerable populations from pressure tactics and
inappropriate products. They expressed concerns that the change would
increase
[[Page 17460]]
confusion, high-pressure interactions, and misleading encounters during
plan selection, especially for beneficiaries with complex medication
needs, limited health literacy, cognitive impairment, limited English
proficiency, or those relying on local counseling resources.
Response: As stated in the Contract Year 2027 proposed rule, these
concerns regarding beneficiary pressure appear to be outweighed by the
importance of maximizing timely 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.
Comment: Commenters questioned characterizing SOA collection as
educational rather than as a marketing activity, noting that procuring
a signature on an SOA form relates to a sales appointment.
Response: As stated in the Contract Year 2027 proposed rule, CMS
reiterates that 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 because it does not meet the definition of marketing
at Sec. Sec. 422.2260 and 423.2260, which requires the activity to
meet specific standards for intent and content. Rather, the collection
of an SOA form is simply 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.
Comment: A few commenters asserted that when federal protections
are removed, states must either navigate the new landscape or create
their own rules, and states lose contractor attention to beneficiary
protection. Some commenters urged CMS to withdraw the proposal,
establish a dedicated office to receive referrals from state insurance
departments and SHIP offices, take swift enforcement action against
violations, share complaints with state insurance departments, and
retain existing standards for beneficiary outreach.
Response: CMS thanks the commenters for these recommendations. If
states or SHIP offices encounter any issues or have questions related
to this regulation, they may contact CMS directly through already
established channels, including the use of the Complaints Tracking
Module and sharing of information as outlined in existing MOUs that CMS
has with states.
As to the comment that states must create their own rules, CMS
reminds all parties of the statutory and regulatory framework
applicable to MA, and that standards established under federal law
preempt state law, other than state licensing laws or state laws
relating to plan solvency, with respect to MA plans. These federal
standards include communications and marketing standards set forth in
42 CFR part 422, subpart V, and 42 CFR part 423, subpart V. Section
1856(b)(3) of the Act states the following: ``Relation to state laws.
The standards established under this part shall supersede any State law
or regulation (other than State licensing laws or State laws relating
to plan solvency) with respect to MA plans which are offered by MA
organizations under this part.'' In turn, CMS's regulation, under Sec.
422.402, closely mirrors this statutory language regarding federal
preemption.
Comment: Some commenters requested clarity regarding compliant
educational environments for SOA collection, ``standardized scripts,''
clear guidance, and guardrails to prevent beneficiary confusion and
promote industry consistency.
Response: Compliant educational environments for SOA collection
include any educational events that meet the requirements outlined at
Sec. 422.2264(c)(1). CMS is unsure what commenters mean by
``standardized scripts,'' however, CMS notes that the Agency currently
does not provide a model document for SOAs, nor any SOA scripts. CMS
will consider the need for any sub-regulatory guidance regarding the
finalized policy.
Comment: Some commenters also noted the importance of ongoing
oversight and evaluation to ensure changes meaningfully advance
beneficiary understanding and trust without unintended consequences and
emphasized ensuring discussions are clear about plan benefit offerings.
Commenters commended CMS for recognizing the evolving marketing and
communications landscape and encouraged the Agency to work proactively
to empower beneficiaries to make informed choices.
Response: As stated previously, CMS engages in active oversight and
evaluation of plans and their contracted agents/brokers. CMS agrees
with commenters that beneficiary understanding and trust are important.
CMS also appreciates commenters' commending the Agency's recognition of
the evolving MA landscape and proactive work to help beneficiaries. CMS
remains committed to improving MA marketing and communications
policies.
After considering all the comments received on allowing the SOA at
educational events, CMS is finalizing the proposal 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.
4. Summary of Regulatory Changes
In summary, in the Contract Year 2027 proposed rule, CMS proposed
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 included: (1) allowing a marketing event to directly follow
an educational event in the same location (provided there is
appropriate beneficiary notification and opportunity to leave); (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 received a range of comments pertaining to these proposals, the
majority of which reflected support for the regulations. After
considering the comments received and for the reasons outlined in the
Contract Year 2027 proposed rule and in responses to comments, CMS is
finalizing all provisions under Removing Rules on Time and Manner of
Beneficiary Outreach as proposed. As finalized, these regulatory
changes will 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.
F. 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
[[Page 17461]]
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. In the April 2023 final rule, CMS asserted
that 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). In the Contract Year
2027 proposed rule, CMS explained that, after years of implementation
and oversight, including one revision to the requirement, the current
restrictions regarding use of superlatives at Sec. Sec.
422.2262(a)(1)(ii) and 423.2262(a)(1)(ii) were 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 (90 FR 54956). Although CMS proposed 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 noted that the
Agency would 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 (90 FR 54956). CMS also explained that it would
continue to encourage MA organizations and Part D sponsors to make
available to beneficiaries and the public data, reports, or other
documentation that supports the superlative to promote informed
enrollment decisions (90 FR 54956).
As described in the Contract Year 2027 proposed rule, 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
(90 FR 54956). However, because Sec. Sec. 422.2262 and 423.2262
already broadly prohibit misleading, confusing, and inaccurate
marketing and communications materials, CMS believes that removing
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. CMS also
explained that, 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 (90 FR 54957). CMS noted, however, that if this
proposed change to CMS's regulations was finalized, MA organizations
and Part D sponsors could still choose to make data available to
beneficiaries as they determine appropriate, which may reduce the
administrative burden (90 FR 54957).
CMS stated it would 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 CMS is investigating a complaint regarding a misleading,
confusing, or materially inaccurate material, CMS may request the plan
provide documentation that supports a superlative used, per the
Agency's oversight authority at Sec. Sec. 422.504(f)(2) and
423.505(f)(2).
In the Contract Year 2027 proposed rule, CMS provided examples of
quantifiable superlatives that would be acceptable if this provision
was finalized, such as ``highest rated providers in Chester County,''
``largest provider network in Florida,'' or ``highest rated plan in
Virginia'' (90 FR 54957). Further, CMS noted that MA organizations and
Part D sponsors would need to be able to factually support such
superlatives through data, surveys, studies, or other type of
information, and when requested, provide that information to CMS (90 FR
54957). 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. CMS explained that the use of a superlative such as ``The most
popular Medicare Prescription Drug plan in Montgomery County in 2023''
would be acceptable (90 FR 54957). Conversely, CMS noted that the
Agency would generally find the same statement to be misleading if the
date was missing (90 FR 54957).
CMS recognized 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'' (90 FR 54957). CMS explained that both
examples would be permissible, 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 (90 FR 54957).
Consistent with Executive Order 14267,\51\ 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
[[Page 17462]]
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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\51\ https://www.federalregister.gov/documents/2025/04/15/2025-06463/reducing-anti-competitive-regulatory-barriers.
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For the reasons discussed, CMS proposed to delete current
paragraphs at Sec. Sec. 422.2262(a)(1)(ii) and 423.2262(a)(1)(ii) in
their entirety to remove the prohibition of using superlatives in
marketing and communications materials without providing supporting
documentation. With this revision, CMS explained that the Agency would
renumber current paragraphs Sec. Sec. 422.2262(a)(1)(iii)-(xix) and
423.2262(a)(1)(iii)-(xviii) (90 FR 54957).
Consistent with Executive Order 14192,\52\ Unleashing Prosperity
Through Deregulation, issued on January 31, 2025, CMS also proposed
deleting the current paragraphs at Sec. Sec. 422.2262(a)(1)(i) and
423.2262(a)(1)(i), which reiterated the prohibition on MA organizations
and Part D sponsors providing misleading and inaccurate information to
beneficiaries (90 FR 54957). 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. CMS solicited comments on this proposal
and appreciates stakeholders' input on the proposed changes. The Agency
received the following comments and provided responses as follows.
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\52\ https://www.federalregister.gov/documents/2025/02/06/2025-02345/unleashing-prosperity-through-deregulation.
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Comment: Many commenters expressed support for this proposal. They
stated that the marketing landscape is currently so restrictive that
the actual benefits of plans are often unable to be effectively and
clearly communicated to beneficiaries, which can be harmful.
Response: CMS thanks the commenters for their support.
Comment: Many commenters urged CMS to reconsider or revise this
proposal as they believed it may result in increased complaints, and a
few added that the Agency may not have the bandwidth to adequately
oversee all those complaints. Many expressed that this proposal would
allow for exaggerated, subjective, and misleading information that
beneficiaries may not be able to verify themselves, which the industry
has previously experienced. Some commenters underscored examples of
past beneficiary complaints related to marketing, including several
that highlighted the current substantial marketing of supplemental
benefits, which already creates frequent beneficiary confusion. Some
commenters requested additional guidance on superlatives that CMS would
consider permissible.
Another commenter suggested that CMS maintain the requirement to
include supporting documentation for a material with a superlative but
modify it to allow exceptions for media formats with limited time and
space. Another suggested that CMS adopt limitations with this proposal,
such as prohibiting the use of superlatives when marketing materials
describe benefits or prices of a plan.
Response: CMS appreciates the feedback on this proposal and
acknowledges the commenters' concerns and suggestions. However, CMS
maintains that the existing marketing and communications requirements
at Sec. Sec. 422.2262 and 423.2262 uphold beneficiary protections
against misleading, confusing, and inaccurate information. CMS will
continue oversight of marketing materials, as statutorily required, and
will adjust resources accordingly if there is an increase in the volume
of complaints. As such, the Agency will consider the use of
superlatives and may request supporting documentation when conducting
marketing material reviews or investigating beneficiary complaints.
CMS acknowledges that some supplemental benefits can be complex and
challenging for beneficiaries to understand. CMS expects the majority
of superlatives that mention benefits, including supplemental benefits,
to be quantifiable, as they can be reasonably measured. To offer some
examples of superlatives about supplemental benefits, CMS would
consider ``we have the best supplemental benefits in Texas'' to be
misleading and confusing as the ``best'' supplemental benefits are
entirely subjective to the health needs of each beneficiary. However,
when describing mandatory supplemental benefits as, ``we have the most
comprehensive dental benefits in Michigan'' and ``we offer the cheapest
over the counter benefits in Beaverhead County,'' CMS would not
consider those misleading, confusing, or materially inaccurate,
provided ``most comprehensive'' and ``cheapest'' can be factually
supported through data, surveys, studies, or other types of
information, and when requested, the plan can provide that information
to CMS.
Moreover, during a review of a material that uses a superlative,
whether it be a routine prospective review or a retrospective review in
response to a complaint, CMS will focus on the use of the superlative
in tandem with other regulatory requirements to determine if the
overall material is misleading, confusing, or inaccurate. For example,
if a material markets an optional supplemental benefit by saying, ``we
offer the most rides to medical appointments in Oregon,'' CMS would
consider the use of the superlative ``most'' acceptable provided it can
be factually supported with data, but would consider the statement in
its entirety misleading and confusing because it does not include
information informing the beneficiary that they must opt into the
optional benefit to access it, such as ``. . . for those who elect our
optional transportation benefit.'' That is, CMS would still consider a
marketing material misleading, confusing, or inaccurate unless the
statement clearly references that the beneficiary must pay for, elect,
or opt in to the optional benefit mentioned. Additionally, for
superlatives focused on special supplemental benefits for the
chronically ill (SSBCI), for example, CMS would consider ``we offer the
most meal deliveries in Massachusetts for those who qualify,'' to not
be misleading, confusing, or inaccurate provided the use of the
superlative ``most'' can be factually supported and the statement
clarifies that a beneficiary must qualify for the special supplemental
benefit. As a reminder of an additional beneficiary protection, if a
marketing material includes any information or statements about SSBCI,
that material must include the SSBCI disclaimer as required at Sec.
422.2267(e)(34).
Comment: Numerous commenters urged CMS to continue or increase
oversight and monitoring efforts to ensure beneficiaries are protected
from misleading, confusing, and inaccurate information. Proactive
oversight recommendations included issuing significant civil money
penalties or temporary suspension of marketing for repeated non-
compliance, requiring correction and re-education campaigns to affected
beneficiaries. Another commenter requested clarification on how this
proposal will be enforced.
Response: CMS reiterates that the Agency will continue to conduct
oversight and monitoring of marketing and communications materials to
ensure beneficiaries receive accurate information. In addition,
beneficiaries or their caregiver can report misleading marketing to 1-
800-MEDICARE. As
[[Page 17463]]
noted previously, when investigating a marketing or communications
material for accusations of the material being misleading, confusing,
or materially inaccurate, such as from a complaint reported to 1-800-
MEDICARE, if the material includes the use of superlatives, CMS may
request supporting documentation from MA organizations and Part D
sponsors per the Agency's oversight authority. Also, CMS reminds MA
organizations and Part D sponsors to maintain adequate oversight of
entities marketing on their behalf as they are ultimately responsible
for ensuring their first tier, downstream, and related entities, as
well as TPMOs, comply with CMS's requirements, per Sec. Sec.
422.504(i), 423.505(i), 422.2274(g)(1) and 423.2274(g)(1).
Comment: Some commenters noted that this proposal will not
responsibly increase competition and will only lead to greater
beneficiary confusion, with a commenter stating that beneficiaries will
no longer be able to easily verify the recency of the supporting data.
Response: CMS thanks these commenters for sharing their concerns.
CMS disagrees that this rule will create confusion for beneficiaries
because MA organizations will continue to be prohibited from providing
misleading, confusing, or inaccurate information in marketing and
communications materials. As described previously, if a superlative is
based on supporting documentation that uses data from before the
current or prior contract year, the statement should directly refer to
the relevant contract year to not be considered misleading, confusing,
or materially inaccurate.
Comment: A few commenters noted that this proposal will not reduce
administrative burden, with some stating that it will shift the burden
away from plans and onto beneficiaries, with another commenter stating
that this signals CMS's intent to neglect its oversight of marketing.
Another commenter remarked that this proposal may result in higher
operational costs, yet a different commenter stated that this proposal
will be especially beneficial for small plans.
Response: CMS respectfully disagrees that this provision will shift
administrative burden onto beneficiaries, nor does this proposal impede
CMS's oversight of marketing. MA organizations and Part D sponsors will
still remain responsible for complying with the robust beneficiary
protections that remain at Sec. Sec. 422.2262 and 423.2262. This
includes that MA organizations and Part D sponsors are still required
to ensure their materials do not include misleading, confusing or
inaccurate information and the Agency will continue oversight of all
marketing and communication materials for compliance with these
requirements. In addition, CMS reiterates here that MA organizations
and Part D sponsors remain ultimately responsible for entities
marketing on their behalf and should maintain adequate oversight of
said entities. While a quantifiable superlative must be able to be
substantiated by supporting documentation, CMS reiterates that this
provision could reduce administrative burden, depending on plans'
internal processes, as the supporting documentation must no longer be
provided directly in the material. The Agency appreciates the feedback
that this provision may be especially beneficial for small MA
organizations and Part D sponsors that may have less administrative
capacity.
Comment: Another commenter stated that this proposal might
negatively impact Make America Healthy Again (MAHA) priorities.
Response: Without any examples of how or why, CMS does not see how
this proposal negatively impacts MAHA priorities.
Comment: A commenter asked CMS to specify what types of supporting
documentation would be acceptable for substantiating superlative
statements.
Response: CMS has similar expectations for supporting documentation
as the Agency did previously. CMS expects supporting documentation data
to reflect data, reports, studies, or other documentation that applies
to the current year. If the supporting documentation includes data that
is not from the current or prior contract year, as described
previously, it would be permissible if the older contract year is
referenced in the superlative. In the Contract Year 2027 proposed rule,
CMS provided examples of permissible superlatives supported by data
from prior contract years, which CMS will include in the Agency's
review of marketing materials and requests for supporting documentation
when necessary.
Comment: Another commenter wrote that CMS should allow descriptive
language such as superlatives and terms like ``free'' when the
statements are substantiated by facts. Another commenter noted that
advertising rides to medical appointments as ``free'' could be
misleading if there are only a limited number of rides.
Response: As noted in this rule, CMS agrees that superlative
statements should be permitted in marketing and communications
materials provided they can be factually supported, when applicable, as
previously discussed. However, CMS also notes that the use of the term
``free'' is outside the scope of this proposal as ``free'' is not a
superlative. Currently, Sec. 422.2262(a)(1)(xiii) prohibits the use of
``free'' in certain scenarios, and Sec. 422.2262(a)(2)(iii) explains
when the term ``free'' may be used.
Comment: A couple of commenters urged CMS to reinstate the
``meaningful difference'' requirement, which would limit plans to only
benefit packages that are ``substantially different'' from other plans
offered by the same parent organization in a service area.
Response: CMS appreciates these comments and will take them into
consideration. However, the ``meaningful difference'' requirement that
was previously in place is outside the scope of this proposal.
After consideration of the public comments CMS received, CMS is
finalizing these provisions as proposed.
G. 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)
In the Contract Year 2027 proposed rule, CMS proposed to codify the
revision of 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 presently 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 proposed
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 only modified 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 the proposal did
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).
[[Page 17464]]
To meet enrollment documentation requirements for enrollments that
occur over the phone, plans are still 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 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, such as the Department of Justice
(DOJ) 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. The recordings were
reviewed to determine if the claims against the agent or broker were
supported by the call recording. 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 notifies the MA organization or Part D sponsor of
the Agency's findings and requests 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. When CMS proposed
revisions to these regulations in the Contract Year 2027 proposed rule,
there were over 68 million Medicare beneficiaries, of which 51.1
percent are enrolled in MA and other health plans.\53\ Of the
approximately 34 million beneficiaries enrolled in an MA plan or other
health plan, 31 percent use agents to assist with plan choices,\54\
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,\55\ resulting
in approximately 3.1 million beneficiaries using agents or brokers to
review their plan choices. Based on these data, CMS conservatively
estimated 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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\53\ https://data.cms.gov/summary-statistics-on-beneficiary-enrollment/medicare-and-medicaid-reports/medicare-monthly-enrollment.
\54\ https://www.medpac.gov/wp-content/uploads/2024/08/Medicare-agents-MedPAC-03.25sec.pdf.
\55\ 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
[[Page 17465]]
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 proposed 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. The 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 stated that a 6-year record retention requirement for the
marketing and sales portion of calls is sufficient for the purpose of
enabling CMS to review 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 for CMS to review the
marketing and sales portion of audio recordings when the Agency
receives complaints from beneficiaries related to being misled into
choosing a plan and 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.
When CMS proposed a revised 6-year record retention requirement for
the marketing and sales portion of calls, in the Contract Year 2027
proposed rule, CMS also said that the Agency would consider several
other alternatives for finalization as described below. CMS considered
alternatives based on the cost and burden of recording and storing
calls.
One alternative to the proposed 6-year retention requirement was to
reduce the 10-year retention requirement for the marketing and sales
portion of calls to a 3-year retention requirement. In the Contract
Year 2027 proposed rule, CMS noted that a 3-year retention would
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, CMS also noted in the Contract
Year 2027 proposed rule that a 3-year retention requirement would
result in a more significant decrease in burden as compared to the
proposed 6-year retention requirement.
In the Contract Year 2027 proposed rule, CMS also considered
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 considered
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 the remainder of the retention
period would be sufficient to achieve the purpose articulated by CMS in
the Contract Year 2027 proposed rule. An important factor to this
alternative that CMS considered was the ability of current technology
to automate the transcription with sufficient accuracy. CMS stated the
Agency was considering that 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. However, CMS also stated that, on the other hand,
transcripts would not capture the tone by which the agent or broker
interacted with the beneficiary. The Agency also acknowledged that 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 considered as an alternative whether maintaining a
recording, 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
acknowledged there are differences between MA, Part D, Marketplace,
Medicaid, and commercial insurance, however, CMS noted 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.
CMS solicited comments on all aspects of the proposal and requested
comments on other alternatives for consideration in the final rule. CMS
thanks commenters for their input. In the following section, CMS
describes the comments received and CMS's corresponding responses.
Comment: Numerous commenters supported the proposal to change the
call recording requirement from 10 to 6 years, mentioning that auditing
recorded calls is a necessary practice to protect beneficiaries.
Commenters noted the proposal reflects operational realities while
preserving program integrity; assists small and mid-size brokerages
regarding storage and cybersecurity; represents a balanced regulatory
approach that appropriately reduces administrative and financial
burdens; will foster greater competition with the industry, ultimately
improving the cost effectiveness and quality of products offered by MA
organizations and Part D sponsors; and addresses the issue of
compliance costs not proportionality improving oversight outcomes.
Commenters stated that a 6-year retention requirement is still
sufficient for oversight and monitoring and preserves accountability
for enrollment related interactions. Commenters also mentioned that it
is unlikely to need call recordings for review beyond certain
timeframes ranging from 1 to 6 years. Other commenters supported the
proposal with no specific reasons for the support.
Response: We appreciate commenters' support. CMS agrees that the
shorter timeframe will still provide CMS, MA and Part D plans, TPMOs,
and agents and brokers with the necessary tools for oversight and
monitoring. The Agency also appreciates the commenters addressing how
the proposal will be beneficial for the industry in areas including
storage costs, compliance costs, and operational realities while still
protecting beneficiaries.
Comment: Several commenters opposed the proposal and urged CMS to
maintain the 10-year record retention requirement. These commenters
emphasized that the record retention requirement serves as an important
beneficiary protection, supports a Medicare enrollee's marketing
violation complaint with Medicare that can lead to a timely resolution
(for example, retroactive or prospective enrollment via a SEP), and
that the calls constitute an integral source of accountability for
TPMOs and MA organizations. A commenter stated that call recordings
were needed when plan changes and
[[Page 17466]]
billing timelines are pushed into the following year or beyond as
claims work through various systems. The commenter stated that CMS's
requirements should remain aligned with similar requirements associated
with Medicaid and Medicare dually eligible individuals. In addition,
this commenter also stated that 10 years may be excessive.
Response: We acknowledge the commenters' concerns. However, we have
determined that a shorter record retention period will not compromise
beneficiary protections, result in an untimely resolution of a
beneficiary, or jeopardize appropriate accountability for TPMOs and MA
organizations. Commenters noted that most beneficiary issues and
complaints arise within the first few years of a beneficiary's plan
enrollment. Reviewing more dated call recordings would provide limited
value for oversight, monitoring, or beneficiary assistance,
particularly when beneficiaries have transitioned to different plans
since the original recording. In some instances, the TPMO, agent, or
broker no longer sells MA plans, further limiting the value of a dated
call recording. After 6 years, it is also likely that additional
training was provided, which resulted in more compliant agent or broker
behavior. As for the commenter who stated that call recordings assist
in a timely resolution for marketing complaints, CMS agrees that a call
recording can assist in a timely resolution for marketing complaints.
However, CMS believes that the outcome is often optimized when the
issue is addressed within close proximity of a marketing complaint and
that keeping call recordings for an additional 4 years would provide no
added value in resolving marketing complaints in a timely manner.
Regarding the commenter stating that CMS's rules should align with
similar Medicaid and Medicare requirements associated with dually
eligible individuals, CMS notes that the 6-year requirement would apply
to dually eligible individuals who are enrolled into MA or Part D
plans, unless a State Medicaid Agency Contract requires a longer
retention period. In addition, alignment with State Medicaid programs
would be extremely challenging given each state may have different
requirements. To protect enrollees, it is longstanding CMS policy that
MA and Part D enrollees who believe they may be adversely impacted by
an enrollment decision based on an agent or broker misrepresenting plan
options may contact 1-800-MEDICARE to request a special enrollment
period (SEP) due to the circumstances. CMS reviews the supporting
details and documentation for these requests and determines eligibility
for an exceptional circumstances SEP on a case-by-case basis.
Comment: A couple of commenters requested that CMS eliminate the
call recording requirement entirely without providing any alternatives.
These commenters stated that the recordings add unnecessary complexity
and cost without demonstratable benefit to clients. The commenters
furthered this point in saying the recordings do not solve any issue,
and seniors do not like recordings at all.
Response: We appreciate the feedback from the commenters. However,
CMS does not support eliminating call recordings in their entirety at
this time. Currently, call recordings play an integral role as a
beneficiary protection, assist in identifying brokers, agents, and
TPMOs that fail to adhere to CMS regulations, and assist in monitoring
and oversight of the MA and Part D programs. CMS will continue to
gather data on the value of call recordings to further inform future
decisions about marketing and sales recording requirements before
making any additional changes beyond what was proposed in the Contract
Year 2027 proposed rule.
Comment: A commenter stated that CMS should focus monitoring
efforts on unscrupulous marketing organizations that have United States
call centers that contract with Third Party Marketing Organizations
(TPMOs) that use foreign call center representatives. The commenter
added that these call centers can spend up to 18 hours a day calling
Medicare beneficiaries within the U.S. to get them to enroll or change
Medicare Advantage plans. The commenter further stated that these
foreign call centers are driven by sales quotas, not beneficiary
suitability.
Response: We agree that monitoring call centers, including those
contracting with out-of-country entities, is important. Although the
commenter's suggestion is out of scope, CMS's review of call recordings
assists in identifying unscrupulous marketing organizations, including
those that contract with out-of-country entities. In cases where CMS
determines marketing violations have occurred, MA and Part D plans are
held accountable for the actions of their downstream entities.
Comment: A commenter stated that CMS assumes an audio call
meaningfully prevents fraud, citing that beneficiaries sometimes claim
the voice is not theirs, resulting in a plan-based enforcement action
taken against an agent. The commenter stated that, if a call recording
can be dismissed by a beneficiary simply stating, ``that is not my
voice,'' recordings are not immune to dispute, do not conclusively
prove identity, create massive data security and privacy risks, and
expose agents and beneficiaries to long-term breach liability. This
same commenter also said that documentation and transcripts are better
because they capture intent, document what was discussed, are
searchable and auditable, are less costly to store, and reduce exposure
to sensitive voice data. This commenter suggested that CMS allow secure
transcripts, summaries, or enrollment attestations instead of call
recordings.
Response: We thank the commenter but maintain that call recordings
are extremely valuable. Call recordings can capture the intent and the
tone of the call, providing a clear, realistic view of the interaction
between the beneficiary and the agent or broker that transcripts cannot
capture. CMS acknowledges that voice recordings can be manipulated but
maintains that they are not quite as easy to manipulate as transcripts.
Entire sections of a call can be eliminated in a transcript, which
could go unnoticed, while removing a portion of an audio recording
would likely be more noticeable. CMS also believes a beneficiary's
identity is more likely to be authenticated through a call recording
over a transcript. Regarding data breaches and security concerns, CMS
recognizes these are areas of concern, but requirements are in place
for securing sensitive data. Currently, it is the Agency's position
that transcript summaries are too limited and do not provide enough
detail to capture inaccurate or misleading information between an agent
and a beneficiary during a marketing or sales calls. Likewise,
enrollment attestations provide even less information than a transcript
summary. Summaries and attestations do not provide the information
necessary to properly monitor TPMO marketing and sales calls. CMS
agrees with the commenter that transcripts are searchable and less
costly to store but does not agree that transcripts have more value
than call recordings. Because call recordings are a valuable tool, CMS
will not be allowing transcripts in lieu of all audio recordings for
the entire retention period, however, CMS is modifying its original
proposal to allow the use of transcripts in the last 3 years of the
retention period.
Comment: About half of the commenters requested that the
requirement for call recordings be eliminated, however, they
[[Page 17467]]
acknowledged that if CMS determined a full rescinding of the
requirement was not feasible, a reduced retention period of 2 years
would be more than sufficient for review purposes. The vast majority of
these commenters relayed the same concerns, including legal and
practical challenges, logistical and financial strain on independent
agents with no measurable enhanced beneficiary protection, unwarranted
data management burden, and strains on resources that could otherwise
be dedicated to serving beneficiaries. Additional concerns included
infrastructure, compliance oversight, data storage, privacy,
operational complexities, liability risks, the sheer number of
recordings to maintain, and an unnecessary barrier to natural
communications between the beneficiary and agent. Commenters also
stated that a 10-year retention period is excessive, places an undue
administrative burden on independent agents and agencies, and far
exceeds what is practically necessary for addressing most beneficiary
complaints or conducting CMS investigations. According to commenters, a
2-year record retention period would adequately accommodate compliance
needs, allowing for thorough review and investigation without creating
an unnecessarily extensive and costly data storage requirement for
independent agents who are already managing multiple administrative
tasks. Commenters also stated that a 2-year retention period would be
entirely sufficient to fully accommodate most beneficiary complaints,
CMS investigations, and plan or agent reviews, while maintaining
adequate oversight without imposing unnecessary burden on independent
agents and freeing up resources for more direct beneficiary support.
Response: CMS values these commenters' suggestions and recognizes
that record retention requirements impose additional burden and costs,
which may affect independent agents and brokers more than other
entities. CMS agrees that call recording retention for 10 years is
excessive and exceeds what is necessary to review and address
beneficiary complaints. CMS appreciates the commenters understanding
CMS's need for call recordings and proposing the alternative 2-year
record retention requirement. As stated in the Contract Year 2027
proposed rule, the DOJ utilizes call recordings for investigative and
legal purposes. DOJ's investigations and legal proceedings often span
multiple years, necessitating access to call recordings that extend
beyond a 2-year timeframe. Beyond the DOJ requirements, CMS's
monitoring activities, including potential audits, may require access
to records beyond a 2-year retention period. Insufficient retention or
eliminating call recordings could prevent the identification of
misleading agent or broker practices and hinder the ability of MA plans
and Part D sponsors to take appropriate corrective action.
Comment: Several commenters expressed support of the proposal to
reduce the record retention period while recommending alternative
timeframes ranging from 2 to 5 years. Commenters' rationales for a 2 to
5 year record retention period varied by specific reasons but the
sentiments were similar in nature. These commenters suggested: noting
that a much reduced timeframe would be longer than most consumers
remain in a particular plan; there would be ample opportunity for post
enrollment reviews; requests for recordings beyond 3 years are
uncommon; reduced administrative burden and data storage costs would
not impair oversight and audit integrity; existence of consumer
protection; alignment with the Federal Trade Commission's Telemarketing
Record Retention requirement; more efficient storage of call
recordings; a more accurate reflection of real-world compliance
timeliness while continuing to support complaint resolution, audits,
and enforcement actions; significant reduction in data storage volume
and associated costs resulting in meaningful financial and
administrative efficiencies for MA and Part D plans without
compromising program integrity or beneficiary protections; essential
accountability and affordability promoting prudent financial guidance
and product offering is maintained; reduction of potential
cybersecurity risks; and that it is a correct balance of satisfying
CMS's interests while reflecting the pragmatic realities of member
churn and administrative burden. Commenters expressed similar concerns
as previously noted, regarding the 10-year retention requirement,
stating that a 10-year requirement is excessive, places an undue
financial and logistical burden on independent agents, and has
significant storage costs.
Response: CMS values the feedback from commenters recommending a
further reduction from 6 years to a range of 2 to 5 years. CMS agrees
that a further reduction in call recording retention requirements will
further reduce costs, storage volume, and administrative burden. CMS
also agrees that a shorter audio recording retention period is a more
accurate reflection of CMS's and DOJ's compliance needs without
compromising program integrity. However, CMS maintains that a reduction
from a 10-year retention period to a 6-year retention period fulfills
the Agency's and DOJ's oversight, investigative, and litigation
requirements; while a 2 to 5 year retention period is too limited to
adequately address those needs.
Comment: A few commenters supported the alternative of permitting
transcripts in lieu of call recordings, citing reasons including
substantially less storage, transcripts being more easily ingested by
AI systems to review, and a reduction of administrative burden.
Response: CMS thanks the commenters for providing feedback on
alternatives to current call recording requirements as well as those
that were proposed in the Contract Year 2027 proposed rule. CMS agrees
that transcripts are substantially less expensive and require less
storage. CMS believes transcripts can be a valuable and cost-effective
alternative for call retention. However, CMS believes that call
recordings provide additional benefits beyond those provided by
transcripts. Call recordings provide the tone of both the beneficiary
and the agent, including if the beneficiary is pressured into enrolling
in a plan. CMS believes the benefits of call recordings outweigh the
benefits of transcripts during the time period that most complaints
occur. As mentioned by the commenters, most complaints are addressed
within the first few years after a beneficiary enrolls in a plan. A
decreased retention period will still adequately support CMS's and
DOJ's monitoring, oversight, and litigation needs. Following the
timeframe in which most complaints are addressed, CMS believes
transcripts can provide the pertinent information if additional review
is necessary.
Therefore, based on alternative proposals included as part of CMS's
request for comments in the Contract Year 2027 proposed rule and CMS's
oversight and monitoring requirements, CMS is finalizing its proposal
with a modification to allow for marketing and sales call records to be
retained using both audio recordings and transcripts. For the first 3
years of the retention period, records must be maintained in audio
format. In the last 3 years of retention (of the 6-year retention
period), records may be maintained in either audio format or as
complete and accurate transcript recordings. A transcription is
considered complete and accurate if it documents the full recording,
reflecting all statements made
[[Page 17468]]
by the participants as it originally occurred. CMS believes this
strikes the appropriate balance in maintaining program integrity while
reducing burden and costs on MA organizations.
Comment: A few commenters expressed concerns with call centers.
These commenters noted that call centers presented more significant
concerns than independent agents and recommended that CMS require
recordings from call centers but not from independent agents.
Response: CMS appreciates the suggestion but maintains that, at
this time, all sales and marketing calls should be recorded, not just
those from call centers. Any agent, regardless of whether the agent
works for a call center or is independent, may provide inaccurate
information or steer a beneficiary into a particular plan. Complaints
received by CMS concern both independent agents and agents working for
call centers. Call recordings currently allow CMS and other agencies to
fully address these complaints.
Comment: A few commenters mentioned that CMS needs to reduce the
retention requirements for enrollment calls, citing that many times the
sale, marketing, and enrollment calls are combined, making separating
them difficult and more burdensome.
Response: CMS thanks commenters for their feedback. However, the
Contract Year 2027 proposed rule did not address the call retention
timeframe of enrollment calls and therefore this comment is out of
scope.
After careful consideration of public comments, CMS is finalizing
in Sec. Sec. 422.2274(g)(2)(ii) and 423.2274(g)(2)(ii) the 6-year
marketing and sales call retention policy with a modification to allow
for complete and accurate transcripts in the last 3 years of retention.
As mentioned above, a transaction is considered complete and accurate
if it documents the full recording, reflecting all statements made by
the participants as it originally occurred. In summary, all marketing
and sales calls, including the audio portion of calls conducted via
web-based technology, must be recorded and retained in their entirety
for a minimum period of 6 years. For the first 3 years of the retention
period, records must be maintained in audio format. For years 4, 5, and
6, records may be maintained in either audio format or as complete and
accurate transcript recordings.
H. 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. CMS's NoA requirements are closely aligned with and broadly
duplicate OCR's NoA requirements and were adopted by CMS to implement
and ensure compliance with Title VI, section 504 of the Rehabilitation
Act of 1973, and ACA Section 1557 (incorporating Title VI and section
504 by reference). 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).\56\ 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), but
recognizes that ``[a]gency heads should make decisions as they deem
necessary to fulfill their respective agencies' mission and efficiently
provide Government services to the American people'' and notes that
``nothing in [the E.O.] requires or directs any change in the services
provided by any agency'' and ``[a]gency heads are not required to
amend, remove, or otherwise stop production of documents, products, or
other services prepared or offered in languages other than English.''
On January 31, 2025, E.O. 14192 was issued: ``Unleashing Prosperity
Through Deregulation'' (hereinafter referred to as E.O. 14192).\57\
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,\58\ provides guidance for
compliance with E.O. 14224, but indicates that additional guidance will
be forthcoming on compliance with Title VI. As CMS stated in the
Contract Year 2027 proposed rule, 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 requirements under
Title VI and Section 1557 throughout the programs under HHS's
purview.\59\
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\56\ https://www.whitehouse.gov/presidential-actions/2025/03/designating-english-as-the-official-language-of-the-united-states/.
\57\ https://www.whitehouse.gov/presidential-actions/2025/01/unleashing-prosperity-through-deregulation/.
\58\ https://www.justice.gov/opa/pr/justice-department-releases-guidance-implementing-president-trumps-executive-order.
\59\ As discussed later in this section, CMS imposes other
language assistance (and auxiliary aid and service) requirements on
such entities for programmatic reasons related to the operation of
the Medicare program pursuant to its authority under the Social
Security Act, and unrelated to nondiscrimination requirements
imposed by Title VI or ACA Section 1557.
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CMS inadvertently omitted references to cost plans from this
proposal in the Contract Year 2027 proposed rule and notes that the
intent was always for the proposal to rescind the NoA requirement to
apply to cost plans pursuant to CMS's authority in section
1876(c)(3)(C) to regulate marketing by section 1876 cost plans and the
authority in section 1876(i)(3)(D) to specify new section 1876 contract
terms as the Secretary may find necessary and appropriate. It is also
established at Sec. 417.428 that most of the marketing and
communication regulations in subpart V of part 422, including the NoA
requirement, also apply to section 1876 cost plans. Accordingly, the
rescission of the NoA requirement applies to cost plans as well as MA
organizations and Part D sponsors.
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, Part D sponsors, and cost plans, CMS proposed to
eliminate CMS's NoA requirement under Sec. Sec. 422.2267(e)(31) and
423.2267(e)(33) and to defer to OCR's requirements related to
notification of language assistance services and auxiliary aids and
services under 45 CFR 92.11. CMS stated that 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 with respect to
civil rights and nondiscrimination. On May 18, 2016, OCR published the
Nondiscrimination in Health Programs and Activities final rule (81 FR
31376), hereinafter referred to as the ``2016
[[Page 17469]]
section 1557 final rule,'' implementing the requirement that all
covered entities--any health program or activity, any part of which
receives Federal financial assistance (including credits, subsidies, or
contracts of insurance), and any program or activity that is
administered by an executive agency or any entity established under
title I of the ACA (or amendments)--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 five 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 OCR's
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.\60\
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\60\ 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 (Notice of Availability) 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 MA organizations and Part D
sponsors to include in the notice that, at a minimum, they provide
language assistance services and appropriate auxiliary aids and
services free of charge (89 FR 30534). CMS's 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 MA
organizations and Part D sponsors to provide CMS's 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 CMS's 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
organizations and Part D sponsors to develop a NoA with more than 15
languages, exceeding OCR's requirements.
In the Contract Year 2027 proposed rule, CMS explained that while
currently OCR's and CMS's requirements are mostly aligned, CMS noted
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
explained that its 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 its 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 its 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, ACA Section 1557 (42
U.S.C. 18116(a)) 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 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 an Executive Agency; or any program or activity
administered by any entity established under Title I of the Act or
amendments.
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
[[Page 17470]]
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
CMS's 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 its NoA requirements that also aligned with Medicaid
materials requirements, such as updating CMS's NoA to require the 15
most common languages in the State rather than the 15 most common
languages nationally (89 FR 30529).
CMS stated in the Contract Year 2027 proposed rule that, while
CMS's and OCR's current requirements are now mostly aligned, CMS was
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 CMS's NoA
requirement under Sec. Sec. 422.2267(e)(31) and 423.2267(e)(33). CMS
stated that eliminating its 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 under OCR's relevant authorities. CMS notes that dual eligible
special needs plans (D-SNPs) 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 in
the Contract Year 2027 proposed rule was that eliminating the
duplicative nature of OCR's and CMS's regulatory requirements supported
the principles set forth in E.O. 14192 by promoting prudent financial
management and alleviating unnecessary regulatory burdens.
In summary, removing Sec. Sec. 422.2267(e)(31) and 423.2267(e)(33)
reduces the potential for future confusion and administrative burden on
CMS and MA organizations and Part D sponsors by eliminating duplicative
requirements. CMS is not scoring this update in the COI section as CMS
believes there will be no burden impacts for this update. In addition,
this update is not expected to have any economic impact on the Medicare
Trust Fund.
CMS reiterates that it is rescinding the CMS-specific NoA
requirement promulgated pursuant to Title VI, to avoid duplication and
potential misalignment as OCR Title VI policies evolve, but this
policy, as finalized, will not reduce Medicare program protections
related to language assistance and effective communication, promulgated
for programmatic reasons related to the operation of the Medicare
program pursuant to its authority under the Social Security Act. Even
with the rescission of the CMS-specific NoA requirements at Sec. Sec.
422.2267(e)(31) and 423.2267(e)(33), MA organizations, Part D sponsors,
and cost plans remain subject to multiple Medicare program requirements
that ensure meaningful access for individuals with limited English
proficiency (LEP) and individuals with disabilities. For example, MA
organizations, Part D sponsors, and cost plans must continue to provide
interpreter services for non-English speaking and LEP individuals,
including requirements related to interpreter availability and wait
times for incoming calls, and that such services be available at no
cost to the caller consistent with Sec. Sec. 422.111(h)(1)(iii),
423.128(d)(1)(iii), and 417.427. In addition, CMS's existing
translation and accessibility standards for CMS-required materials and
content remain in effect. Under Sec. Sec. 422.2267(a)(2) and
423.2267(a)(2), MA organizations, Part D sponsors, and cost plans must
translate required materials into any non-English language that is the
primary language of at least 5 percent of individuals in a plan benefit
package service area, and under Sec. Sec. 422.2267(a)(3) and
423.2267(a)(3), upon request or when otherwise learning of an
enrollee's primary language, provide non-English materials in any non-
English language identified in Sec. Sec. 422.2267(a)(2),
423.2267(a)(2), 422.2267(a)(4), and 423.2267(a)(4), including the
Annual Notice of Change (ANOC), Evidence of Coverage (EOC), Explanation
of Benefits (EOB), Summary of Benefits (SB), and provider directories,
among others.
CMS solicited comment on the proposed amendments and thanks
commenters for their input. In the following section, CMS describes the
comments received and CMS's corresponding responses.
Comment: Many commenters supported CMS's plan to rescind CMS's NoA
requirement and suggested that this proposal would reduce
administrative burden and costs for MA organizations and Part D
sponsors while protecting against future misalignment between CMS and
OCR's language access requirements. Commenters expressed support for
eliminating duplicative requirements and centralizing oversight of
language access requirements under OCR, with one commenter noting the
importance of this, given forthcoming changes to language access
requirements. They also noted that this rescission, while reducing
administrative burden, would maintain beneficiary protections around
language access. Multiple commenters cited the significant volume of
notice requirements, which can be lengthy or confusing to enrollees, as
further support for CMS to streamline notice requirements and reduce
redundancy. One commenter noted the reduced burden from rescinding this
notice could benefit small plans like special needs plans (SNPs).
Response: CMS thanks commenters for their support of this proposal.
Because the provisions proposed to be rescinded relate only to the
notice of
[[Page 17471]]
availability of language access services and auxiliary aids and
services, CMS notes that CMS proposed to defer to OCR with respect to
such requirements at 45 CFR 92.11, promulgated under Title VI, Section
504, and/or ACA Section 1557, and that it remains responsible for
language assistance and auxiliary aids and services requirements
promulgated for programmatic reasons related to the operation of the
Medicare program pursuant to its authority under the Social Security
Act.
Comment: Another commenter, though supportive of the rescission and
greater efficiency, noted concern regarding the transition of these
requirements to OCR's oversight and requested MA organizations and Part
D sponsors receive timely and detailed guidance on future OCR oversight
and clarifications on how OCR's requirement will differ from CMS's NoA
requirements. The commenter also requested implementation timelines and
coordination between CMS and OCR to prevent conflicting directives and
clarification of any ongoing notice obligations for D-SNPs.
Response: CMS understands the commenter's concern about changing MA
and Part D oversight and will share these concerns with OCR. CMS notes
that OCR already has oversight of its NoA requirements, and that
oversight will continue despite this final rule. OCR is the HHS
component responsible for interpreting, implementing, overseeing and
enforcing Title VI/ACA Section 1557 notice requirements related to
language assistance.
Comment: The majority of commenters opposed this proposal and
requested CMS maintain its NoA requirement, citing the importance of
CMS's NoA in informing beneficiaries of their ability to access
language assistance services, and auxiliary aids and services, at no
cost to the beneficiary. Some commenters stated that beneficiaries with
limited English proficiency (LEP) and those with disabilities rely on
CMS's NoA as a safeguard for vulnerable populations. A few commenters
expressed concern that rescinding CMS's NoA requirement would limit
language access and, therefore, effective communication which could
lead to worse health outcomes or result in expensive downstream
consequences. These commenters were concerned that without the CMS NoA,
beneficiaries will face greater barriers to care, with one commenter
citing the already substantial barriers to care that beneficiaries with
limited English proficiency may face. Another commenter was concerned
that without CMS's NoA, enrollees will not be aware of these services
for enrollees with LEP or disabilities. Lastly, a commenter noted that
CMS's NoA helps reduce burden on community-based organizations with
limited resources.
Response: CMS thanks commenters for their thoughts and acknowledges
these concerns. However, the Agency wants to emphasize that MA
organizations and Part D sponsors will still be required to provide
OCR's NoA as required by 45 CFR 92.11 and Medicaid regulations at Sec.
438.10(d)(2), as applicable. As stated earlier, CMS is proposing to
rescind CMS's NoA to ensure clarity, minimize administrative burden,
and limit confusion for MA organizations and Part D sponsors. Under
OCR's requirements, beneficiaries will continue to receive the
appropriate notices. Deferring to OCR's oversight, management, and
enforcement of Title VI, Section 504, and/or ACA Section 1557 with
respect to such notice requirements as required by 45 CFR 92.11,
related to language assistance services and auxiliary aids and
services, would also mitigate the potential for future misalignment and
the need for additional modifications to CMS's Title VI, Section 504,
and/or ACA Section 1557 requirements as policy evolves. Moreover, CMS
has other language-based requirements, promulgated for programmatic
reasons related to the operation of the Medicare program pursuant to
its authority under the Social Security Act, that remain in effect that
provide a level of protection to non-English speaking beneficiaries.
Under Sec. Sec. 422.2267(a)(2) and 423.2267(a)(2), for example, 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 individuals in a plan benefit package service area, and
under Sec. Sec. 422.2267(a)(3) and 423.2267(a)(3), upon request or
when otherwise learning of an enrollee's primary language, provide non-
English materials in any non-English language identified in Sec. Sec.
422.2267(a)(2), 423.2267(a)(2), 422.2267(a)(4), and 423.2267(a)(4).
Comment: A few commenters had specific concerns about deferring
oversight to OCR's NoA requirements, with commenters claiming OCR has a
limited capacity, due to low staffing, to properly oversee these
requirements or that there could be enforcement gaps. Commenters
articulated concern that the lack of clear oversight or protection
could harm beneficiaries or lead to ineffective oversight and that
reducing CMS oversight may mean MA organizations and Part D sponsors
are less inclined to provide these notifications. Another commenter
noted that, while appreciative of CMS's goal to mitigate future
misalignment, they were concerned that this change would create more
confusion, without additional benefit for beneficiaries. Furthermore,
this commenter recommended CMS communicate changes to OCR guidance
through HPMS and continue streamlining requirements. Another commenter
requested that CMS not defer oversight and management to OCR until
clear, enforceable mechanisms are in place to ensure enforcement.
Response: CMS appreciates commenters' thoughts. However, CMS
reiterates that OCR is the HHS component responsible for interpreting,
implementing, overseeing, and enforcing Title VI, Section 504, and/or
ACA Section 1557 requirements related to notification for language
assistance services and auxiliary aids and services at 45 CFR 92.11.
Rescinding CMS's NoA requirement will assist MA organizations and Part
D sponsors and beneficiaries in removing duplicative requirements that
could result in potential confusion for beneficiaries and unnecessary
administrative burden, including the need to ensure compliance with
both CMS and OCR NoA requirements. Moreover, CMS has other language-
based requirements, promulgated for programmatic reasons related to the
operation of the Medicare program pursuant to its authority under the
Social Security Act, that remain in effect that provide a level of
protection to non-English speaking beneficiaries. Under Sec. Sec.
422.2267(a)(2) and 423.2267(a)(2), for example, 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
individuals in a plan benefit package service area, and under
Sec. Sec. 422.2267(a)(3) and 423.2267(a)(3), upon request or when
otherwise learning of an enrollee's primary language, provide non-
English materials in any non-English language identified in Sec. Sec.
422.2267(a)(2), 423.2267(a)(2), 422.2267(a)(4), and 423.2267(a)(4).
Comment: A few commenters expressed concern about limitations to
civil rights and that this proposal will harm Americans with
disabilities and individuals with LEP. A commenter disagreed with CMS's
rationale that CMS and OCR's requirements are duplicative or confusing
and instead believes that these requirements work together to promote
effective communication. This commenter added that removing CMS's
requirement eliminates CMS's monitoring capacity
[[Page 17472]]
in its complaint tracking system. An additional commenter disagreed
with CMS that CMS's NoA is duplicative with OCR's requirements, arguing
that it provides clear directions to MA organizations and Part D
sponsors within the Medicare context. Another commenter was concerned
administrative burden would shift from MA organizations and Part D
sponsors to beneficiaries and providers.
Response: CMS understands commenters' concerns but reiterates that
OCR is the HHS component responsible for implementation of Title VI,
Section 504, and/or ACA Section 1557 requirements and that CMS is
proposing to rescind CMS's NoA due to its duplicative nature and to
streamline oversight of notice requirements as required by 45 CFR 92.11
under OCR. Rescinding CMS's NoA does not limit CMS's ability to monitor
relevant complaints, and MA organizations and Part D sponsors will
still be responsible under their CMS contracts to follow all applicable
federal rules and regulations. As previously stated, CMS has other
language-based requirements, promulgated for programmatic reasons
related to the operation of the Medicare program pursuant to its
authority under the Social Security Act, that remain in effect that
provide a level of protection to non-English speaking beneficiaries.
Under Sec. Sec. 422.2267(a)(2) and 423.2267(a)(2), for example, 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 individuals in a plan benefit package service area, and
under Sec. Sec. 422.2267(a)(3) and 423.2267(a)(3), upon request or
when otherwise learning of an enrollee's primary language, provide non-
English materials in any non-English language identified in Sec. Sec.
422.2267(a)(2), 423.2267(a)(2), 422.2267(a)(4), and 423.2267(a)(4).
Comment: Several commenters expressed concern with deferring to OCR
requirements, arguing that those are broader and less specific to
Medicare populations. A few commenters noted that MA and Part D
requirements are more explicit and supportive of Medicare beneficiaries
than OCR's requirements. A commenter noted that the current CMS NoA
requirements are clear and prescriptive, requiring CMS's NoA to be
included on all CMS required documents, which promotes clarity and
consistency for operations and compliance. The commenter explained that
while some of the OCR's NoA categories are straightforward, others are
subjective and require detailed, document-level interpretation which MA
organizations and Part D sponsors would be required to evaluate for all
CMS required documents. Another commenter expressed concern that
certain CMS-required materials, such as the Mid-Year Change
Notifications, Star Ratings Document, and Federal Contracting
Statement, would not include the NoA under OCR's requirements. Another
commenter requested CMS collaborate with OCR to limit the number of
required communications OCR's NoA must be included in, arguing costly
printing and a poor enrollee experience and recommended that CMS
require the inclusion of the NoA in the Annual Notice of Change (ANOC),
Evidence of Coverage (EOC), Explanation of Benefits (EOB), and Summary
of Benefits documents.
Response: CMS understands commenters' concerns regarding the minor
differences in OCR and CMS's current NoA requirements. However, CMS
notes that language access notification requirements have historically
been updated based on OCR's language access requirements. Most
recently, in the April 2024 final rule, CMS updated its notice
requirements from the MLI to the NoA to align with proposed changes to
OCR's language access notifications. Furthermore, OCR is the HHS
component responsible for implementing and enforcing the HHS civil
rights regulations at Section 1557 and 45 CFR 92.11 and their
requirements currently include many pertinent and important materials.
CMS disagrees with commenters that OCR's requirements are less specific
to Medicare beneficiaries or less detailed than CMS's requirements.
Some examples, as listed in OCR requirements at 45 CFR 92.11(c)(5),
include that the NoA is required to be included on application and
intake forms, and communications related to an individual's rights,
eligibility, benefits, or services that require or request a response
from a participant, beneficiary, enrollee, or applicant. OCR also
requires the NoA to be provided annually to participants,
beneficiaries, enrollees (including late and special enrollees), and
applicants of a covered entity's health program or activity, per 45 CFR
92.11(c)(1), and upon request, per 45 CFR 92.11(c)(2). To streamline
regulatory processes and limit duplicative guidance and enforcement,
deferring to OCR with respect to Title VI, Section 504, and/or ACA
Section 1557 requirements related to notification for language
assistance services and auxiliary aids and services, as required by 45
CFR 92.11, will ensure MA organizations and Part D sponsors have clear
guidance on civil rights requirements. CMS notes that, although the OCR
requirements do not specifically define the applicable CMS materials,
OCR's NoA requirements provide clear instructions on which materials
should include OCR's NoA,
Comment: Many commenters shared concerns that OCR's NoA requirement
does not include the CMS requirement at Sec. Sec.
422.2267(e)(31)(ii)(B) and 423.2267(e)(33)(ii)(B) that CMS's NoA be
provided in additional languages if there are additional languages in a
particular service area that meet the five percent service area
threshold beyond the languages described in Sec. Sec.
422.2267(e)(31)(i) or 423.2267(e)(33)(i), and that CMS's NoA must also
be translated into those languages. One commenter was concerned about
the impact on local populations with LEP that may no longer receive
notices in their primary language, leading to barriers to coverage.
Response: CMS understands commenters' concern regarding the five
percent service area threshold. CMS notes that while the OCR
requirement does not include this additional five percent service area
threshold requirement, OCR's current requirement at 45 CFR 92.11(b)
requires ``at least the 15 languages most commonly spoken by
individuals with limited English proficiency of the relevant State or
States in which a covered entity operates.'' MA organizations and Part
D sponsors are permitted to include additional languages in OCR's NoA
beyond this requirement. Furthermore, under CMS requirements at
Sec. Sec. 422.2267(a)(2) and 423.2267(a)(2), for all required
materials and content under Sec. Sec. 422.2267 and 423.2267, MA
organizations and Part D sponsors must, ``[f]or 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,'' and under Sec. Sec.
422.2267(a)(3) and 423.2267(a)(3), upon request or when otherwise
learning of an enrollee's primary language, provide non-English
materials in any non-English language identified in Sec. Sec.
422.2267(a)(2), 423.2267(a)(2), 422.2267(a)(4), and 423.2267(a)(4).
These requirements are also applicable to cost plans pursuant to Sec.
417.428.
Comment: A few commenters who opposed this proposal had concerns
[[Page 17473]]
about how this rescission would impact MA organizations and Part D
sponsors. A commenter expressed concern the proposal would result in MA
organizations and Part D sponsors needing to hire more translators,
increased call center volume and a re-allocation of resources to
address these changes, which would disproportionally impact smaller MA
organizations and Part D sponsors. Another commenter, while
appreciative of the effort to streamline communication requirements,
was concerned the proposal would inadvertently create increased
complexity and introduce additional compliance risks for MA
organizations and Part D sponsors. Another commenter recommended CMS
revert to CMS' MLI requirement, arguing that the language requirement
to include the top 15 non-English languages nationally was less
burdensome to MA organizations and Part D sponsors, less costly and
better for beneficiaries.
Response: CMS maintains the position that the duplicative nature of
these requirements may result in potential confusion and burden for MA
organizations and Part D sponsors and beneficiaries as well as
resulting in additional regulatory updates, and corresponding burdens
as policy evolves. While CMS understands concerns regarding adapting to
the requirements, CMS notes that OCR currently oversees its Title VI,
Section 504, and/or ACA Section 1557 NoA requirements. Under this
proposal, CMS is solely removing a duplicative requirement and
deferring to OCR, the agency responsible for implementing these civil
rights requirements at 45 CFR 92.11. Additionally, CMS believes that MA
organizations and Part D sponsors will benefit from more centralized
and streamlined civil rights guidance, especially those organizations
whose operations include more insurance products than Medicare
Advantage and Medicare prescription drug plans.
Comment: A few commenters highlighted the impact on SNPs and their
enrollees, citing the potential for regulatory inconsistency. One
commenter noted that, for D-SNPs, coordination with state Medicaid
requirements is still applicable and that rescinding the NoA could
create problems with enrollment in D-SNPs, who would still be subject
to notice requirements in the State Medicaid Agency Contract (SMAC) or
State statute. Another commenter noted while CMS's NoA requirement will
exist for D-SNPs, for non-D-SNPs, beneficiaries could be harmed in
their ability to fully understand and comprehend complex information.
Response: CMS acknowledges that D-SNPs would still be required to
follow the Medicaid requirement under Sec. 438.10(d)(2), as described
above. By removing the NoA requirements under Sec. Sec.
422.2267(e)(31) and 423.2267(e)(33), D-SNPs will only need to consider
applicable Medicaid and OCR language access notification requirements,
which CMS believes will reduce the administrative burden on D-SNPs of
complying with MA and Part D, Medicaid and OCR notification
requirements concerning language access services and auxiliary aids and
services.
Comment: A couple of commenters praised the current CMS NoA
requirement burden reduction, by allowing MA organizations and Part D
sponsors at Sec. Sec. 422.2267(e)(31)(ii)(F) and
423.2267(e)(33)(ii)(F), to only provide one notice when mailing
multiple required materials together. One commenter noted OCR does not
have this requirement, which may result in a higher volume of mail and
redundancy for MA organizations, Part D sponsors, and enrollees.
Response: CMS appreciates commenters' insight on the benefits of
mailing one notice with multiple required materials. In alignment with
CMS's rationale to reduce duplication, CMS's goal with this proposal is
to further streamline requirements for MA organizations and Part D
sponsors and to prevent beneficiaries being inundated with duplicative
notices. OCR's regulations implementing section 1557 of the Affordable
Care Act separately require recipients of Federal financial assistance,
such as MA organizations and Part D sponsors, to provide an NoA in
certain circumstances as set forth in 45 CFR 92.11, including in
specified electronic and written communications listed under Sec.
92.11(c)(5). CMS notes that while OCR's requirements do not explicitly
permit MA organizations and Part D sponsors to provide one notice when
mailing multiple required materials as in Sec. Sec.
422.2267(e)(31)(ii)(F) and 423.2267(e)(33)(ii)(F), doing so is not
explicitly prohibited by OCR's requirements at 45 CFR 92.11.
Comment: One commenter argued that CMS did not provide a sufficient
rationale for why previously cited concerns about language barriers for
beneficiaries are outweighed by potentially confusing regulations for
MA organizations and Part D sponsors. Another commenter disagreed with
CMS that OCR's requirement was duplicative, citing CMS's rationale in
the April 2024 final rule that OCR's requirements were insufficient to
protect beneficiaries and stated that CMS has not provided a rationale
to reverse these statements.
Response: As noted in the Contract Year 2027 proposed rule,
eliminating CMS's NoA requirement under Sec. Sec. 422.2267(e)(31) and
423.2267(e)(33) will ensure consistency and clarity for covered
entities as any Title VI language access services and Section 504
auxiliary aids and services notification requirements required by 45
CFR 92.11 will be addressed by OCR, which is responsible for enforcing
civil rights laws with respect to HHS programs. OCR is the HHS
component that implements and enforces civil rights requirements, and
CMS will defer to OCR's oversight, management, and enforcement of any
Title VI, Section 504, and/or ACA Section 1557 requirements related to
notification for language assistance services and auxiliary aids and
services at 45 CFR 92.11. Regarding CMS's previous rationale, in the
April 2024 final rule, CMS referenced the discussion from the May 2022
final rule that ``relying on the requirements delineated in the 2020
section 1557 final rule for covered entities to convey the availability
of interpreter services is insufficient.'' \61\ In OCR's 2020 section
1557 final rule, they rescinded their language access notification
requirements, known as ``taglines.'' Since that time, in May 2024, OCR
finalized new rules implementing their NoA requirements,\62\ after
proposing these changes in their 2022 section 1557 proposed rule.\63\
CMS had already updated its NoA requirements in the April 2024 final
rule to align its requirements with OCR's based on OCR's 2022 section
1557 proposed rule. While these requirements are now aligned, CMS is
concerned about the redundancy of these requirements and is taking the
prudent step to defer to OCR for oversight of Title VI and/or ACA
Section 1557 language access requirements at 45 CFR 92.11. CMS
reiterates that it has other language-based requirements, promulgated
for programmatic reasons related to the operation of the Medicare
program pursuant to its authority under the Social Security Act, that
remain in effect that provide a level of protection to non-English
speaking beneficiaries. Under Sec. Sec. 422.2267(a)(2) and
423.2267(a)(2), for example, 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 individuals in a plan
[[Page 17474]]
benefit package service area, and under Sec. Sec. 422.2267(a)(3) and
423.2267(a)(3), upon request or when otherwise learning of an
enrollee's primary language, provide non-English materials in any non-
English language identified in Sec. Sec. 422.2267(a)(2),
423.2267(a)(2), 422.2267(a)(4), and 423.2267(a)(4).
---------------------------------------------------------------------------
\61\ 89 FR 30529
\62\ 89 FR 37522
\63\ 87 FR 47824
---------------------------------------------------------------------------
Comment: One commenter described the legal foundation for the
requirement for covered entities to notify individuals of the
availability of language assistance services, citing Title VI of the
Civil Rights Act of 1964, Section 1557 of the Affordable Care Act, and
the implementing regulations at 45 CFR 92.11. The commenter stated that
these statutory requirements cannot be overridden by executive orders,
and that they cannot nullify civil rights protections established by
statute. The commenter noted that the July 2025 Attorney General
memorandum cited by CMS does not eliminate Section 1557 requirements
and argued that these legal requirements exist because meaningful
access to healthcare services requires that individuals first know that
language assistance is available to them.
Response: CMS clarifies that rescinding the CMS required NoA should
not be construed as the Agency taking a position on the laws and
regulations cited by the commenter. Rather, CMS's decision to rescind
CMS's NoA requirements under Sec. Sec. 422.2267(e)(31) and
423.2267(e)(33) is due to concerns previously expressed in this
preamble, including the duplicative nature of CMS and OCR's
requirements and the corresponding burden placed on MA organizations
and Part D sponsors to ensure compliance with NoA requirements from CMS
and OCR. OCR is also the HHS component responsible for implementing and
enforcing Title VI, Section 504, and/or ACA Section 1557 notice
requirements as required by 45 CFR 92.11. CMS has other language-based
requirements, promulgated for programmatic reasons related to the
operation of the Medicare program pursuant to its authority under the
Social Security Act, that remain in effect that provide a level of
protection to non-English speaking beneficiaries. Under Sec. Sec.
422.2267(a)(2) and 423.2267(a)(2), for example, 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
individuals in a plan benefit package service area, and under
Sec. Sec. 422.2267(a)(3) and 423.2267(a)(3), upon request or when
otherwise learning of an enrollee's primary language, provide non-
English materials in any non-English language identified in Sec. Sec.
422.2267(a)(2), 423.2267(a)(2), 422.2267(a)(4), and 423.2267(a)(4).
After considering the comments received and for the reasons
outlined in the Contract Year 2027 proposed rule and in responses to
public comments, CMS is finalizing the rescission of CMS's NoA
requirements at Sec. Sec. 422.2267(e)(31) and 423.2267(e)(33) as
proposed.
I. 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
proposed to establish a three level appeals process for Part D program
integrity PDE record review audits (90 FR 54962). Specifically, we
proposed 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 proposed
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 plan
sponsor may appeal the findings. There would be no minimum threshold
for an appeal at any level.
2. Appeals Process
In this final rule, we are codifying 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 proposed 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. In alignment with the proposed changes to the scope of
subpart Z, we proposed to remove from these regulations any mention of
the RACs specifically, as the proposed appeals process would include
any Part D program integrity audits that review PDE records for
appropriateness (90 FR 54962).
Furthermore, the proposed modifications would serve to 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
[[Page 17475]]
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. As
explained in the proposed rule, for these reasons, we believe it is
necessary to provide timeframes for decisions to be made at each appeal
level (90 FR 54962). 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.
Comment: Several commenters supported the addition of an appeals
process for the Part D program integrity PDE record review audits. A
commenter requested CMS consider establishing a standard timeframe by
which PDE record review audits must be completed, so that plans receive
findings or recommendations and delete improper PDE records
accordingly.
Response: We proposed specific timeframes for completion of each
step of the appeals process (90 FR 54962). CMS thanks the commenter for
this feedback. While audit completion timelines are outside the scope
of this provision, we will consider this feedback separately.
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. In alignment with our proposal to broaden
the scope of subpart Z to include CMS [Part D program integrity PDE
record review audits], we also proposed to 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 (90 FR 54962). As such, we proposed to modify the existing
regulatory language at Sec. 423.2600 to state Medicare Part D plan
sponsors may appeal program integrity prescription drug even record
review audit determinations. We proposed 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 proposed 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 deleted, whether the error resulted from actions made by
CMS.
We proposed to further amend Sec. 423.2600 by adding a new
paragraph (b), which would identify issues ineligible for appeal (90 FR
54962). 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 proposed to require that plan sponsors
provide documentation in accordance with the proposed provisions the
proposed rule that proposed 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.
Comment: A commenter expressed support for CMS's proposal to
introduce a structured appeals process for PDE record review audits,
stating the proposal represents a step toward ensuring fairness,
transparency, and due process for Part D sponsors. Furthermore, the
three-tiered appeal structure and defined timelines will improve
predictability and compliance planning. This commenter also believes
that the process as proposed has some limitations, including the scope,
burden/timelines, adequate evidence standards, technology enablement,
and compliance risks.
Response: We appreciate the commenter's support for this provision
but disagree with the commenter regarding the limitations of the
appeals process. For the three levels of appeals, CMS will not allow
additional documentation to be considered during an appeal. It is
essential for plans to provide all documentation needed to support
coverage under the Medicare Part D benefit at the time of submission.
As CMS has previously explained, the issues that are appealable under
this process include CMS's application of Part D policy(ies) and
factual or data errors because there would be documentation to review
to ensure that the payment was proper under the Medicare Part D
benefit. CMS has been granting, and will continue to grant, plan
sponsors extensions to submit initial documentation when requested.
Requests are often made due to plan sponsors' involvement in other
concurrent CMS audits or large universe sample size. In addition, the
audit methodology is not subject to appeal under our proposed policy.
Regarding the commenter's concerns about the lack of technology
enablement or digital submission capabilities and a standardized
tracking platform, CMS reminds commenters that a standard system is in
place, and CMS utilizes a secure online portal for all steps of
aforementioned Part D PDE Record Review Audits.
Comment: A commenter supported efforts to improve audit consistency
but was concerned that some of the proposed requirements could create
onerous obligations and risk PDE record deletion. Other commenters
believed
[[Page 17476]]
that the proposals in section IV.D. of the proposed rule to
``Strengthen Documentation Standards for Part D Plan Sponsors'' would
involve collecting information not typically available to plans. An
example was the identity of the person who submitted the request at the
provider's office, which is not information currently collected or easy
to retroactively collect if that information is not submitted to the
plan, particularly if it comes from a larger provider office or group.
Another commenter expressed concern that if this information is not
available and documented, then upon audit the PDE record would be
marked improper, and the PDE record determination would also be unable
to be appealed by the plan sponsor.
Response: We appreciate this concern and assure the commenters
that, under this approach, we will review the case file in its entirety
and will not require PDE deletions simply because a specific piece of
information that does not impact the determination is missing. CMS has
clarified that the documentation requirements included in this rule
will account for scenarios in which certain information, such as the
identity of the requestor, may not be available or not retrievable. CMS
also clarifies that if the plan sponsor believes that the information
in the case file documentation is sufficient to ensure payment under
the Medicare Part D benefit is appropriate, this scenario would be
appealable on the basis of ``factual or data errors.'' In addition, CMS
reminds the commenter that supporting documentation is not appealable
in the instance where a plan sponsor fails to submit a full case file
within the audit timeframe specified. This is to ensure that plan
sponsors provide CMS complete and accurate case files to avoid
unnecessary delays in the audit.
b. Reconsiderations (Sec. 423.2605)
In existing paragraph (a), we proposed 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 proposed 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
proposed 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 proposed to 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed to replace ``45
days'' with ``30 calendar days.'' Furthermore, in existing paragraph
(e), we proposed 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.
Comment: A commenter appreciated that the appeals process for PDE
record review audits does not create extra burden or require changes to
the current process for plan sponsors. The commenter welcomed guidance
on the steps and timelines required for each level of appeal. Several
other commenters supported the establishment of an appeals process,
stating it would enhance transparency and promote greater fairness in
the audit process.
Response: We thank commenters for their support of the proposal.
Additional information regarding each level of appeal will be provided
through program instruction or otherwise.
After consideration of the comments received and for the reasons
outlined in the proposed rule and our responses to those comments, we
are finalizing our proposal to update the existing appeals process at
42 CFR part 423 subpart Z to include any CMS Part D program integrity
PDE record review audits, without modification.
J. 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
[[Page 17477]]
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, which requires a Part D sponsor to submit an initial PDE
record for a selected drug (as described at section 1192(c) of the Act)
within 7 calendar days from the date the Part D sponsor receives the
claim.
In this rule, we proposed 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 proposed 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 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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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 listing an excluded
prescriber without an applicable waiver.
As reflected in the scenarios described in this Background, it may
not be appropriate to resolve every 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, due to operational constraints, 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. CMS's DDPS
does not allow Part D sponsors to submit PDE deletion records
associated with rejected PDE records.
2. Requirements
As explained earlier, CMS does not have insight into all of the
reasons why a Part D sponsor might not submit a revised PDE record to
resolve 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 proposed 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 proposed 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
[[Page 17478]]
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
In the proposed rule, we welcomed feedback on these proposed
changes.
Comment: A few commenters expressed their support for CMS's
proposal to revise the general PDE submission timeliness requirements
specified in Sec. 423.325(a)(3).
Response: We thank the commenters for their support of our
proposal.
Comment: Some commenters believed that CMS's proposal was
burdensome. One commenter was concerned about potential downstream
impacts on contracted pharmacy audit partners and pharmacies, as the
proposed requirements would necessitate changes to current research
processes related to rejected PDE records.
Response: As stated in our proposed rule and this final rule, since
2011, the vast majority of the PDE records that are rejected are
resolved by sponsors within the current 90-calendar-day timeframe. In
recent years, nearly all PDE rejections are resolved within this
period. The current regulation already requires sponsors to submit a
revised PDE record to resolve a rejected PDE within 90 calendar days of
the rejection. To the extent rejected PDE records result in claims
adjustments to address and resolve these PDE rejections, sponsors are
already collaborating with their pharmacy partners, and therefore, we
do not believe that our provision will necessitate changes to the
current research processes related to PDE records. Therefore, we
disagree with the commenters that our proposed rule is burdensome.
Comment: A few commenters stated that the proposal would not
provide CMS with additional insight into the underlying status of the
rejected PDE records and believed that it would be beneficial for CMS
to have a definitive claim status. Commenters recommended alternatives
to gain visibility into the status of a claim associated with a
rejected PDE record. Some commenters encouraged CMS to consider
adopting mechanisms to promote information sharing about the status of
a claim associated with a rejected PDE record within the existing PDE
record review process, under which CMS flags PDE records and requests
additional information from sponsors. Other commenters recommended that
CMS create new functionality in the PDE to allow the submitter to
inform CMS that the previously rejected PDE is for a claim that has
been reversed or has been deemed invalid by the sponsor. One commenter
recommended the creation of a new deletion code value (or another field
or new value for a field) for the sponsor to specifically inform CMS
the claim has been reversed or has been deemed invalid. A commenter
noted that such a mechanism could have benefits beyond the intent of
the proposal.
Response: We appreciate the recommendations for alternative
approaches and acknowledge that these suggestions may provide CMS with
more definitive information regarding the status of the claim
associated with a rejected PDE record. However, our proposal achieves
our goals. As we stated in both the proposed rule and in this final
rule, we recognize that submission of a revised PDE record in
accordance with the current rule is not always appropriate, and a
sponsor may not be able to comply under various scenarios. The new
requirements we proposed account for these scenarios, increase
transparency, and address circumstances where resubmission of PDE
records is not appropriate.
We considered the recommendations from commenters regarding
alternatives to promote visibility into the status of a claim
associated with a rejected PDE record that they believe would provide a
clearer understanding of the status of the claim associated with the
rejected PDE record. After careful thought, we concluded that the
proposed alternatives--such as additional analysis, outreach to
sponsors, and responses from sponsors, or modifications to the PDE file
layout or the creation of new functionality in the PDE--would impose a
greater burden on CMS and Part D sponsors compared to our proposal.
While we acknowledge that an alternative approach might yield more
comprehensive information with benefits extending beyond the intent of
this proposal, such considerations are beyond the scope of our proposed
rule.
Comment: A few commenters noted that certain PDE rejections cannot
be resolved by sponsors because they do not have the ability to resolve
the reject. These commenters pointed to plan-to-plan (P2P) PDE
rejection edits, for example PDE Edit 706.\67\ Commenters also stated
that certain beneficiary enrollment and eligibility PDE rejection edits
cannot be resolved by the sponsor and that the sponsor may be waiting
for a response from CMS on a pending eligibility case prior to
resolution of a PDE rejection.
---------------------------------------------------------------------------
\67\ PDE Edit 706--PDE rejects when the Submitting Contract
differs from Contract of Record and does not fall within a valid P2P
period (Beneficiary is not enrolled in the Submitting Contract for
the given DOS. PDE falls outside of the P2P period facilitated by
CMS (greater of enrollment effective date with new Contract of
Record + 30 days, or CMS process date + 30 days)). See DDPS Edit
Spreadsheet, at https://www.csscoperations.com/internet/csscw3.nsf/
DIDC/
FGSMOX8LWK~Prescription%20Drug%20Program%20(Part%20D)~References.
---------------------------------------------------------------------------
The commenters suggested that when a PDE rejects due to edits that
the sponsor cannot resolve, CMS should assume no further action is
needed by the sponsor. The sponsor should not be required to continue
resubmissions of these PDE records and should be exempt from any
compliance action. Additionally, commenters recommended that when PDE
rejections occur due to enrollment or eligibility issues, CMS should
assume no further action is needed by the sponsor, as there is no way
to resolve the error. The sponsor should not be required to continue
resubmissions of these PDE records unless enrollment or eligibility
changes such that the sponsor would expect the resubmitted PDE record
to be accepted by CMS.
Response: We acknowledge that in some cases, our proposed rule will
result in a sponsor repeatedly submitting PDE records that will not be
accepted by CMS. Based on comments, we explored potential exclusions
and exceptions of certain PDE rejection edits from our rule. In doing
so, we considered our goal of transparency into claims status and the
volume of PDE records impacted. Given that nearly all PDE rejections
are resolved within 90 calendar days, our proposed rule will result in
only a small percentage of PDE records being repeatedly submitted
without resolution until DDPS closes \68\
[[Page 17479]]
for the contract year of the PDE at issue. In addition, it is possible
that a claim associated with a PDE record that continues to be rejected
by CMS is later reversed by the pharmacy. Under that scenario, and
consistent with the proposed rule, a sponsor would cease submission of
the PDE records, indicating to CMS that the claim was reversed or
deleted, or the PDE record that was rejected was otherwise found to
have been submitted in error by the sponsor. As proposed, our rule
gives us transparency into the status of claims associated with
rejected PDE records and allows us to know whether sponsors are
compliant with our PDE submission requirements. Therefore, we decline
to exempt or exclude certain PDE rejection edits from our requirements.
---------------------------------------------------------------------------
\68\ CMS systems remain open to PDE data (adjustments,
deletions, and new submissions) until the end of the 6-year
overpayment look-back period. Defined in 42 CFR 423.360(f), the
overpayment look-back period encompasses the 6 most recently
completed payment years. This period is tied to the ``applicable
reconciliation,'' which marks the annual deadline for submitting
data for a Part D payment reconciliation, according to 42 CFR
423.360(a). Upon reaching the deadline for a Part D payment
reconciliation (i.e., around June 30), the year being reconciled is
included in the look-back period, and the earliest year leaves the
look-back period. Consequently, from July 1 onward, sponsors are no
longer able to submit PDE data for the year that has exited the
look-back period. See, for example, the HPMS memorandum titled
``Closing the Drug Data Processing System (DDPS) for benefit year
2018'', dated April 11, 2025 (available at https://www.cms.gov/about-cms/information-systems/hpms/hpms-memos-archive-weekly/hpms-memos-wk-2-april-7-11).
---------------------------------------------------------------------------
Comment: A few commenters noted that CMS's proposal does not
address situations where additional CMS guidance or clarifications are
needed or when there is a known issue with PDE processing. In these
cases, sponsors cannot resolve the errors until CMS takes action to
resolve the issue. Commenters recommended that in such scenarios, CMS
should allow sponsors to temporarily stop resubmitting the related PDE
records until CMS issues additional guidance or corrections are made to
DDPS. Furthermore, commenters suggested that CMS should provide a grace
period, giving sponsors enough time to implement any necessary changes
related to CMS guidance, clarifications, or DDPS changes. One commenter
recommended a minimum grace period of 180 days. During this grace
period, commenters suggested that the related PDE records should be
exempt from any timeliness requirements.
Response: PDE processing and editing can be complicated, and at
times, CMS must correct system issues or release new or clarifying
guidance for a valid PDE record to be accepted. Under these
circumstances, it is still important for us to know if the rejected PDE
record is associated with a paid claim or if the claim is reversed or
deleted or the PDE that was rejected by CMS is otherwise found to have
been submitted in error. In addition, compliance with our proposed rule
allows us to understand the scope of the issue.
We acknowledge that there would be various considerations given the
nature and scope of an issue preventing acceptance of a valid PDE
record. The resolution may or may not reasonably require a ``grace
period'' for PDE submissions as suggested by the commenters. Each
situation requiring us to take action to resolve a PDE editing issue
will be individually assessed based on its unique circumstances. When
necessary, we will provide guidance to clarify the requirements for the
sponsors.
Comment: Some commenters requested guidance related to the proposed
rule. A commenter sought guidance from CMS on when resubmission to
correct a rejected PDE record is required. Another commenter requested
that CMS clarify its expectations related to rejected PDE records that
are actively under research or rework. A commenter also requested
technical support and system testing for PACE organizations to ensure
that the requirements could be met without disrupting participant care
or operations.
Response: As stated in this final rule, there are no exceptions or
exemptions to our proposed rule. It is applicable to all rejected PDE
records, including those that are actively under research or rework.
We do not believe that CMS system testing is necessary for PACE
organizations to comply with the requirements. Under the current
regulations at Sec. 423.325(a)(3), sponsors must submit a revised PDE
record to resolve a CMS rejected record within 90 calendar days of the
rejection. The proposed amendment to that rule will not result in
disruptions to participant care or the operations of the PACE
organization.
Comment: A few commenters noted that the proposed rule did not
address rejected PDE records sent to the Medicare Transaction
Facilitator (MTF), which CMS uses to facilitate manufacturer
effectuation of negotiated maximum fair prices (MFPs) under Part E of
Title XI of the Act (sections 1191 through 1198 of the Act) through the
exchange of data and, if applicable, the pass through of MFP refund
payments between manufacturers and dispensing entities. One commenter
highlighted that it would be beneficial for the MTF to receive
information indicating a claim associated with a PDE record that was
previously rejected is reversed, so that if an MFP refund has been paid
to a pharmacy, it can be recouped by the manufacturer. Commenters
encouraged CMS to provide information about such rejected PDE records
to the MTF.
Response: We appreciate the feedback on our proposal and how it
relates to the operations of the MTF for the purposes of the Medicare
Drug Price Negotiation Program. While we value these insights, the
operations of the MTF under the Medicare Drug Price Negotiation Program
are beyond the scope of this regulation.
Comment: A commenter referenced CMS's memorandum dated July 3,
2013, PDE Guidance for Post Point-of-Sale Claim Adjustments.\69\ The
commenter stated that the proposal does not appear to clearly align
with this guidance.
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\69\ HPMS memorandum, PDE Guidance for Post Point-of-Sale Claim
Adjustments, July 3, 2013.
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Response: Our July 3, 2013, PDE guidance for Post Point-of-Sale
Claim Adjustments provided sponsors with information on determining the
appropriate course of action for post point-of-sale (POS) adjustments
to rectify errors under specific scenarios. The guidance explains how
to adjust or delete PDE records that were previously accepted. Our
proposal amends Sec. 423.325(a)(3) related to rejected PDE records.
The proposal does not amend the PDE submission timeliness requirements
for adjustments or deletions of accepted PDE records addressed in Sec.
423.325(a)(2). Although we believe that our proposed regulation text is
clear, we have slightly modified the proposed regulation text to make
clear that the amendment to Sec. 423.325(a)(3) is limited to rejected
PDE records for paid claim transactions. The revised Sec.
423.325(a)(3) requires a sponsor to submit a PDE record for a paid
claim transaction associated with a PDE record that was previously
rejected by CMS 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
that was rejected is otherwise found to have been submitted in error.
After consideration of the public comments we received, we are
finalizing the proposal to modify Sec. 423.325(a)(3) with slight
modifications to make clear that the requirements are related only to
rejected PDE records.
K. Eligibility for Supplemental Benefits for the Chronically Ill
(SSBCI) and Technical Changes to the Definition of Chronically Ill
Enrollee (Sec. 422.102)
The Balanced Budget Act (BBA) of 2018 (Pub. L. 115-123) provided
new authorities concerning supplemental benefits that may be offered to
chronically ill enrollees in Medicare Advantage (MA) plans. CMS
addressed these new supplemental benefits, now known as Special
Supplemental Benefits for the Chronically Ill (SSBCI), extensively in
the Medicare Program; Contract Year 2021 Policy and
[[Page 17480]]
Technical Changes to the Medicare Advantage Program, Medicare
Prescription Drug Benefit Program, and Medicare Cost Plan Program
(hereinafter referred to as the June 2020 final rule) (85 FR 33800
through 33805).
Supplemental benefits, including SSBCI, are generally funded using
MA plan rebate dollars. MA rebate dollars may be used for mandatory,
but not optional, supplemental benefits offered by the plan (Sec.
422.266(b)(1)).\70\ When submitting an annual bid to participate in the
MA program, an MA organization includes in its bid a Plan Benefit
Package (PBP) and Bid Pricing Tool (BPT) for each of its plans, where
the MA organization provides information to CMS on the premiums, cost
sharing, and supplemental benefits (including SSBCI) it proposes to
offer. Since the statutory amendment authorizing SSBCI and subsequent
guidance in a Health Plan Management System (HPMS) memorandum dated
April 24, 2019,\71\ the number of MA plans that offer SSBCI--and the
number and scope of SSBCI offered--has significantly increased.
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\70\ Rebates can also be used to buy down Part B and D premiums
under Sec. 422.266(b)(2) and (b)(3).
\71\ https://www.cms.gov/medicare/health-plans/healthplansgeninfo/downloads/supplemental_benefits_chronically_ill_hpms_042419.pdf.
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Section 422.102(f)(4)(i) and (ii) requires that the MA plans have
written policies for making SSBCI enrollment determinations, document
that each enrollee eligible for SSBCI is a chronically ill enrollee,
and provide this documentation to CMS upon request. As CMS described in
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) (hereinafter referred to as the April 2024 final rule)
(89 FR 30551), to offer an item or service as an SSBCI to an enrollee,
an MA plan must make at least two separate determinations, with respect
to that enrollee, in order to satisfy the statutory and regulatory
requirements for these benefits.
First, the MA plan must determine that an enrollee is eligible for
SSBCI by meeting the statutory definition of ``chronically ill
enrollee.'' Section 1852(a)(3)(D)(iii) of the Act defines ``chronically
ill enrollee'' as an individual enrolled in the MA plan who meets all
of the following: (I) has one or more comorbid and medically complex
chronic conditions that is life-threatening or significantly limits the
overall health or function of the enrollee; (II) has a high risk of
hospitalization or other adverse health outcomes; and (III) requires
intensive care coordination. Per Sec. 422.102(f)(1)(i)(B), CMS may
publish a non-exhaustive list of conditions that are medically complex
chronic conditions that are life-threatening or significantly limit the
overall health or function of an individual. This list of chronic
conditions is the same as the list for which MA organizations may offer
chronic condition special needs plans (C-SNPs), which can be found in
the definition of ``severe or disabling chronic condition'' within
Sec. 422.2. CMS does not further define ``high risk of
hospitalization'' or ``intensive care coordination.'' As noted in the
June 2020 Final Rule, plans have flexibility in determining what these
phrases mean in a way that will best serve their enrollees. However,
CMS noted some examples of methods through which plans may assess
hospitalization risk or need for care coordination, such as conducting
a health risk assessment, performing a retrospective claims review for
an enrollee, or by other means the plan deems necessary. Second, the MA
plan must determine that the SSBCI has a reasonable expectation of
improving or maintaining the health or overall function of the
enrollee. Section 422.102(f)(4)(iii)(A) requires that MA plans have and
apply written policies based on objective criteria for determining a
chronically ill enrollee's eligibility to receive a particular SSBCI.
Section 422.102(f)(4)(v) further requires that MA plans maintain
without modification, as it relates to an SSBCI, evidentiary standards
for a specific enrollee to be determined eligible for a particular
SSBCI, or the specific objective criteria used by a plan as part of
SSBCI eligibility determinations for the full coverage year.
In the June 2020 final rule, CMS stated the expectation that plans
communicate information to enrollees about the scope of SSBCI that the
MA plan covers and who is eligible for those benefits in a clear manner
(85 FR 33803). CMS made further changes in the April 2024 final rule,
where CMS modified the disclaimer requirements at Sec. 422.2267(e)(34)
to require plans to include clear information about SSBCI eligibility
criteria in marketing and communications materials that mention SSBCI,
including by listing the chronic conditions an enrollee must have in
order to be eligible for particular SSBCI. These actions and the
changes to the regulation finalized here demonstrate the importance of
transparency as it applies to SSBCI eligibility.
Currently, as permitted by Sec. 422.504(f)(2), CMS may review
SSBCI eligibility criteria by requesting it from plans. This is done on
a case-by-case basis. Since there is no public posting of a plan's
criteria for determining how enrollees qualify for SSBCI, this lack of
transparency limits potential enrollees' ability to review and
determine what SSBCI are available to them. CMS received numerous
comments in response to 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 proposed rule
(herein after referred to as the ``November 2023 proposed rule'')
requesting that plans post their objective eligibility criteria for
SSBCI on a public-facing website to increase transparency for potential
enrollees. In response to these comments, CMS noted that CMS would
consider taking this action in future rulemaking (89 FR 30558).\72\ CMS
believes having MA plan SSBCI eligibility criteria publicly available
will improve transparency, promote good governance of the Medicare
Trust Fund, and allow enrollees' participation in their care and
awareness of their eligibility for benefits.
---------------------------------------------------------------------------
\72\ https://www.federalregister.gov/d/2024-07105/p-1069.
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Therefore, in 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 proposed rule
(hereinafter referred to as the Contract Year 2026 proposed rule) (89
FR 99340), CMS proposed that plans must publish the objective
eligibility criteria on their public-facing website. Specifically, CMS
proposed that MA plans must post on their public-facing website their
objective criteria for determining that an enrollee is a chronically
ill enrollee within the statutory and regulatory definition and is
eligible to receive SSBCI offered by the plan. CMS reminded MA plans of
their digital accessibility obligations as recipients of Federal
assistance under section 504 of the Rehabilitation Act. CMS proposed to
[[Page 17481]]
codify this requirement in the regulation text at Sec.
422.102(f)(4)(iii)(C).
Next, in the Contract Year 2026 proposed rule, CMS proposed several
technical changes that align with the statute to clarify SSBCI
eligibility requirements and ensure that plans and providers have a
clear understanding about which enrollees qualify for SSBCI. When
reviewing SSBCI eligibility criteria, CMS discovered that several plans
offering SSBCI benefits do not determine eligibility in an objective
manner, as required at Sec. 422.102(f)(4)(iii)(A).\73\ For example,
allowing an enrollee to self-attest that they are eligible for SSBCI
without additional criteria or any verification from the plan of this
eligibility status would not meet CMS requirements. Additionally, CMS
has observed that some plans determine what SSBCI to cover and pay for
without consultation with a doctor or other medical professional to
determine the clinical appropriateness of the items and services
offered under the SSBCI benefit. CMS has also identified instances
where plans, when determining eligibility, are not properly evaluating
enrollees using all three components of the definition for
``chronically ill enrollee'' as defined in section 1852(a)(3)(D)(iii)
of the Act. CMS has identified that the current regulation text (Sec.
422.102(f)(1)(i)(A)) may need further clarification for plans. It was
never the Agency's intention to imply that the presence of a chronic
illness or chronic condition alone is sufficient to satisfy all three
of the statutory criteria to qualify as a chronically ill enrollee.
Therefore, CMS proposed to clarify that having a medically complex
chronic condition or comorbidity by itself is insufficient to satisfy
the requirements in Sec. 422.102(f)(1)(i)(A)(1), (f)(1)(i)(A)(2), and
(f)(1)(i)(A)(3) with a technical edit. Specifically, CMS proposed to
amend Sec. 422.102(f)(1)(i)(A) and (f)(1)(i)(A)(1) through (3) to
specify that ``a chronically ill enrollee is an individual enrolled in
the MA plan who meets all of the following:
---------------------------------------------------------------------------
\73\ Prior to the effective date of the April 2024 final rule,
this requirement was codified at 42 CFR. 422.102(f)(3)(iii). The
April 2024 final rule slightly reorganized Sec. 422.102(f) as part
of amendments to adopt new requirements.
---------------------------------------------------------------------------
Has one or more comorbid and medically complex chronic
conditions that is life threatening or significantly limits the overall
health or function of the enrollee.
Has a high risk of hospitalization or other adverse health
outcomes.
Requires intensive care coordination.
This is consistent with the statute, which defines a ``chronically
ill enrollee'' at section 1852(a)(3)(D)(iii) of the Act as an enrollee
who: (1) has one or more comorbid and medically complex chronic
conditions that is life threatening or significantly limits the overall
health or function of the enrollee; (2) has a high risk of
hospitalization or other adverse health outcomes; and (3) requires
intensive care coordination. This clarification will allow the
definition of a chronically ill enrollee at Sec.
422.102(f)(1)(i)(A)(1) through (3) to mirror the statutory language at
section 1852(a)(3)(D)(iii) of the Act as intended in the 2020 final
rule.
Next, CMS proposed that plans must demonstrate that an enrollee has
met all three of the criteria set forth in Sec. 422.102(f)(1)(i)(A)
through the use of an objective process (for example, either a health
risk assessment, a claims review, or other similar means). This
proposed requirement would help to ensure that the MA plan
responsibilities at Sec. 422.102(f)(4)(1)(i)(A) are fully realized
while retaining the flexibility plans have in choosing between methods
that determine whether enrollees have met all three criteria. For
example, a plan could establish that to be eligible for certain SSBCI,
an enrollee must have a confirmed diagnosis of diabetes by their
primary care physician, and must also have been admitted to the
hospital in the last 90 days. Under this example, the diagnosis of a
chronic illness is sufficient to satisfy the first criterion (as
proposed), that the enrollee, ``has one or more comorbid and medically
complex chronic conditions that is life threatening or significantly
limits the overall health or function of the enrollee \74\.'' However,
the plan must also determine that the enrollee has met the second and
third criteria: (2) has a high risk of hospitalization or other adverse
health outcomes; and (3) requires intensive care coordination. The plan
may determine that an enrollee meets the second requirement by being
hospitalized in the last 90 days. The plan may reason that enrollees
who have been hospitalized in the last 90 days are at high risk of
readmission and so meet the second statutory requirement of having a
high risk of hospitalization. The plan may further decide that the
enrollee would require intensive care coordination to prevent further
hospitalization and thus would satisfy the third regulatory
requirement. In this hypothetical scenario, the plan has determined
through an objective process that the chronically ill enrollee meets
all three requirements at Sec. 422.102(f)(1)(i)(A).
---------------------------------------------------------------------------
\74\ As previously noted, the list of chronic conditions that
qualify as comorbid and medically complex chronic conditions that
are life threatening or significantly limit the overall health or
function of an enrollee for purposes of SSBCI eligibility can be
found within the definition of ``severe or disabling chronic
condition'' in CMS's regulations at Sec. 422.2.
---------------------------------------------------------------------------
As described previously, it has become evident through CMS's
routine monitoring that MA plans have not consistently applied the
statutory requirements to determine eligibility for SSBCI. To address
this, CMS also proposed to add regulation text to Sec.
422.102(f)(1)(i)(C). This additional regulation text reiterates that:
(1) having one or more comorbidities and medically complex chronic
conditions alone is not sufficient to demonstrate that an enrollee
meets all three criteria set forth in paragraph (f)(1)(i)(A) and (2) MA
plans must (through health risk assessments, review of claims data, or
other similar means) demonstrate that enrollees meet all three criteria
set forth in paragraph (f)(1)(i)(A). This technical correction would
codify existing policy regarding SSBCI eligibility and would not impose
any new collection of information requirements.
Finally, CMS proposed to restructure paragraph (f)(4)(iii) to
clarify the requirements by adding, ``Have objective criteria for
SSBCI. Specifically, the plan must'' and then listing the requirements
in paragraphs (f)(4)(iii)(A) through (C).
CMS believes these updates, will provide greater transparency and
consistency to the eligibility determination process for potential
enrollees and will enhance enrollees' ability to understand what
benefits would likely be available to them and thus their ability to
make informed decisions about their enrollment. CMS reminds MA
organizations that Sec. 422.102(f)(4)(v) requires MA plans to maintain
their evidentiary standards or objective criteria for enrollee
eligibility for the entire coverage year.
CMS received the following comments on this proposal and responses
follow.
Comment: Several commenters were supportive of the proposal to
require reporting of SSBCI eligibility criteria on a plan's public-
facing website.
Response: CMS thanks commenters for their support of this proposal.
Comment: Several commenters mentioned concerns that CMS proposed to
restrict a member's ability to self-attest to eligibility for SSBCI.
Response: CMS did not propose a new prohibition on the ability of
members to self-attest to SSBCI eligibility; rather, as
[[Page 17482]]
stated in the Contract Year 2026 proposed rule, enrollees never had
such ability and the use of self-attestation is out of compliance with
current requirements. CMS has pursued compliance actions against plans
that used self-attestation as a method to confirm SSBCI eligibility.
Section 422.102(f)(4)(iii)(A) states that plans must have objective
criteria for making SSBCI eligibility determinations, and self-
attestation is not objective.
Comment: Several commenters were concerned that claims review or
other verification of eligibility may delay coverage of certain SSBCI.
Some of the commenters also requested a grace or deeming period wherein
plans may provide SSBCI coverage while the plan verifies eligibility.
Response: CMS thanks commenters for this feedback and understands
the concerns about the potential for delays in coverage. However, as
outlined in the preamble, it is, and has always been, the MA plan's
responsibility to verify that an enrollee meets the eligibility
criteria for SSBCI prior to administering the benefit. Moreover, CMS
believes the inherent risk of waste and potential for abuse in
administering benefits to ineligible enrollees when providing benefits
before determining eligibility outweighs the possibility of delayed
coverage. If plans are already performing the intensive care
coordination that is required for the enrollee to be eligible for
SSBCI, any delay due to verification of eligibility should be minimal.
Finally, CMS does not consider a grace or deeming period to be
appropriate because in the event an ineligible enrollee is permitted to
access SSBCI during the grace period, this would create a situation
where MA plans are out of compliance with their statutory obligation
and increase the chance of plans inadvertently providing payment for
non-covered items.
Comment: A commenter requested that CMS clarify that MA plans have
the flexibility to determine that enrollees have met the three-part
``chronically ill'' definition for SSBCI if they have an approved
chronic condition code and a documented food/nutrition, housing/living
environment, and/or transportation need. Additionally, several
commenters conflated the two determinations MA plans are required to
make when evaluating SSBCI eligibility.
Response: CMS appreciates these comments. As outlined in the
preamble, CMS reiterates that MA plans are required to make two
determinations when evaluating SSBCI eligibility. The first
determination is that an enrollee is chronically ill-as per the
statutory definition in section 1852(a)(3)(D)(iii) of the Act. To make
this determination plans must verify that enrollees have met the three-
pronged definition for a chronically ill enrollee.
The second determination, per section 1852(a)(3)(D)(ii)(I), is that
each particular SSBCI ``have a reasonable expectation of improving or
maintaining the health or overall function of the chronically ill
enrollee.'' Food/nutrition, housing, and transportation needs are all
considerations that should be taken into account in this second
determination when a plan decides which specific benefits may maintain
or improve the overall health or function of the enrollee. Once a plan
has confirmed that an enrollee is chronically ill per the statute, the
plan may then refer to their objective eligibility criteria for each
specific SSBCI.
The following example outlines how a plan may make this
determination: The enrollee is diabetic and has been hospitalized in
the past 90 days. The plan determines that the enrollee is at high risk
of readmission and requires intensive care coordination to prevent
further hospitalization, and therefore meets the statutory definition
of ``chronically ill.'' The enrollee is then observed during an in-home
health risk assessment (HRA) using a walker to get around their two-
story home. The plan's criteria for ``structural home modification'' is
that the enrollee requires assistance navigating the home (for example,
a cane, walker, etc.) and that the home has stairs. In this case, the
plan may reasonably recommend a ``structural home modification''
benefit to install a chair lift to assist that enrollee in navigating
the home more easily. This example shows how the plan uses objective
criteria (that the enrollee requires assistance to walk and live in a
home with stairs). The plan may also conclude that the chair lift has a
reasonable expectation of improving or maintaining the health or
overall function of the enrollee as the use of the chair lift may
prevent the enrollee from falls, or from injuries that may cause health
complications. This example demonstrates how a plan can meet CMS's
requirements of making two separate determinations in order to
adequately comply with 42 CFR 422.102(f)(4)(i) and
422.102(f)(4)(iii)(A).
CMS has already made allowances for plans to consider social
determinants of health (SDOH) when identifying enrollees whose health
or condition could be improved or maintained with SSBCI. This is set
forth in the regulations at 42 CFR 422.102(f)(2)(iii). CMS notes
however that plans may not use SDOH as the sole basis for determining
SSBCI eligibility.
Finally, CMS clarifies that the proposed requirement is such that
MA plans must publicly post their objective criteria for both steps of
the SSBCI process. Specifically, MA plans must publicly post their
criteria for determining that someone has met the definition of a
chronically ill enrollee and their specific SSBCI benefit eligibility
criteria. To clarify this, CMS is finalizing the proposal with a
modification to refer to 42 CFR 422.102(f)(4)(iii)(A).
Comment: A commenter requested that certain chronic conditions such
as end-stage renal disease (ESRD), diabetes and chronic obstructive
pulmonary disease (COPD) should automatically qualify enrollees for
SSBCI due to their high hospitalization risks.
Response: While CMS agrees that many ESRD, diabetes and COPD
patients would likely meet the three-pronged definition of a
chronically ill enrollee and potentially be eligible for several SSBCI
items and services, CMS is not finalizing any automatic eligibility
based on chronic condition diagnosis at this time. CMS notes that some
patients with these conditions, or others on the chronic condition list
set forth at Sec. 422.2, may be able to manage their conditions well,
and not be at high risk of hospitalization or other adverse health
outcomes or require intensive care coordination. Such enrollees would
not meet the chronically ill enrollee definition. It would therefore
not be prudent to automatically confirm chronically ill status or SSBCI
eligibility based on a singular chronic condition.
CMS acknowledges that many patients with the noted chronic
conditions may meet the eligibility standards based on an HRA, which
SNPs are required to complete within 90 days, before or after
enrollment in a plan. Since many enrollees with these conditions are
enrolled in C-SNPs, CMS notes that plans may use these HRAs to
determine: (1) chronically ill enrollee status and (2) particular SSBCI
items and services that would meet the reasonable expectation standard.
However, CMS reiterates its commitment to allowing plans to have the
flexibility to determine the form and manner of confirming
``chronically ill'' status and SSBCI eligibility criteria. CMS noted in
the Contract Year 2026 proposed rule that HRAs and claims reviews were
merely two examples by which a plan may confirm these.
Comment: A commenter requested that CMS exempt C-SNPs from SSBCI
eligibility criteria publication.
[[Page 17483]]
Response: CMS appreciates this suggestion, however CMS is not
finalizing any exemptions to the public posting requirement at this
time. It is the Agency's intention to increase the transparency of
SSBCI benefits for enrollees. By exempting C-SNPs from the proposed
requirement, CMS would exclude a vulnerable population from receiving
this important information regarding SSBCI benefits. While many
potential C-SNP enrollees may meet the chronically ill statutory
definition, the lack of transparency on the eligibility requirements
could be a deterrent to them during the enrollment period. For example,
a C-SNP enrollee could choose a different plan with benefits less
suited to them. The result of such a choice could have negative
outcomes for all parties.
Comment: Some commenters noted concerns with being required to post
proprietary SSBCI eligibility criteria on the plan's website.
Response: CMS understands that plans may have concerns about
competitive advantage with new requirements to publish this information
on a public-facing website. CMS notes however that listing eligibility
criteria may provide for additional open competition in the
marketplace, further incentivizing MA plans to offer supplemental
benefits that are valued by enrollees in a clear and consistent manner.
CMS has therefore determined that the potential benefit to enrollees
far outweigh concerns about posting SSBCI eligibility information.
Comment: A commenter requested that CMS rely on the subset of
chronic diseases identified by the Agency itself that allow for the
current provision of SSBCI and enrollment in C-SNPs to determine
eligibility. They urged CMS not to finalize limitations on SSBCI
eligibility by requiring plans to impose an ``objective process'' to
ensure beneficiaries meet three criteria to receive SSBCI.
Response: CMS appreciates this comment and attempts to clarify
here. The requirement for plans to have and apply objective criteria
for determining a chronically ill enrollee's eligibility to receive a
particular SSBCI is already a regulatory requirement and has been since
the inception of SSBCI in the MA program (85 FR 9013).
The commenter suggests that enrollees with chronic conditions
identified by CMS meet the chronically ill enrollee definition and
qualify for SSBCI solely on the basis of having one of those
conditions. As CMS noted in a previous response, this is not the case
and plans are required to have further criteria to make such
determinations. CMS reminds commenters that this proposal was a
technical update to emphasize the existing statutory and regulatory
requirements, and CMS has held this standard since the inception of
SSBCI.
Comment: Some commenters recommended that CMS consider providing
detailed directions on what information must be included on the plan's
public-facing website to ensure consistency between plans and help
beneficiaries more easily compare their choices.
Response: CMS appreciates this concern and may consider providing
additional guidance if, in practice, there is evidence that
inconsistency among MA plan websites cause beneficiary confusion.
Comment: A commenter requested that CMS provide a comprehensive
list of acceptable methodologies that would meet the definition of
``objective process'' for purposes of determining SSBCI eligibility.
This commenter urged CMS to include the review and identification
factors that influence disease progression. They suggested that these
factors include, but not be limited to, race, ethnicity, socioeconomic
status, comorbidities, and recent acute care utilization.
Similarly, another commenter asked that plans be allowed to use
low-income status (LIS) and dual-eligibility as part of the objective
criteria to support that a member is at risk for hospitalizations or
adverse health outcomes and thereby requires care management.
Response: CMS appreciates this recommendation. Per section
1852(a)(3)(D)(iii)(III) of the Act, for purposes of SSBCI, a
chronically ill enrollee must ``require[ ] intensive care
coordination.'' CMS reiterates that in the June 2020 Final Rule, CMS
did not define ``intensive care coordination'' to allow plans
flexibility in determining what the phrase meant to best serve their
specific enrollee population. However, CMS noted some examples of
methods through which plans may determine an enrollee required
intensive care coordination, such as conducting an HRA, performing a
retrospective claims review for an enrollee, or by other means the plan
deems necessary. CMS reaffirms its position stated in the June 2020
final rule, that objective criteria which utilize the above mechanisms
for meeting the three-pronged definition are present in the medical
community and may be readily accessible to the plan.
CMS reminds commenters that an enrollee's high risk of
hospitalization, does not necessarily affirmatively establish that the
enrollee will also require intensive care coordination, as these are
separate factors to evaluate in determining whether an enrollee meets
the statutory definition of ``chronically ill'' for purposes of SSBCI.
CMS notes that the commenters listed several factors that may be
useful in meeting CMS' requirements. It is at the plans' discretion to
determine their objective criteria for determining whether an enrollee
meets the definition of ``chronically ill'' for purposes of SSBCI,
based on their specific enrollee population and any other relevant
considerations that may be unique to the plan. CMS does not wish to
limit the flexibility of MA organizations to determine which objective
criteria are best for a particular plan, or their enrollees.
Comment: Another commenter believed that CMS' proposed provision
regarding posting criteria for determining chronically ill enrollee
status on a public-facing website would increase administrative burden
on plans and provide little to no value to enrollees.
Response: CMS acknowledges that this requirement will place
administrative burden on plans to implement and discusses the burden in
the Collection of Information section of this final rule. CMS proposed
to make SSBCI criteria publicly available in response to numerous
comments received during previous rulemaking. Commenters expressed the
need for such transparency in order for potential enrollees to make
informed choices when choosing an MA plan to join and to have a better
understanding of their current care options while enrolled. Such
transparency will have an overall positive impact on enrollee
experience and choice as it fosters enrollee empowerment and
competition in the MA market.
Comment: Some commenters requested that CMS not require
hospitalization in the past 90 days to meet the second and third
criteria that chronically ill enrollees have a ``high risk of
hospitalization or other adverse health outcomes'' and ``require
intensive care coordination'' respectively. Specifically, a commenter
mentioned that I-SNP enrollees are inherently at high risk due to their
clinical and care needs and recommended that CMS consider adjusting the
eligibility criteria for this population to better reflect the goals of
preventative care in long-term care settings.
Response: CMS appreciates this feedback. CMS clarifies that the
discussion pertaining to hospitalization in the past 90 days in the
Contract Year
[[Page 17484]]
2026 proposed rule and in this section of the final rule is meant to
serve only as an example of objective criteria an MA plan might apply
in determining chronically ill enrollee status. CMS did not propose and
will not be finalizing a requirement that MA enrollees must have been
hospitalized in the past 90 days in order to be eligible to receive
SSBCI.
CMS also appreciates the commenter drawing attention to I-SNP
enrollees specifically. CMS agrees that many I-SNP enrollees would
likely meet the chronically ill enrollee definition. CMS therefore
notes, if plans were to use a qualifying chronic condition diagnosis in
conjunction with enrollee utilizing institutional level of care (LOC)
to satisfy the 3-pronged criteria for chronically ill enrollee, this
would meet CMS requirements and expectations, as the need for an
institutional LOC could indicate a high risk of hospitalization or
other adverse health outcomes and a need for intensive care
coordination.
Comment: A commenter recommended that if finalized, the
implementation of the public posting of chronically ill enrollee
criteria be delayed at least one year to allow adequate time to inform
beneficiaries while minimizing any potential disruptions to care.
Response: CMS appreciates these concerns regarding the timing of
these requirements. CMS notes that MA organizations will have until
January 2027 to implement these requirements. Additionally, MA plans
should already be utilizing objective criteria for both determining
that an enrollee meets the definition of a chronically ill enrollee and
that a specific SSBCI has a reasonable expectation of improving or
maintaining the enrollee's overall health or function. Therefore,
requiring MA organizations to post this information on their plan's
website should present minimal challenges regarding timeliness and
should not require a full year to finalize.
Comment: Another commenter requested that CMS allow plans to
proactively approve members for SSBCI benefits prior to their effective
date with a plan. This approach would help ensure vulnerable members
have access to the support they need as soon as possible, which is
essential for improving their health outcomes. They also recommended
that plans be allowed to use multiple chronic conditions (MCC) files as
a method of SSBCI eligibility verification.
Response: CMS appreciates this commenter's feedback and notes that
this proactive approval process would be allowable. For example, many
plans choose to complete HRAs before the beginning of the coverage
year. The information obtained from the HRA can then be used to help
confirm the chronically ill status of an enrollee prior to the plan's
effective date. CMS agrees that plans should utilize data streams that
provide the most utility in accordance with the resources available to
them.
Comment: Another commenter requested additional clarification of
the requirements for objective criteria given that some HRAs are self-
attested.
Response: CMS appreciates this comment and the opportunity to
clarify. Self-attested HRAs include questions about an enrollee's
habits, environment, or other pertinent information. The enrollee is
answering questions which are specific in nature, and do not rely on
the enrollee's judgement to self-diagnose or make SSBCI eligibility
determinations about themselves. An MA organization may use an
enrollee's HRA responses in determining, based on objective criteria,
the enrollee's eligibility for SSBCI. If, by contrast, an enrollee was
to certify their own eligibility for SSBCI by checking a box, for
example, without first receiving an independent determination by the MA
organization that objective criteria for eligibility are met, this
would not be compliant with CMS' rules. It is the responsibility of the
MA organization (not enrollees) to understand and abide by CMS
requirements.
An MA organization cannot delegate its responsibility to make
objective eligibility determinations to the enrollee, given that the
enrollee may have a strong financial incentive to certify themselves
eligible for SSBCI and may not fully understand the applicable
criteria. Consider an example where the plan provides money for gas as
``transportation for non-medical benefits'' SSBCI which is administered
through a debit card or ``flex card'' and the enrollee is asked to
check a box if they are ``eligible to receive a gas card.'' Allowing an
enrollee to self-attest or self-certify to SSBCI eligibility in this
scenario is inconsistent with the MA organizations' responsibility for
ensuring objective SSBCI eligibility determinations. This scenario is
distinguishable from self-attested responses to questions on an HRA,
which can then be used by the MA organization to determine, based on
objective criteria, whether the enrollee is eligible for SSBCI. As a
result, self-attestation of eligibility for SSBCI is not permissible,
but MA organizations may use self-attested HRA responses in determining
eligibility for SSBCI.
Comment: A commenter recommended that CMS not finalize its proposed
requirement for plans to publicly post their SSBCI eligibility criteria
as they believed it would be duplicative of information provided in the
Evidence of Coverage (EOC) and is also required in any marketing of the
SSBCI benefits as finalized in the April 2024 final rule.
Response: CMS appreciates this comment and agrees that best
practices in providing EOC materials and other plan documents would
include this information. CMS stated in the June 2020 final rule that
it is expected that plans communicate to enrollees information in a
clear manner about the scope of SSBCI that the MA plan covers and who
is eligible for those benefits (85 FR 33803). The EOC requirements in
Sec. 422.111(b)(2) require the inclusion of information about the
benefits offered under a plan, including applicable conditions and
limitations. In the April 2024 final rule, CMS modified the disclaimer
requirements at Sec. 422.2267(e)(34) to require plans to include clear
information about SSBCI eligibility criteria in marketing and
communications materials that mention SSBCI, including by listing the
chronic conditions an enrollee must have in order to be eligible for
the SSBCI. However, this regulation does not explicitly state that
plans must list their SSBCI eligibility criteria apart from specific
chronic conditions that might qualify for SSBCI. Some MA organizations
have neglected to include such additional eligibility criteria in their
plan's EOC and other documents. For plans that already list the
information elsewhere, there will be a lower associated burden. Plans
that do not provide this information anywhere in enrollee-facing
documentation will be providing an additional level of transparency
into their operations that may improve patient experience.
CMS is finalizing the proposal with the following modifications:
First, for the reasons discussed in this section, Sec.
422.102(f)(4)(iii)(C) will be finalized as follows, ``For each SSBCI,
list all the written policies and objective criteria on which the
policies are based, as noted in paragraph (f)(4)(i) and (f)(4)(iii)(A)
of this section, on their public-facing website.'' Second, CMS is
finalizing non-substantive technical changes at 42 CFR
422.102(f)(4)(iii)(A)-(C) for structure and clarity.
Finally, CMS notes that while this provision was originally
proposed in the Contract Year 2026 proposed rule, it is being finalized
in the Contract Year 2027 final rule. Therefore, this provision will be
applicable January 1, 2027.
[[Page 17485]]
L. Administration of Supplemental Benefits Coverage Through Debit Cards
Sec. Sec. 422.102, 422.111, and 422.2263
The following provisions were proposed in 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 proposed rule (hereinafter referred to as the Contract Year
2026 proposed rule) (89 FR 99340). This section discusses what was
proposed and the modifications being made in this final rule.
1. Background
Section 1852(a)(3)(A) of the Act gives Medicare Advantage (MA)
organizations the ability to offer supplemental benefits to plan
enrollees, subject to the Secretary's approval. CMS has adopted rules--
primarily in Sec. Sec. 422.100(c)(2) and 422.102--to regulate how
those supplemental benefits, such as vision, dental, gym membership,
and others, must be offered. For example, in the Medicare Program,
Establishment of the Medicare Advantage Program Final Rule,\75\ which
appeared in the Federal Register on January 28, 2005, CMS established
at Sec. 422.102(a)(4) that an MA organization could offer as a
mandatory supplemental benefit a reduction in cost sharing below the
actuarial value specified in section 1854(e)(4)(B) of the Act (70 FR
4617). Later, 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 \76\ (January 19, 2021; 86 FR 5913) (hereinafter referred to
as the January 2021 final rule), CMS further clarified the scope of
supplemental benefits that reduce cost sharing by adding rules at Sec.
422.102(a)(5) and (a)(6)(i) and (ii) to clarify the different
circumstances under which an MA plan may reduce cost sharing for
covered items and services as a mandatory supplemental benefit and the
mechanisms by which an MA plan may make such reductions in cost sharing
available to enrollees. Mandatory supplemental benefits are benefits
that are included in the plan and are generally available to all
enrollees with no additional premiums. As described in Sec.
422.102(b), optional supplemental benefits are purchased at the
discretion of the enrollee and are available to all plan enrollees who
choose to pay an additional premium in order to receive those benefits.
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\75\ https://www.federalregister.gov/documents/2005/12/23/05-24446/medicare-program-establishment-of-the-medicare-advantage-program.
\76\ https://www.govinfo.gov/content/pkg/FR-2021-01-19/pdf/2021-00538.pdf.
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In the January 2021 final rule, CMS explained that MA plans may
choose to structure mandatory supplemental benefits in a few ways (86
FR 5913). For example, an MA plan may offer, as a mandatory
supplemental benefit, the use of a debit card to administer reduced
cost sharing for plan-covered services or to provide coverage of 100
percent of the cost of plan-covered items or services. This may include
reduced cost sharing for dental and vision services (when offered as a
mandatory supplemental benefit--not as an optional benefit) where a
claim for additional payment is submitted to the plan, and/or coverage
by the plan (through use of the card) of all or part of the cost of OTC
items, fitness-related benefits, food and produce, transportation, and
utilities support. With respect to a mandatory supplemental benefit in
the form of reduced cost sharing, a beneficiary may receive a debit
card to use to pay for any applicable cost sharing when receiving a
basic benefit or mandatory supplemental benefit, including Special
Supplemental Benefits for the Chronically Ill (SSBCI). For example, if
the plan provides a transportation service as a covered benefit and
provides a debit card to be used to reduce cost sharing for those
defined transportation services, the beneficiary could use the debit
card to pay for those services. However, MA organizations that choose
to use a debit card to administer mandatory supplemental benefits must
do so in a manner that ensures the debit card can only be used towards
plan-covered items and services. To the extent these items and services
are mandatory supplemental benefits, they must also meet all the
regulatory supplemental benefit standards at Sec. Sec. 422.100(c)(2)
and 422.102(a) through (f). CMS reminds readers that reduced cost
sharing is not permitted as an optional supplemental benefit (that is a
supplemental benefit that a beneficiary would select in exchange for
additional premiums) (see 86 FR 5913). Thus, this mechanism of using
debit cards is not permitted to administer optional supplemental
benefits (that is, an optional dental or vision service package).
The use of debit cards is permitted for administering both
mandatory supplemental benefits for all MA enrollees and mandatory
supplemental benefits available as SSBCI as defined at Sec.
422.102(f). CMS also explained in the January 2021 final rule that
debit cards may only be used to administer coverage of items and
services that are identified in the MA plan's bid and marketing and
communication materials as covered benefits (86 FR 5913). Consistent
with guidance in Chapter 4 of the Medicare Managed Care Manual (MCM),
Sec. 40.3, CMS stated that debit cards used for plan-covered benefits
must be exclusively linked to only the covered items and drugs
specified by the MA organization and that MA organizations are not
permitted to offer use of a debit card to enrollees for purchasing
items or services that are not plan-covered (86 FR 5913). In addition,
the use of the debit card to pay cost sharing or pay for covered items
and services must be tied to the period of coverage, that is the
specific plan year or part of a plan year during which the enrollee is
enrolled with and covered by the MA plan. (MA organizations may include
a maximum dollar limit on a per-month basis, per-year basis, or other
periodicity within the plan year tied to the benefit maximum.) The
debit card itself is not a supplemental benefit; rather, it is a tool
used to administer coverage to an enrollee for identified plan-covered
items and services at a reduced cost. Plan-covered items and services
that are paid for by a debit card must meet the requirements and
standards for mandatory supplemental benefits or be basic benefits in
the case of reduced cost sharing for a Part A or B covered benefit, as
specified in the January 2021 final rule (86 FR 5913).
Since the January 2021 final rule, many MA organizations have
disclosed the use of debit cards to administer a benefit in their
annual bid notes. In reviewing annual bids, CMS has observed that MA
organizations appear to regularly use debit cards to administer several
mandatory supplemental benefits, including reductions in cost sharing
for dental and vision services and/or payment for OTC items, fitness-
related benefits, food and produce, transportation, and utilities
support. In recent years, based on questions from stakeholders,
including beneficiaries, CMS has also become aware that there is some
confusion around the use of debit cards. For example, many stakeholders
have submitted questions requesting CMS clarify what these cards are
and how they can be used. CMS has also received complaints from
enrollees who tell us that they are confused when trying to use their
debit card. Often these individuals do not receive guidance on
[[Page 17486]]
which plan covered supplemental benefits can be purchased with their
debit card or where and how they can use them. Additionally,
stakeholders have raised concerns that there are not enough guardrails
on how these cards are used and how purchases are tracked, especially
at large box stores that carry non-covered items and services (for
example, Costco or Walmart) that would be inappropriate for the MA plan
to cover as supplemental benefits. For example, there are concerns that
the enrollee may use the plan debit card to purchase items and services
that are not covered or that do not meet the requirements for MA
supplemental benefits.
To provide further clarity to both MA organizations and
beneficiaries on the parameters around the appropriate use of plan
debit cards, in the Contract Year 2026 proposed rule, CMS proposed
requirements on the proper administration of supplemental benefits.
Based on CMS's authority under section 1856(b)(1) of the Act to
establish standards for MA organizations, along with the authority in
section 1857(e)(1) of the Act to adopt additional terms and conditions
for MA contracts that are not inconsistent with the Part C statute and
that are necessary and appropriate for the MA program, CMS proposed to
codify in regulation text the requirements and limitations discussed in
the preamble of the January 2021 final rule and later in the May 6,
2024 HPMS memo titled, ``Final Contract Year (CY) 2025 Standards for
Part C Benefits, Bid Review and Evaluation'' regarding the
administration of supplemental benefits, including the use of debit
cards. CMS believes codifying these standards will also ensure that MA
requirements regarding supplemental benefits are applied uniformly
across the MA industry and for all supplemental benefits: both standard
(that is, primarily health-related) supplemental benefits and non-
primarily health-related SSBCI. CMS also proposed to expand on these
requirements by adopting additional disclosure and access guardrails to
increase transparency, protect access to plan-covered services for MA
enrollees, and ensure that MA plans cover (that is, provide, furnish,
and/or pay for) only those items and services that are permissible MA
benefits.
Specifically, CMS proposed to add a new paragraph (g) at Sec.
422.102 to codify existing guidelines for administering supplemental
benefits, including the use of debit cards to administer plan-covered
benefits, and add new guardrails to ensure that beneficiaries are fully
aware of covered supplemental benefits and how to access those
benefits.
2. The Administration of Supplemental Benefits
CMS regulations at Sec. 422.100(c)(2) define a mandatory or
optional supplemental health care benefit (with the exception SSBCI as
defined at Sec. 422.102(f)) as an item or service: (1) not covered by
original Medicare; (2) that is primarily health-related; and (3) for
which the plan must incur a non-zero direct medical cost. The 2022
Final Rule further clarified at Sec. 422.100(c)(2)(ii)(A) that to be
considered primarily health-related, a supplemental benefit must be to
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 health care utilization. Additionally, CMS has codified numerous
requirements that MA organizations must comply with when delivering
supplemental benefits at Sec. 422.102(a) through (e). More recently,
CMS codified standards for SSBCI benefits at Sec. 422.102(f), which
include the requirements that SSBCI may only be offered to chronically
ill enrollees as defined by section 1852(a)(3)(D) of the Act, must
incur a non-zero non-administrative cost, and must have a reasonable
expectation of improving or maintaining the health or overall function
of the enrollee. SSBCI may include benefits that are not primarily
health-related per Sec. 422.100(c)(2)(ii)(A) but must have a
reasonable expectation of improving or maintaining the health or
overall function of the chronically ill enrollee. Additionally, per
section 1852(a)(3)(D)(ii)(II) of the Act, CMS has authority to waive
the uniformity requirements that usually apply for all MA benefits so
that SSBCI can be offered non-uniformly.
CMS proposed in the Contract Year 2026 proposed rule that MA
organizations must have processes for delivering all MA plan-covered
supplemental benefits to enrollees that ensure compliance with
Sec. Sec. 422.100(c)(2) and 422.102(a) through (f) and appropriate
access to suppliers and providers in accordance with Sec. 422.112(a)
as applicable. Per Sec. 422.112(a), MA coordinated care plans may
specify the networks of providers from whom enrollees may obtain
services if the MA organization ensures that all covered services,
including supplemental services contracted for by (or on behalf of) the
Medicare enrollee, are available and accessible under the plan. The MA
organization may therefore contract with providers or vendors to
furnish covered services, including supplemental benefits administered
via a debit card or otherwise. For example, a plan may contract with a
particular vendor to provide their food and produce benefit. In this
scenario, that specific vendor is the network provider for furnishing
the food and produce benefit. CMS noted that section 1854(a)(6)(B)(iii)
of the Act, commonly known as the ``non-interference clause,''
prohibits CMS from requiring any MA organization to contract with a
particular provider to furnish covered items and services. Therefore,
CMS does not specify which vendors MA organizations contract with to
furnish covered items and services. (Note, however, that Sec.
422.204(b)(3) requires that providers that furnish covered Part A and B
benefits must meet the applicable requirements of Title XVIII of the
Act and that certain types of institutional providers must have
participation agreements with Medicare.)
CMS also noted that all coordinated care plans are required to
cover benefits, including supplemental benefits, at in-network cost
sharing when an in-network provider or benefit is unavailable or
inadequate to meet an enrollee's medical needs in accordance with the
standards set forth in rules and regulations.\77\ This is required for
all benefits, regardless of how they are administered.
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\77\ Sec. 422.112 (a)(1)(iii); Chapter 4, section 30.2 of the
Medicare Managed Care Manual; 88 FR 22200.
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If an in-network provider is unavailable or inadequate to
administer covered plan benefits, whether Parts A and B or supplemental
benefits, the MA organization should have a plan or process in place to
ensure that the requirements under Sec. 422.112(a)(1)(iii) are met.
However, given inconsistencies in how supplemental benefits are
provided, CMS believes it is necessary to clarify this requirement in
regulatory text. Therefore, in the Contract Year 2026 proposed rule,
CMS proposed and sought comment on new Sec. 422.102(g)(1) that would
require MA organizations to have processes for delivering all MA
organization covered supplemental benefits to enrollees that ensure
compliance with Sec. Sec. 422.100(c)(2) and 422.102(a) through (f) and
appropriate access to all covered services in accordance with Sec.
422.112(a).
3. New Guardrails for Plan Debit Cards
In the Contract Year 2026 proposed rule, CMS proposed to include a
clarification in Sec. 422.102(g)(1) requiring
[[Page 17487]]
that MA organizations have processes for delivering all MA organization
covered supplemental benefits to enrollees that ensure compliance with
Sec. Sec. 422.100(c)(2) and 422.102(a) through (f) and appropriate
access to all covered services per Sec. 422.112(a). Thus, CMS believes
it is necessary to specify that this requirement would apply to all
plan-covered supplemental benefits, including supplemental benefits
administered through debit cards. Under this proposal, plans must have
a process in place to maintain enrollee access to these benefits. When
plans offer debit cards to assist with the cost sharing for covered
benefits or otherwise administer supplemental benefits, the MA
organization must ensure that the access requirements at Sec.
422.112(a) are met. This means regardless of the mode of delivery (for
example, debit card or other means), MA organizations must ensure that
all covered services, including supplemental benefits, and SSBCI for
eligible enrollees, contracted for by (or on behalf of) enrollees, are
available and accessible under the plan.
In addition, CMS requires that plan-covered benefits be disclosed
in the plan's evidence of coverage (EOC). Section 422.111 requires that
MA organizations disclose all benefits offered under an MA plan,
including applicable conditions and limitations, and any other
conditions associated with receipt or use of benefits. These
requirements are applicable to all benefits, including those
administered via debit card. CMS also noted that MA organizations are
required to send an Explanation of Benefits (EOB) to an enrollee that
captures all claims activity that occurs during a reporting period
(monthly or quarterly cycle). The EOB must include claims information
for all Part C claims processed during the reporting period, including
all claims for Part A and Part B covered items and services, mandatory
supplemental benefits, optional supplemental benefits, and SSBCI.\78\
The EOB must disclose for each claim a descriptor, billing code and
amount billed, total cost approved for reimbursement, share of the
total cost paid by the plan, and share of the total cost for which the
enrollee is liable. Additionally, the EOB must include certain year-to-
date information such as the amount an enrollee has incurred toward the
Maximum Out-of-Pocket (MOOP) limit.\79\ These EOB requirements include
supplemental benefits that MA plans elect to cover through a debit
card.
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\78\ https://www.ecfr.gov/current/title-42/part-422/section-422.111#p-422.111(k).
\79\ https://www.ecfr.gov/current/title-42/part-422/section-422.111#p-422.111(k).
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However, given stakeholder and enrollee feedback, CMS believes
additional clarity and more specific guardrails regarding the use of
debit cards are necessary to ensure that enrollees are adequately aware
of the benefits that are available to them from their plan through a
debit card and how to access them.
In the January 2021 final rule, CMS stated that consistent with
current guidance in section 40.3 of Chapter 4 of the Medicare MCM,
debit cards may only be used for plan-covered benefits under the
condition that the card is exclusively linked to the covered items. CMS
also suggested in the January 2021 final rule (86 FR 5913) that MA
organizations may accomplish this by providing a debit card that is
linked to an appropriate merchant and item/service codes so that the
enrollee may pay the cost sharing at the point of service. CMS believes
such a link is necessary to ensure that the debit card is used for the
permissible purpose--to reduce the enrollee's cost sharing for a
covered item or service or to pay for an item or service that is
covered by the MA plan at up to 100 percent of the cost. Therefore, CMS
proposed at Sec. 422.102(g)(2)(i) the following requirements that MA
organizations must meet if they choose to administer reductions in cost
sharing or provide coverage of 100 percent of the cost of a mandatory
supplemental benefit. CMS proposed at Sec. 422.102(g)(2)(i) that when
administering a mandatory supplemental benefit through plan debit
cards, an MA organization must provide debit cards that are
electronically linked to plan covered benefits through a real-time
identification mechanism to verify eligibility of plan covered benefits
at the point of sale. This means that a plan-issued debit card must be
electronically linked to the covered benefit through a real-time
mechanism that ensures the enrollee is only able to receive covered
items or services that they are eligible to receive at the point of
sale. The debit card must include some sort of mechanism that ensures
the enrollee may only use the card to purchase the covered item or
service. For example, an MA organization could provide a debit card
linked to covered benefits through the use of item/service codes so
that the enrollee is only able to pay the cost sharing for those select
items at the point of sale. In this scenario, the MA organization would
have to ensure that the enrollee is only able to purchase items or
services they are specifically eligible to receive. This is necessary
to ensure that enrollees only receive benefits they are eligible to
receive and that MA organizations do not inadvertently furnish non-
covered benefits. The debit card is intended only to facilitate or
administer certain covered benefits and may not be used to pay for non-
covered items or services. CMS did not propose to prescribe exactly how
plans effectuate the proposed requirements at Sec. 422.102(g)(2)(i)
because CMS believes flexibility for plans to innovate around these
processes will be beneficial to the industry. However, if an MA
organization provides a debit card that is not electronically linked to
covered items and services and does not include checks to ensure that
the enrollee may only receive covered benefits they are eligible to
receive, the MA organization would be in violation of these
requirements.
Next, CMS proposed at Sec. 422.102(g)(2)(ii) to require MA
organizations that use debit cards to administer a supplemental benefit
to provide instructions for debit card use and customer service support
to enrollees to answer questions or help with issues related to the
administration of the card. For example, if an MA organization provides
a food and produce benefit that may be accessed via a debit card, the
plan must provide eligible enrollees with instructions on how to use
the debit card and provide customer support service to beneficiaries
who have questions about how to use the debit card. This support
service must include instructions to beneficiaries on the process to
access these benefits if not accessible by debit card, in accordance
with Sec. 422.112(a). CMS believes this is necessary to ensure that
enrollees are fully aware of their benefits and how to properly access
those benefits, particularly those living in rural areas with limited
access to broadband/internet for communication. Finally, all benefits
must be limited to the specific plan year. Therefore, the Contract Year
2026 proposed rule proposed to state at Sec. 422.102(g)(2)(iv) that MA
organizations must ensure the use of a debit card to administer a
covered benefit is limited to the specific plan year.
In the January 2021 final rule, CMS amended Sec. 422.102(a)(6) to
state that an MA organization may offer reduced cost sharing as a
mandatory supplemental benefit through the use of reimbursement,
through a debit card or other means. In order to further support the
proposed requirements at Sec. 422.102(g)(1), in the Contract Year 2026
proposed rule, CMS also proposed to revise Sec. 422.102(a)(6) by
removing ``or
[[Page 17488]]
other means'' and adding ``manual'' before reimbursement to ensure that
reductions in cost sharing as a supplemental benefit are clearly
limited to either manual reimbursement or to a debit card governed by
the proposed rules under Sec. 422.102(g) for covered items and
services. CMS explained that ``other means'' could be interpreted to
allow an unrestricted card or other vague mechanisms, which would
conflict with CMS requirements that a debit card be exclusively linked
to covered benefits and limited to the plan year or the requirements
being proposed at Sec. 422.102(g)(1)(i).
While CMS proposed to remove ``or other means,'' CMS also solicited
comment on what other means, outside of manual reimbursement or a debit
card, would be unintentionally removed as options to plans should this
proposed revision be finalized. CMS solicited comment on how these
other means or mechanisms may still guarantee compliance with existing
requirements at Sec. 422.102(a)(6) and the requirements proposed at
Sec. Sec. 422.102(g) and 422.111(b)(6) (discussed in section III.H.2
of the Contract Year 2026 proposed rule). For example, it was not CMS's
intent that the proposed changes at Sec. 422.102(a)(6) would prohibit
an organization from using a stored value card,\80\ provided the use of
these cards by MA plans complies with the requirements at Sec.
422.102(g). Therefore, CMS solicited comment on whether the use of
stored value cards meets the requirements at Sec. 422.102(g).
Specifically, CMS solicited comment on whether the mechanisms available
and used with stored valued cards are sufficient so that the purchases
made through such cards can be electronically linked to plan covered
items through a real-time identification mechanism that verifies the
eligibility of plan covered benefits at the point of sale, and can
restrict the time period allowed for the use of the stored value card
to the plan year only. CMS also solicited comment on whether stored
value cards should be explicitly added to Sec. 422.102(a)(6) and Sec.
422.102(g) as an acceptable means of administering reductions in cost
sharing and the coverage of supplemental benefits.
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\80\ https://www.fiscal.treasury.gov/stored-value-card/.
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4. Access
While an MA organization may utilize a debit card to administer a
benefit, this does not exempt the plan from ensuring access and network
adequacy is preserved for the benefit if there is an issue with the
vendor or a technical issue with the debit card. As discussed earlier,
the regulations at Sec. 422.112(a)(1)(iii) specify that coordinated
care plans must arrange for, and cover any, medically necessary
(clinically appropriate for non-primarily health-related SSBCI) covered
benefit outside of the plan provider network, but at in-network cost
sharing, when an in-network provider or benefit is unavailable or
inadequate to meet an enrollee's medical needs. Additionally, long-
standing guidance under section 40.3.1 of Chapter 4 of the Medicare MCM
states, ``Every MA plan, independent of the payment method it chooses,
must also allow--under circumstances which it describes (for example,
when the debit card network is not operating correctly)--for manual
reimbursement for the purchase of OTC items based on submitted
receipts.'' CMS included this language in the Medicare MCM Chapter 4 to
ensure enrollee access by requiring plans to have an alternative method
(for example, reimbursement based on submitted receipts) for enrollees
to receive their OTC benefits if there was an issue with the contracted
vendor or an operational issue with the debit card. CMS believed that
it was important to propose a similar policy here to maintain enrollee
access for all benefits administered through a debit card, not just OTC
benefits.
Therefore, CMS proposed at Sec. 422.102(g)(2)(iii) that a plan
must have an alternative process that allows for reimbursement of
eligible expenses for plan covered benefits. CMS believed this proposal
would allow enrollees to maintain access to covered benefits that are
administered through the offering of a debit card should the real-time
identification mechanism fail or otherwise be unavailable. This would
allow enrollees to be reimbursed for the purchase of eligible plan
covered benefits if they are unable to use their plan debit cards. CMS
believed that requiring plans to allow this alternative will ensure
that the enrollee has access to the benefit if there is an issue with
the vendor, a technical issue with the debit card, or any other
situation in which the use of a debit card is unfeasible for the
enrollee. This may include non-technical issues, such as when an
enrollee is having trouble understanding how to use the debit card or
is otherwise running into non-technical obstacles to its use. This
alternative reimbursement process could also apply if there are
failures with the electronic processing system used by the provider.
This includes situations where a permitted transaction is erroneously
declined. In other words, in the case that the debit card is not
operating correctly or as intended, there is an issue with the vendor,
or any other situation in which the use of a debit card is unfeasible
for the enrollee, the MA plan must allow enrollees to be reimbursed for
the purchase of the covered benefit based on submitted receipts. This
also includes situations in which a contracted vendor is not easily
accessible due to an enrollee's transportation constraints. This
requirement would protect enrollee access to benefits that they are
entitled to receive regardless of issues that may arise from a plan's
chosen mode of delivery (for example, plan debit card).
CMS proposed that this alternative process must be in place for
both in-network and out-of-network access to the benefit where
necessary (for example, in the event that in-network providers and/or
vendors are unavailable or inadequate to meet the enrollee's needs). In
this scenario, the plan is still responsible for ensuring out-of-
network access at in network cost sharing. Under this requirement, MA
organizations would be expected to adequately disclose the process by
which reimbursement may be made to enrollees and to ensure that the
process is accessible to all enrollees. CMS also encouraged MA
organizations to be mindful of enrollees in rural areas, especially
those who have limited access to broadband or internet communication,
when implementing this requirement and when disclosing information
about how to effectuate a reimbursement to plan enrollees.
CMS also noted that MA plans that are PPOs are required to provide
reimbursement for all covered services, regardless of whether the items
are provided within the network of providers under Sec.
422.4(a)(1)(v). Regarding reimbursement, Sec. 422.4(a)(1)(v)(B)
requires PPOs to provide for ``reimbursement for all covered benefits
regardless of whether the benefits are provided within the network of
providers.'' This applies to all supplemental benefits, including those
administered through a debit card (it was noted that in this scenario,
an enrollee may be subject to increased cost sharing). For example, an
MA organization may contract with a particular grocery store to furnish
their food and produce benefit. However, in a PPO, enrollees may
purchase eligible food and produce at another non-contracted grocer
(out-of-network provider) and be reimbursed for those covered items.
CMS expects MA PPOs to have processes to verify out-of-network
reimbursement is only made
[[Page 17489]]
for plan-covered services and to indicate to enrollees the process by
which reimbursement can be made. As noted above, that process should be
mindful of enrollees in rural or remote areas with limited access to
providers and internet-based communication methods.
Finally, CMS reminded MA plans that the regulations at Sec.
422.112(b)(3) provide for coordinated care MA plans to include
community-based services in their plans for coordination and continuity
of care for enrollees. In addition, Sec. 422.112(b)(3) specifically
states that MA coordinated care plans are required to ``coordinate MA
benefits with community and social services generally available in the
area served by the MA plan.'' MA plans may contract with community-
based organizations to provide supplemental benefits that are compliant
with the statutory and regulatory requirements. The Agency strongly
encouraged, for example, an MA plan that elects to offer a food and
produce supplemental benefit to do so via a community-based
organization that is able to process the benefit through a debit card.
CMS understands that in some areas there may be a limited number of
community-based providers, including small businesses. However, plans
were strongly encouraged to partner with community-based providers or
other local, smaller businesses when offering supplemental benefits,
particularly regarding food and produce benefits that may be offered to
chronically ill enrollees under SSBCI regulations at Sec. 422.102(f).
Encouraging plans to contract with community-based providers will
improve enrollee access to benefits. With covered benefits available in
their communities, enrollees will be able to more readily and easily
obtain and use covered benefits and thus have the potential to improve
their overall health.
5. Additional Disclosure Guardrails
To increase transparency for beneficiaries accessing plan-covered
benefits, CMS also proposed to add additional disclosure requirements
specific to supplemental benefits under Sec. 422.111. Section
422.111(b) currently requires MA organizations to disclose mandatory
and optional supplemental benefits and the premium for those benefits.
Additionally, CMS proposed to amend Sec. 422.111(b)(6) to state that
MA organizations must disclose any mandatory supplemental benefits
(including reductions in cost sharing) or optional supplemental
benefits, the premium for optional supplemental benefits, and any
applicable conditions and limitations associated with receipt or use of
supplemental benefits. CMS also proposed to clarify that this
disclosure must include eligible OTC items and, where supplemental
benefits are administered through a debit card, must specify which
benefits may be accessed using the debit card. CMS believes that such
disclosure is necessary to ensure transparency considering the growth
of the scope of supplemental benefits and authorized administrative
flexibilities, such as the use of plan-furnished debit cards to
administer certain supplemental benefits. This will help ensure that
plan enrollees are sufficiently aware of what covered benefits may be
accessed through any debit card they receive from their plan.
Lastly, regarding OTC items, longstanding CMS guidance (section
40.1 of Chapter 4 of the Medicare MCM) defines OTC items as health
related items and medications that are available without a
prescription, and Sec. 422.102(c)(2) provides that permissible
supplemental benefits are items and services that are not covered by
Medicare Part A, Part B or Part D. Per Sec. 422.100(c)(2), plans may
never offer as a supplemental benefit something that is covered under
Part B or Part D for the plan's enrollees, including an OTC item or
medication. Additionally, while the 2022 Final Rule did include OTC
items as an example of permissible primarily health-related
supplemental benefits (86 FR 5971), it did not include a non-exhaustive
list of acceptable and non-acceptable items. CMS has also received
feedback that a non-exhaustive list could provide further clarity for
MA organizations. Therefore, CMS included a non-exhaustive list of
acceptable and non-acceptable items here. Examples of permitted
primarily health-related OTC items that have been reviewed and approved
by CMS during the bid review process include, but are not limited to:
amplified phones, analgesics, antacids, anti-bacterial grooming
products (when recommended by a provider), antihistamines, anti-
inflammatories, antiseptics, blood pressure cuffs, callous/wart
remover, custom made compression garments (if furnished under
circumstances when it would not be covered by the Part B benefit),
contact lens solution and cases, over the counter contraceptives (such
as condoms and over the counter, non-prescription birth control pills),
cotton swabs, COVID-19 tests (over the counter), decongestants,
dressing and eating aids, extension grabbers or reaching aids, facial
cleaners (including acne wash), feminine hygiene products (such as
douche, lubricants, pads, tampons, wipes), fiber supplements, first aid
supplies, energy protein bars and power drinks, nutritional drinks/
shakes, hand sanitizer, hearing aid batteries, hearing amplifiers,
herbal supplements, hip kits, dietary supplements (such as CoQ10,
garlic, gingko biloba, melatonin, and saw palmetto), incontinence
supplies (such as adult diapers and under pads), insulin refrigeration
units, and lip soothers/balms (non-medicated), low vision aids,
magnifying glasses, medicine dispensers, mouth/oral care products (such
as toothbrush/paste, floss, mouthwash, denture adhesives/cleaners),
naloxone (if furnished under circumstances when it would not be covered
by Medicare Part B or Part D), night lights, nicotine replacement
therapy (NRT), pain relief products (such as Epsom salt and ice packs),
pill bottle openers, pill/tablet boxes, cutters, and crushers, pulse
oximeters, probiotics, nonprescription reading glasses, shoe insoles/
inserts/arch supports, skin moisturizers for dry skin, skin protectant
(such as diaper rash ointment, moleskin, mosquito repellent and
petroleum jelly), witch hazel, sleep aids, soap (doctor recommended
antibacterial/antimicrobial), sunscreen, supportive items (such as
compression hosiery, rib belts and elastic knee support), toilet
lights, vitamins and minerals, nonprescription weight loss items,
weight scales, and disposable face masks (to protect against
respiratory illnesses). Although this is not considered to be an
exhaustive list of acceptable OTC items, CMS solicited comment on
whether there are additional items that stakeholders believe should be
included on this list.
CMS has also reviewed items that have been determined not to be
permissible MA supplemental benefits because they do not meet the
requirement that the item or service be primarily health-related. Such
OTC items that cannot be covered as MA supplemental benefits include
air conditioners, baby items, bad breath remedies (gum and breath
mints), bagging fees, body scrubs, cleaning products (Clorox and
Lysol), clocks, dehumidifiers, deodorant, grooming/shaving supplies,
hair care (shampoo, conditioner, dye, bleach, hair removal and hair
growth products), humidifiers, jar openers, paper products (tissue,
toilet paper and paper towels), perfume, pest control, skin
moisturizers used for anti-aging, teeth whiteners, water bottles, and
personal coolers. It was noted that items such as air conditioners,
cleaning products, dehumidifiers, humidifiers, grooming supplies to
assist with hygiene, paper
[[Page 17490]]
products (tissue, toilet paper and paper towels), and pest control may
be permissible as a non-primarily health-related SSBCI provided the
item has a reasonable expectation of improving or maintaining the
health or overall function of the enrollee and meets the standards at
Sec. 422.102(f). For example, research indicates that air conditioners
may improve the breathing of patients with COPD and asthma.\81\ CMS
solicited comment on these listed items.
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\81\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5291496/.
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CMS reiterated that the list of permissible primarily health-
related OTC items set forth in the Contract Year 2026 proposed rule was
non-exhaustive. CMS also included a non-exhaustive list of items that
are not primarily health-related but could be offered as a non-
primarily health-related SSBCI, provided the requirements under Sec.
422.102(f) are met. CMS reviews bids each year to ensure that proposed
supplemental benefits meet the applicable regulatory and statutory
standards.\82\ For example, MA organizations may propose to offer OTC
items not on this list and CMS may come across items in the future, not
listed here, that CMS believes do not meet the definition of a
supplemental benefit per Sec. 422.100(c)(2) or are not primarily
health-related per Sec. 422.100(c)(2)(ii). However, the Agency
believes including these lists in this preamble discussion will help MA
organizations consistently apply the requirements at Sec. Sec.
422.100(c)(2) and 422.100(c)(2)(ii) and assist MA organizations when
planning and preparing their annual bid packages.
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\82\ MA organizations that are looking to cover new or novel
benefits are strongly encouraged to raise those to CMS well in
advance of bid submission to allow ample time for the MA
organization to provide, and CMS to review, information explaining
how the applicable statutory and regulatory standards are met for
the proposed benefits without the time pressures of the bid review
process.
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6. Marketing Supplemental Benefits
Another consideration related to debit cards is MA organizations'
marketing tactics. CMS has become aware of certain advertisements that
solely mention debit cards, or marketing terms such as ``Medicare flex
cards,'' with an alluring value attached to them, potentially giving
false impressions that the card itself is the benefit.
In the Contract Year 2026 proposed rule, CMS raised concerns with
these advertisements, articulating that there could be a risk that a
beneficiary might view this type of advertisement and make an
enrollment decision based on the belief that, by enrolling in the plan,
they will automatically receive a card with ``free'' money to spend
wherever they choose. CMS proposed new parameters for MA organizations'
marketing of supplemental benefits. Specifically, CMS proposed to add
new paragraph (b)(11) to Sec. 422.2263, prohibiting MA organizations
from marketing the dollar value of a supplemental benefit or the method
by which a supplemental benefit is administered, such as use of a debit
card by the enrollee to provide the plan's payment to the provider for
the covered services. CMS solicited comment on all aspects of this
proposal.
CMS thanks commenters for their input on CMS's proposed changes to
requirements for the administration of supplemental benefits coverage
through debit cards. CMS received the following comments and provided
responses as follows.
Comment: While several commenters supported the proposed rule, a
number of commenters raised concerns about potential member confusion
related to various aspects of debit card use. One commenter expressed
concern that the ``combined benefit option'' may be confusing, as
beneficiaries might not understand they are using their allowance on
food at the expense of other benefits like vision and dental. Some
commenters also raised concerns that enrollees may unwittingly use
cards for uncovered services and be found liable later. Given these
concerns about confusion and potential liability, many commenters also
expressed support for the proposed additional disclosure requirements
around supplemental benefits and how to access them via debit cards.
Several commenters also supported the requirements for customer service
and support around using debit cards.
Response: CMS thanks commenters for sharing their concerns and
support of this rule. CMS has heard from various stakeholders that
enrollees are often confused when using plan debit cards. The
clarifications being finalized at 42 CFR 422.111(b)(6) and the
disclosure and customer service requirements under new subsection
422.102(g) address these concerns. As stated in the Contract Year 2026
proposed rule, plans are currently required to disclose all covered
benefits. Given the rapid growth of MA plans' use of debit cards to
furnish covered benefits, CMS is requiring that this disclosure must
include eligible OTC items and, where supplemental benefits are
administered through a debit card, specify which benefits may be
accessed using the debit card. Requiring plans to provide debit card
usage instructions and customer service support will significantly
improve the enrollee experience. While many plans already have customer
service processes in place, CMS is requiring that these processes
include assistance with debit card access to benefits when necessary.
These requirements are expected to enhance the enrollee experience, and
CMS will continue to monitor outcomes.
CMS also thanks commenters for noting confusion around the
``combined benefit option,'' also referred to as a maximum plan
allowance for a package of supplemental benefits under Sec.
422.102(a)(6)(ii). MA plans have long been able to structure benefits
that allow enrollees to choose from a group of covered, eligible
supplemental benefit options. However, CMS acknowledges that when plans
use this structure in combination with debit cards, it can create
confusion as enrollees may not realize that using the card for one
benefit means foregoing another. To address this, CMS emphasizes
throughout this rule that plans are required to disclose all benefits
and accompanying limitations to their enrollees. Specifically, CMS
proposed and is finalizing an amendment to Sec. 422.111(b)(6) to
require disclosure of the applicable conditions and limitations
associated with the receipt or use of supplemental benefits. When
offering a ``combined benefit option,'' plans must clearly communicate
any associated limitations to enrollees, including that selecting one
benefit means foregoing another benefit under this benefit structure.
Comment: Multiple commenters raised concerns about the feasibility
and administrative burden of the real-time verification requirement.
Some commenters argued that requiring real-time verification with SKU
codes for all items would limit access and use of cards, and that plans
are at different operational levels regarding their ability to perform
point-of-sale verification. Some commenters also asserted that various
types of debit cards exist, each with distinct functionalities and
operational characteristics that may have varying levels of
compatibility with these requirements. Several commenters asserted that
even for plans already taking verification steps through third-party
fintech card administrators, operational changes could add significant
burden given the variety of retailer hierarchies of product
identification. A commenter expressed concern that the point-of-sale
verification may have the unintended consequence of detracting from the
beneficiary experience, with beneficiaries potentially facing
[[Page 17491]]
additional steps with added confusion at the point of sale. A commenter
noted that dental benefit and eligibility verification through current
HIPAA-mandated standards are insufficient to support the real-time
identification mechanism of covered services as described. Another
commenter stated that real-time verification technology may be
incompatible with certain benefits. Some commenters requested that CMS
provide examples of permissible methods of meeting the real-time
identification requirements. Other stakeholders supported the real-time
verification requirements, emphasizing that these processes are
necessary to ensure beneficiaries receive the correct benefits and to
enhance the enrollee experience. Another commenter, while supportive of
real-time verification, requested that CMS permit either electronic or
manual verification of plan-covered benefits at point-of-sale.
Response: CMS thanks commenters for feedback. CMS also reminds
commenters that there is longstanding precedent requiring plan debit
cards to be explicitly linked to covered items. CMS guidance (Medicare
MCM Chapter 40.3) states that debit cards must be electronically linked
to eligible, covered items. In the January 2021 Final Rule (86 FR
5913), CMS explained that MA organizations must properly restrict debit
cards to appropriate providers and covered benefits to ensure
compliance with Sec. Sec. 422.100(c)(2) and 422.102(a). CMS stated
directly that if a plan cannot implement such restrictions--for
example, through merchant codes, inventory approval system codes, or
other mechanisms--then debit cards may not be an appropriate mechanism
for that plan to use (86 FR 5913). It has been and continues to be
CMS's expectation that if a plan cannot appropriately restrict debit
cards to actual covered benefits, this mechanism should not be used.
The codifications in this rule formalize and expand upon these existing
expectations for greater clarity given the growth of debit card usage.
Regarding real-time verification specifically, this capability is
necessary to ensure ease of access, transparency, proper payment, and
fraud prevention, aligning with the Administration's commitment to
combating fraud, waste, and abuse in federal programs. Real-time
verification helps eliminate fraud by preventing unauthorized
purchases, ensuring that benefits are used only for their intended
purpose, and reduces the chances of plans inadvertently providing
payment for non-covered items, thus ensuring compliance with CMS
requirements. Additionally, real-time verification removes uncertainty
at the point of sale for plan enrollees and provides assurance that the
purchase is aligned with plan rules, which is particularly important
for a population that may be dealing with reduced functionality.
CMS's primary concern is that benefits are furnished appropriately
to beneficiaries. While debit cards offer one method to administer
benefits, they are not the only option available to plans, nor
mandatory. Plans may administer supplemental benefits through other
methods, including but not limited to, manual claims processing and
online claims submission forms. In fact, plans may find these processes
more operationally appropriate for certain benefits. CMS originally
allowed debit cards as a flexibility to give plans additional options
for benefit administration. However, if it is impractical, unfeasible,
or difficult to effectuate a particular supplemental benefit through a
debit card, CMS does not expect a debit card to be used. Plans should
choose the method--whether debit cards, receipt-based reimbursement,
electronic catalogs, home delivery, or other approaches--that best
enable them to furnish benefits in compliance with program
requirements.
In response to the request for examples of permissible methods of
meeting the real-time identification requirements, CMS refers
commenters to the January 2021 Final Rule, which noted that plans could
use merchant codes, inventory approval system codes, or other similar
mechanisms (86 FR 5914). CMS recognizes that health plans have
successfully utilized debit cards to deliver healthcare benefits for
many years and that the industry has developed substantial expertise in
this area. CMS anticipates continued technological advancement and
therefore refrains from prescribing specific technological solutions or
providing exhaustive examples. It is not CMS's intent to dictate the
technology employed, but rather to establish clear expectations for
outcomes: enrollees should experience seamless front-end user
experiences that preserve both ease of access and transparency.
Finally, regarding the request to permit either electronic or manual
verification of plan-covered benefits at point-of-sale: CMS does not
consider manual verification to be real-time verification. Electronic
verification requires automated, system-to-system data exchange and
validation processes that occur without manual intervention. However,
plans may certainly use manual verification as a troubleshooting
alternative when experiencing technological issues with their
electronic verification systems. This approach can serve as a temporary
workaround to ensure continuity of operations while technical problems
are being resolved.
Comment: Similarly, some commenters stated that difficulties could
arise at small or independently-owned retail stores that do not have
the same technological infrastructure or capacity as larger national
chain stores. Another commenter explained that in many cases, plans do
not have a contractual relationship with retail stores where debit
cards are commonly used, as there is often a financial technology
company in the middle. They explained that these plans select products
that should be covered, then the third-party administrator and the
retail store match products to SKUs.
Response: CMS thanks commenters for sharing their concerns and
providing additional insight into how plans operationalize the
furnishing of covered supplemental benefits through debit cards. It is
important to reiterate that MA operates under a particular structure
governed by statutory and regulatory rules. MA plans that offer
coordinated care plans may specify the networks of providers from whom
enrollees may obtain services, including supplemental benefits.
Furthermore, MA organizations have the discretion to choose with whom
they contract to furnish services. Section 1854(a)(6)(B)(iii) of the
Act, commonly known as the ``non-interference clause,'' prohibits CMS
from requiring an MA plan to contract with a particular health care
provider, including vendors, to furnish a benefit. This applies to
supplemental benefits as well. CMS recognizes that the technological
landscape has evolved and many plans no longer contract directly with
retailers. Instead, they partner with financial technology companies to
oversee card usage, which impacts which vendors can participate. These
arrangements are acceptable, provided that plans comply with CMS
requirements, especially disclosure requirements which describe the
applicable conditions and limitations associated with the use of
supplemental benefits. Finally, CMS reiterates that debit cards are not
unrestricted cash cards. Section 1851(h)(4)(A) of the Act prohibits
plans from providing cash to enrollees. Instead, debit cards serve as
one mechanism that plans may use to furnish covered benefits.
Consistent with the MA program structure--in which plans furnish
services through a
[[Page 17492]]
network of providers or vendors--debit cards are not intended to be
usable everywhere.
Comment: Several commenters expressed support for having
alternative reimbursement processes available to protect enrollee
access to benefits. Some plans acknowledged that they already have
processes in place for alternative reimbursement and one plan requested
that CMS recognize these existing practices while clearly stating any
intended changes to standard industry practices. Another commenter
supported the proposal but recommended that for geographic areas where
vendor capacity for alternative processes does not currently exist, CMS
should allow adequate timeframe for vendors to build out this function.
However, other commenters raised concerns about the administrative
burden that may be associated with manual receipt reimbursement
processes as an alternative to debit cards. Some plans stated that
supplemental benefits like OTC and food allowances rely on CMS-approved
product listings comprising thousands of items, and that the automated
nature of debit cards ensures real-time validation at the point of
sale. Several commenters indicated that mandating a manual
reimbursement process would require extensive administrative effort,
including additional full-time staff to individually review each item.
Some plans stated that current card vendors lack infrastructure to
manage receipt reimbursements, meaning the burden would fall entirely
on plans. Another commenter expressed concern that requiring an
alternative reimbursement process could lead to member confusion, as
the debit card enables members to know at the point of service whether
a product is eligible, whereas after-the-fact filing could result in
situations where purchases made in good faith are not actually
reimbursable. Some commenters requested examples from CMS of
permissible alternate payment methods that would comply with
requirements, as well as examples of issues that would warrant using an
alternate process. Several commenters expressed concern that allowing
alternative processes would set a precedent with members that they
could obtain other plan services through non-contracted locations or
providers.
Response: CMS thanks commenters for their feedback. As described in
the Contract Year 2026 proposed rule, longstanding guidance at Section
40.3.1 of Chapter 4 of the Medicare MCM requires plans to allow manual
reimbursement for OTC purchases via submitted receipts in certain
situations. To maintain enrollee access for all benefits administered
through a debit card, CMS proposed to codify at Sec.
422.102(g)(2)(iii) that plans must have an alternative reimbursement
process for eligible expenses. This would include technical issues such
as difficulty using the debit card, provider system failures, erroneous
transaction declines, or other situations where debit card use is
unfeasible. However, based on feedback from commenters, CMS agrees that
the requirement as proposed could inadvertently cause confusion among
enrollees regarding how to access in-network benefits. Therefore, CMS
will amend Sec. 422.102(g)(2)(iii) to more specifically state that
plans must have an alternative process that allows for reimbursement of
eligible expenses for plan covered benefits in circumstances where the
debit card is unusable at the point of sale, including but not limited
to debit card malfunction.
As noted throughout this rule, plans must ensure that beneficiaries
maintain access to covered supplemental benefits regardless of the
payment mechanism used to administer those benefits. Whether a plan
provides access through a debit card or another payment method, the
underlying benefit must remain available to eligible enrollees. The
manual reimbursement requirement serves as a safeguard to ensure access
to eligible services in situations where the debit card becomes
unusable due to malfunction, damage, or other technical failures. This
requirement protects beneficiaries from losing access to their covered
benefits simply because the payment mechanism is temporarily
unavailable.
Comment: One commenter requested that CMS reconsider its proposal
to allow PPO supplemental benefits to be used at any retailer, noting
that expanding benefits to any retailer would require plans to manage
approvals and validations manually, significantly increasing
administrative complexity. Another commenter asked CMS not to finalize
the out-of-network reimbursement requirement. Some commenters expressed
concern that CMS's requirement for plans to provide all benefits at in-
network cost-sharing rates when no in-network provider is available
could expose the program and plans to potential bad actors, as many
supplemental benefit providers are not Medicare-enrolled medical
providers and are vetted through contractual agreements.
Response: Regarding PPO out-of-network reimbursement, CMS notes
that current regulations at Sec. 422.4(a)(1)(v) require MA plans that
are PPOs to provide reimbursement for all covered services, regardless
of whether the services are furnished within the plan's contracted
network. As CMS stated in the 2005 final rule (70 FR 4598) establishing
this requirement, CMS intended that local and regional PPOs reimburse
enrollees for all covered benefits, regardless of whether those
benefits are provided within the network of providers. This
longstanding requirement applies regardless of the mechanism through
which a benefit is furnished.
Additionally, while plans may maintain established systems for
administering supplemental benefits--such as limiting debit card
functionality to contracted vendors--supplemental benefits remain
covered benefits, and PPOs must still provide reimbursement for covered
services obtained out-of-network. CMS has long articulated a similar
expectation in sub-regulatory guidance. For example, section 40.3.1 of
Chapter 4 of the Medicare MCM states that MA plans, regardless of the
payment method used to furnish OTC benefits, must provide a mechanism
for manual reimbursement under described circumstances (such as when a
debit card network is not functioning). This guidance reflects CMS's
longstanding expectation that the method used to administer a benefit
does not alter a plan's obligation to ensure access to and
reimbursement for covered supplemental benefits in certain situations.
To provide additional clarity, CMS will further amend Sec.
422.102(g)(2)(iii) to specify that plans must establish an alternative
process that permits reimbursement of eligible expenses in
circumstances where the debit card is unusable at the point of sale, as
described earlier in this section, as well as when a beneficiary is
entitled to obtain covered benefits out-of-network. As a best practice,
plans retain the discretion to implement appropriate verification
procedures and safeguards to ensure reimbursement is provided only for
actual covered items. CMS recommends that plans consider these
requirements when deciding whether a debit card is the most appropriate
mechanism for furnishing certain covered benefits.
For Health Maintenance Organization (HMO) plans specifically, it is
important to note that ``eligible expenses'' under the manual
reimbursement requirement refer exclusively to covered services
obtained in accordance with the plan's network requirements. In an HMO,
manual reimbursement does not extend to purchases made from out-of-
network providers or vendors or suppliers, as
[[Page 17493]]
such services would not constitute eligible covered benefits under an
HMO plan structure. The intent of this provision is to protect
beneficiary access to covered benefits when the debit card payment
mechanism fails, not to expand coverage to out-of-network services that
fall outside the plan's benefit design. CMS reminds readers, however,
that even if an MA plan chooses to administer supplemental benefits
through a debit card, the plan must still arrange for and cover any
medically necessary covered benefit outside of the plan provider
network, at in-network cost sharing, when an in-network provider or
benefit is unavailable or inadequate to meet an enrollee's medical
needs under 42 CFR 422.112(a)(1)(iii).
Finally, in response to the request that CMS not finalize the
requirement that MA plans provide all benefits at in-network cost-
sharing rates when no in-network provider is available, CMS again notes
that this is an existing requirement at 42 CFR 422.112(a)(1)(iii) and
is applicable to all covered benefits, including supplemental benefits,
regardless of delivery method. This requirement applies only when a
plan lacks an adequate contracted provider or vendor to furnish a
covered benefit--a situation expected to be rare. It does not require
plans to always cover benefits outside the provider network at in-
network cost sharing.
Comment: A commenter requested that CMS not finalize the removal of
the proposed language ``or other means'' at proposed Sec.
422.102(a)(6)(i), stating that it would unnecessarily restrict plans
from using alternatives such as stored value cards or future
technological developments like mobile applications.
Response: CMS thanks the commenter for this feedback. The Contract
Year 2026 proposed rule proposed to remove ``or other means'' from the
regulation and solicited comments on which alternative delivery methods
beyond manual reimbursement or debit cards might be unintentionally
eliminated, and whether stored value cards can meet the requirements at
Sec. 422.102(g), specifically regarding real-time point-of-sale
verification and plan-year-only restrictions.
CMS clarifies that, as explained in the January 2021 rule, the
cost-sharing reduction flexibilities authorized at Sec.
422.102(a)(6)(i) and (ii) do not exclude stored value cards, provided
they can be programmed to permit their use only for the purchase of
specific, covered items and services. The changes proposed at Sec.
422.102(a)(6) were not intended to prohibit stored value cards,
provided they comply with the requirements at Sec. 422.102(g). CMS
solicited comment on whether to remove the phrase ``or other means''
from Sec. 422.102(a)(6)(i) and instead specify the types of cards or
mechanisms that would satisfy the proposed requirements under Sec.
422.102(g).
CMS received no direct comments on these questions but appreciates
the commenter noting the possible unintended consequences of removing
``or other means.'' Therefore, CMS will not finalize the removal of
``or other means'' in Sec. 422.102(a)(6)(i). Stored value cards will
continue to be permitted as a mechanism to administer reduced cost
sharing and covered benefits, provided such cards comply with the
requirements under Sec. 422.102(g). CMS anticipates continued
innovation in this technological space and welcomes opportunities to
engage with stakeholders on emerging advancements.
Comment: Multiple commenters requested clarification on various
technical aspects of the proposal, including: examples of how plans can
meet disclosure requirements and model documents; whether plans may use
the same physical card year to year with only the amount expiring;
whether a plan can disclose categories of OTC items as opposed to each
individual OTC item; and more detailed specifications for customer
service requirements. Several commenters stated that MA organizations
already have processes in place for delivering plan-covered
supplemental benefits and providing education to enrollees, and that
the objective of the new proposed requirements is unclear.
Response: CMS appreciates the comments received and acknowledges
that many plans are likely to have processes in place to meet several
of the proposed requirements in this rule. As stated throughout this
rule, many of these requirements primarily codify and further clarify
existing expectations. In response to requests for clarification on
whether plans may use the same physical card year to year with only the
benefit amount expiring, CMS proposed and is finalizing at Sec.
422.102(g)(2)(iv) that supplemental benefits administered through debit
cards must be limited to the plan year. Plans may allow enrollees to
use the same physical debit card in subsequent plan years; however, the
dollar amounts or benefit allocations associated with the card cannot
carry over from one plan year to the next. This ensures that each plan
year's benefits are utilized within the designated plan year period.
Regarding whether a plan can disclose categories of OTC benefits as
opposed to listing each individual benefit, the listing of categories
of covered OTC benefits is permissible provided the plan discloses any
limitations and is able to provide more specific details to the
enrollee if necessary. CMS declines to provide more prescriptive
guidance, as the purpose of these requirements (e.g., adequate
transparency and enrollee support) is clear, and CMS does not wish to
be overly restrictive to plans that may already have adequate processes
in place. CMS will continue to engage in dialogue with plans and may
provide additional guidance at a later date as necessary.
Comment: A commenter expressed concern that cards function as
inducements and that beneficiaries may make enrollment decisions based
on having a ``card'' rather than the overall benefit package.
Response: As noted in the Contract Year 2026 proposed rule, CMS
shares concerns that beneficiaries may base enrollment decisions on
perceived debit card access rather than the comprehensive benefits
package. CMS encourages all enrollees and potential enrollees to
consider the full benefits package when selecting a plan. The increased
disclosure requirements in this rule are designed to improve
transparency and support informed enrollment decisions, and CMS will
continue to monitor developments in this area and welcomes ongoing
stakeholder feedback.
Comment: Some commenters expressed concern about lack of
transparency surrounding delivery and use of benefits. While supporting
the proposal, another commenter noted concerns that it would not allow
other agencies or entities to monitor whether plan-provided debit cards
are being used only for items that meet criteria. Another commenter
suggested that CMS should work to ensure MA plans share information
with providers on supplemental benefits available to patients in real
time, at the point of care, and in a standardized manner. A commenter,
while supporting the proposal, expressed concern that the proposed
guardrails do not prevent someone other than the beneficiary from using
the card.
Response: CMS thanks commenters for sharing their concerns. It is
noted that existing requirements mandate MA plans to disclose all
supplemental benefits. The new requirements clarify that such
disclosures must include all applicable conditions and limitations
associated with the receipt or use of supplemental benefits, and that
this disclosure applies to all benefits, including those administered
through a
[[Page 17494]]
debit card. The existing requirements, along with the proposed
disclosure clarifications regarding applicable conditions and
limitations and benefits furnished through debit cards, are sufficient
to ensure transparency. Additionally, per Sec. 422.2267(e)(34), plans
offering CMS-approved SSBCI are required to include the SSBCI
disclaimer in all marketing and communications materials that mention
SSBCI. In the SSBCI disclaimer, plans must list the chronic
condition(s) the enrollee must have in order to be eligible for the
SSBCI (in accordance with CMS requirements). Plans must also convey in
the SSBCI disclaimer that even if the enrollee has a listed chronic
condition, the enrollee will not necessarily receive the benefit
because other eligibility and coverage criteria also apply.
Additionally, in section IV.L. of this rule, CMS is finalizing a
requirement that MA organizations post their SSBCI eligibility criteria
on their plan websites. CMS believes this requirement, together with
existing transparency requirements, will enhance overall transparency
regarding SSBCI benefits.
Regarding comments about provider transparency, CMS expects MA
plans to ensure that contracted providers are informed about covered
benefits and plan policies relevant to the furnishing and coordination
of care. Such information-sharing supports appropriate benefit
administration and care coordination between the plan and its network
providers. Lastly, CMS thanks the commenter for raising concerns that
the proposed guardrails do not prevent non-enrollees from using the
debit card. CMS shares these concerns about potential abuse and will
further evaluate this issue for possible additional guardrails in
future rulemaking.
Comment: A commenter opposed CMS requiring debit card transactions
to be included in the Explanation of Benefits (EOB).
Response: Thank you for the comment. As explained in the Contract
Year 2026 proposed rule, MA organizations must send enrollees an
Explanation of Benefits (EOB) monthly or quarterly that includes all
Part C claims activity--covering basic benefits, mandatory and optional
supplemental benefits, and SSBCI. Each claim must show a descriptor,
billing code, amount billed, approved reimbursement, plan payment, and
enrollee liability. EOBs must also include year-to-date information
such as amounts toward the Maximum Out-of-Pocket (MOOP) limit. These
existing requirements apply to all benefits, including those accessed
via a plan debit card, regardless of delivery method. Plans
experiencing operational challenges in meeting these requirements when
using debit cards may wish to evaluate whether an alternative mechanism
would be more suitable for furnishing covered benefits.
Comment: Some commenters requested additional items be added to the
allowable OTC list and expressed concerns that non-allowable examples--
such as grooming supplies, shampoo, lotion, and hygiene-related items--
are overly restrictive. These commenters argued that requiring these
items to be available only to members with certain chronic conditions
would limit access to many members and increase benefit complexity,
making it more difficult to use. They asserted that requiring some OTC
items to be offered to all enrollees as primarily health-related
supplemental benefits, while allowing others to be limited to
chronically ill enrollees as SSBCI, could lead plans to reduce the
overall scope of their OTC offerings. Another commenter requested that
if CMS proceeds with codifying these changes, the Agency should provide
an exhaustive list of allowed and prohibited OTC products to ensure all
plans operate under consistent expectations. Additionally, a commenter
suggested that only oral health products bearing the ADA Seal of
Acceptance should be included as eligible OTC items for purchase with
debit cards.
Response: CMS thanks commenters for their suggestions. As explained
in the Contract Year 2026 proposed rule, plans have indicated that a
non-exhaustive list would provide further clarity for MA organizations
and would assist in their bid preparations. Such lists were common in
previous sub-regulatory guidance, making this an appropriate
opportunity to provide an updated list of items CMS has previously
approved. CMS declines to add more items to this list because an item's
absence does not prohibit a plan from proposing to offer it. CMS also
declines to provide an exhaustive list, as this would inhibit plans'
ability to further innovate in this area. Regarding the comment that
plans only provide oral health products bearing the ADA Seal of
Acceptance, plans may propose to offer any OTC provided they meet CMS
requirements, particularly those at Sec. 422.100(c)(2) and under Sec.
422.102. Further delineations, such as products endorsed by specific
independent advisory groups, are at the discretion of the plan. With
respect to grooming supplies, shampoo, lotion, and similar hygiene-
related items, a supplemental benefit is not primarily health-related
if the item or service is used solely or primarily for cosmetic,
comfort, general use, or social determinant purposes (86 FR 5971). CMS
considers such items to be general use items that do not qualify as
primarily health-related benefits. Alternatively, plans may propose to
offer these items as SSBCI benefits, provided all requirements under
Sec. 422.102(f) are met.
Comment: Some commenters requested that CMS allow food, housing,
and transport as primarily health-related, and another commenter
requested a non-exhaustive list of allowable special supplemental
benefits for the chronically ill. Some commenters raised concerns about
cards counting towards resources in federal programs and suggested CMS
should issue a rule clarifying that these benefits are not income for
purposes of Medicaid and other federally funded programs. A commenter
recommended CMS regularly analyze and report plan-level data on
supplemental benefits to assess their impact on health expenditures and
outcomes. Another commenter suggested that CMS expand supplemental
benefit data reporting. Others expressed concerns regarding the
potential consequences of VBID sunsetting, particularly the inability
of plans to transition certain VBID benefits in MA. Some FQHCs
requested CMS update Medicare Claims Processing Manual guidance
concerning supplemental payments.
Response: CMS appreciates these comments. However, they are out of
scope of this regulation.
Comment: Regarding comments on CMS's proposal to prohibit MA
organizations from marketing the dollar value of a supplemental benefit
or the method by which a supplemental benefit is administered, most
comments were not supportive. The majority of commenters argued that
prohibiting marketing of supplemental benefit dollar values would
reduce transparency and harm informed decision-making. They stated
beneficiaries have a right to know benefit values before enrolling,
that supplemental benefits were often the most important reference
point, and that the restrictions would create ``secret benefits.''
Response: CMS thanks commenters for their feedback. In
consideration of the comments received, at this time, CMS has decided
not to finalize the proposed amendment to Sec. 422.2263, regarding MA
organizations' marketing of supplemental benefits.
Comment: Commenters also questioned how beneficiaries would obtain
this information beyond dense
[[Page 17495]]
Evidence of Coverage documents and noted that failing to disclose
benefit values was itself potentially misleading. Commenters noted that
without benefit value information, beneficiaries could not
differentiate between similar plans or compare value across MA
organizations. which could create distrust and cause beneficiaries to
decline plans they might otherwise prefer. In addition, some commenters
were concerned that the proposal would burden seniors by requiring them
to call multiple plans for critical information, potentially leading to
more complaints, unwitting enrollment, and benefit misuse.
Response: CMS appreciates these additional concerns raised by
commenters. As noted previously, CMS is not finalizing the proposed
supplemental benefits marketing provision.
Comment: Some commenters suggested that low-income seniors and
dual-eligible beneficiaries would be particularly affected if the
proposal to restrict debit card marketing were finalized. For example,
commenters noted that in Puerto Rico, where over 45 percent of MA
enrollees were dual eligible, debit card availability and benefit
dollar values were most relevant to low-income seniors. Commenters
stated that supplemental benefits filled gaps in federal benefits,
helped cover Part B premiums, reduced pharmacy costs, and provided food
and nutrition services, and furthermore, beneficiaries with specific
health needs relied on supplemental benefits existing only in MA plans.
In addition, a few commenters believed CMS's proposed debit card
marketing restrictions would disincentivize plan innovation and stated
it was not within CMS legal authority to impose judgment on which
benefits were most significant to beneficiaries.
Response: CMS again thanks commenters for this valuable input. In
light of concerns raised by the commenters and as previously discussed,
CMS is not finalizing the marketing proposal at this time.
Comment: Other commenters urged CMS to focus on bad actors rather
than broadly restricting all plans. They recommended revising guidance
to provide clear examples of prohibited misleading marketing, working
with plans to develop clearer communication standards, requiring
disclaimers when marketing benefit values, and establishing limits on
card amounts and approved services.
Response: CMS thanks commenters for these ideas and may take them
under consideration for future policymaking regarding supplemental
benefit marketing issues.
Comment: Several commenters supported prohibiting marketing of
administration methods but opposed prohibiting marketing of dollar
values, arguing this deprived beneficiaries of critical decision-making
information. They understood CMS concerns about consumer confusion but
believed these should be addressed with more information and
transparency, not less. They also noted that not providing information
on benefit access could result in beneficiary confusion contrary to CMS
transparency efforts and could negatively impact Star Ratings measures
based on the Complaints Tracking Module.
Response: CMS appreciates this feedback. While CMS is opting not to
finalize this aspect of the proposal at this time, the Agency may take
this feedback into consideration for future rulemaking.
Comment: Some commenters supported CMS efforts to prevent
misleading advertising that interfered with beneficiaries' plan
selection, particularly ads suggesting ``free money'' without
restrictions. They endorsed prohibiting marketing of benefit
administration methods. Commenters reported instances where flex card
advertising induced individuals to disenroll from PACE or switch plans,
resulting in loss of care. A few commenters recommended additional
safeguards requiring ads to identify coverage limits, covered items,
and eligibility restrictions in the same font or volume as the main
content. Other commenters recommended limiting television, billboard,
and radio marketing mentioning debit card amounts while allowing such
information in plan materials with appropriate disclaimers.
Response: CMS again thanks commenters for their comments and
recommendations on these various issues. CMS is not finalizing the
marketing proposal at this time but will consider the comments received
for future policymaking.
Summary of Regulatory Changes
After considering the comments received and for the reasons
outlined in the Contract Year 2026 proposed rule and in responses to
comments, CMS is taking the following actions in this final rule:
1. Finalizing Sec. 422.111(b)(6) as proposed, which requires MA
plans to disclose all supplemental benefits, including applicable
conditions and limitations, eligible over-the-counter items, and
benefits accessible through debit cards.
2. Finalizing the new subparagraph Sec. 422.102(g) with
modifications, specifically amending Sec. 422.102(g)(2)(iii) to state
that plans must have an alternative process that allows for
reimbursement of eligible expenses for plan covered benefits in
circumstances where the debit card is unusable at the point of sale,
including but not limited to debit card malfunction or when a
beneficiary is entitled to obtain covered benefits out-of-network.
3. Not finalizing the proposed amendment to Sec. 422.102(a)(6)(i),
which would have eliminated ``or other means'' as an acceptable way to
administer cost-sharing reductions.
4. Not finalizing the proposed amendment to Sec. 422.2263, which
would have prohibited MA organizations from marketing the dollar value
of a supplemental benefit or the method by which a supplemental benefit
is administered, such as use of a debit card by the enrollee to provide
the plan's payment to the provider for the covered services.
V. Medicare Advantage/Part C and Part D Prescription Drug Plan Quality
Rating System (Star Ratings) (Sec. Sec. 422.162, 422.164, 422.166,
423.182, 423.184, and 423.186)
A. Introduction
CMS develops and publicly posts a 5-star rating system for Part
C,\83\ 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 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
[[Page 17496]]
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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\83\ We generally use ``Part C'' to refer to the quality
measures and ratings system that apply to MA plans and cost plans.
---------------------------------------------------------------------------
We have continued to identify enhancements to the Star Ratings
program to ensure it is aligned with the CMS Quality Strategy as that
Strategy \84\ evolves over time to increase the health and wellbeing of
enrollees. In this final rule, we are finalizing most of the changes
proposed to simplify and refocus the areas included in the Star
Ratings, including changes to the measure set, with the exception of
the proposal to remove the Diabetes Care--Eye Exam measure from the
Star Ratings. We also are finalizing our proposal 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 are finalizing adding 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 solicited
comments in the Contract Year 2027 proposed rule 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. In this rule we are also
finalizing a technical clarification proposed in 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 proposed rule, which appeared in the Federal Register
on December 10, 2024, to provide details about how the enrollment-
weighted measure score is calculated when a consumed or surviving
contract is missing data for a measure. We also solicited additional
feedback related to Star Ratings in the Request for Information on
Future Directions in Medicare Advantage in section 6 of the Contract
Year 2027 proposed rule.
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\84\ 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)
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) (``Contract Year 2019 final rule''), we
stated we are committed to continuing to improve the Part C and 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 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.
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 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 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
proposed 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 also proposed 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.
We received several comments on our proposal to clarify existing
policies and procedures on measure removal. A discussion of these
comments follows, along with our responses and final decision.
Comment: All commenters expressed support for the proposed language
to clarify the process of measure removal.
Response: We appreciate the support received for the proposed
clarification and thank the commenters for their feedback.
Comment: A few commenters emphasized the importance of transparency
and the value of stakeholder engagement as part of the comment process
for measure removal, particularly for high-impact clinical measures,
including those affecting common chronic conditions.
Response: We agree with these commenters and highlight here that
removals for the reasons stated in Sec. Sec. 422.164(e)(1) and
423.184(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 (that is, the annual Advance Notice and Rate
Announcement) or proposed and finalized through rulemaking. We intend
to use whichever process allows for the most expedient notification to
MA organizations and Part D sponsors. We appreciate the value of robust
stakeholder engagement and note that stakeholders will continue to have
an opportunity to provide input regarding measure removals.
Comment: Another commenter urged CMS to ensure that MA enrollees
are not harmed by any measure removal and that the needs of enrollees
and their providers take priority in decision-making concerning MA and
Part D.
Response: CMS monitors the Part C and D Star Ratings and display
page
[[Page 17497]]
measures for quality improvement, relevance, and necessity. CMS
publishes display measures on www.cms.gov each year, including measures
that have been transitioned from the Star Ratings, new measures that
are tested before inclusion in the Star Ratings, or measures displayed
for informational purposes only. This listing of measures is separate
and distinct from CMS's Part C and D Star Ratings. If CMS identifies
the need to remove a measure from the Part C and D Star Ratings program
for any of the reasons stated in Sec. Sec. 422.164(e)(1) and
423.184(e)(1), measure removal will be announced in a timely manner
either 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. CMS will consider public
input on measure removals, including any impact on enrollees and
providers.
After consideration of the comments received and for the reasons
outlined in the Contract Year 2027 proposed rule and our response to
comments, we are finalizing the proposal at Sec. Sec. 422.164(e)(2),
422.164(e)(3), 423.184(e)(2), and 423.184(e)(3) without modification.
Since this codification is consistent with current practice and policy,
it will apply immediately on the effective date of the final rule and
to the 2027 Star Ratings.
1. Removing Measures
As the Part C and D Star Rating program continues to evolve and
align with the measures included in the Universal Foundation,\85\ a
strategy to align measures across the agency's quality and value-based
care goals, we proposed 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 \86\ and other interested parties that CMS
consider having fewer measures in the Part C and 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''),\87\ as well as from the Star Ratings
Technical Expert Panel (TEP) in October 2024.\88\
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\85\ https://www.cms.gov/medicare/quality/cms-national-quality-strategy/aligning-quality-measures-across-cms-universal-foundation.
\86\ Replacing the Medicare Advantage quality bonus program--
MedPAC.
\87\ https://www.cms.gov/files/document/2026-advance-notice.pdf.
\88\ 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,\89\ we proposed 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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\89\ 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 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 D Star
Ratings program, 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 D
Star Ratings program, and MA organization and Part D sponsor
performance rates are consistently fairly high.
We also proposed 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
[[Page 17498]]
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 proposed to remove the 12 measures in Table 3 beginning with the
Star Ratings year shown in the table for each measure. As stated in the
Contract Year 2027 proposed rule, 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 final rule, would generally increase ratings. We provide the
estimated combined impact of the final Star Ratings policies in section
XI.C.6. of this final 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] TR06AP26.032
We solicited feedback on all of the potential measure removals
discussed in the Contract Year 2027 proposed rule, including feedback
on the timing of measure removals and received many comments. A
discussion of general measure removal comments, along with our
responses follows. Comments about specific measures and our responses
are summarized below each specific measure discussion.
Comment: Some commenters supported streamlining and refocusing the
Star Ratings measure set. These commenters supported a focus on
clinical care, outcomes, and patient experience.
Response: We thank these commenters for their support.
Comment: Some commenters were concerned that removing measures will
reduce oversight and transparency of plan performance. Several
commenters recommended that the measures continue to be reported on the
display page. Some commenters were also concerned about the potential
loss of quality gains if the measures are removed.
Response: CMS agrees that continued transparency and oversight are
important when measures are removed from Star Ratings. Thus, CMS will
continue to publicly report removed measures on the display page, which
are displayed separately on cms.gov and not on Medicare Plan Finder,
and will continue to monitor plan performance through its existing
oversight and compliance activities. Where CMS identifies that an MA
organization has failed to comply with the terms of its contract, we
will continue to take appropriate compliance actions per 42 CFR
422.504(m)(3) and publicly post warning letters and corrective action
plan requests (CAPs). If an organization receives too many compliance
actions, CMS may deny applications for new contracts or service area
expansions under 42 CFR 422.502(b)(1) for failure to perform in
accordance with CMS contractual requirements. This approach preserves
oversight of plans and transparency for beneficiaries and other
interested parties while allowing the Star Ratings program to focus on
measures that more meaningfully differentiate performance across
contracts.
Comment: Some commenters expressed concern about removing
administrative measures and noted that it may distort competition in MA
by disproportionately harming smaller or regional plans and SNPs, and
increase revenue volatility. They cautioned that outcomes-based
measures alone are often harder for plans to control, and that
administrative measures provide a stabilizing counterbalance within the
Star Ratings system.
Response: CMS appreciates commenters' perspectives regarding the
potential programmatic impacts of removing administrative measures from
the Star Ratings program. CMS recognizes that outcomes-based measures
can be more challenging for plans and that administrative measure
scores have historically remained stable within the Star Ratings system
given the high performance across all contracts. However, measures
included in Star Ratings should meaningfully differentiate performance
across contracts. Measures with little variation across contracts do
not provide meaningful comparative information for potential enrollees
when choosing a plan. CMS will continue to evaluate the mix of measures
included in the Star Ratings program and its impact on plans of varying
sizes. With regard to smaller plans or SNPs, in simulations of the
impact of the proposed changes, we did not find that there were
disproportionate impacts to these types of plans (see the Impact of
Proposed and Finalized Changes section for more details).
Comment: Some commenters supported simplification of the Star
Ratings, but cautioned against wholesale removal of measures without
replacement. They recommended that if measures are removed from Star
Ratings, CMS should consider beneficiary impacts and maintain robust,
transparent compliance monitoring, enhanced CAHPS
[[Page 17499]]
questions, or public reporting to preserve accountability. Many of
these commenters emphasized that the removed measures should still be
publicly reported, even if CMS restructures how they are measured or
incentivized.
Response: CMS appreciates commenters' support for simplifying the
Star Ratings program while maintaining accountability. CMS agrees that
continued transparency and oversight are important when measures are
removed from Star Ratings. Thus, CMS will publicly report removed
measures on the display page and will continue to monitor plan
performance through its existing oversight and compliance activities.
This approach preserves transparency for beneficiaries and other
interested parties while allowing the Star Ratings program to focus on
measures that more meaningfully differentiate performance across
contracts.
Comment: A commenter stated that as CMS makes changes to the Star
Ratings including proposing to eliminate the HEI reward, and adding and
removing measures, CMS should ensure that changes are communicated to
beneficiaries in an accessible way, including with State Health
Insurance Assistance Programs (SHIPs) assistance. The commenter also
stated that educational and training materials should be provided to
SHIP counselors to help them understand and interpret the changes.
Response: We agree it is important for beneficiaries to understand
the Star Ratings and we are considering how to best present the Star
Ratings to make it easier for beneficiaries to understand. For example,
we are reviewing how the ratings are presented on the Medicare Plan
Finder website.
Comment: Some commenters raised concerns about Star Ratings
volatility, destabilizing the Star Ratings system, and downstream
impacts to QBPs if CMS removes multiple administrative measures at the
same time. These commenters also raised concerns about making the
remaining measure set smaller and more sensitive to single-measure
changes. Some commenters were concerned about removing too many
measures too fast and recommended a phased approach for removal of
measures. Commenters also raised concerns about program disruption,
which they believe will undermine the predictability and stability of
the program and impact beneficiary experience.
Response: CMS does not agree that removal of measures destabilizes
the Star Ratings program. The measures we proposed for removal have
topped out (i.e., have very high performance across all contracts such
that cut points for the measure are very close together and do not
reflect meaningful differences in performance), are duplicative, or no
longer provide meaningful differentiation across plans. Retaining such
measures reduces the impact of measures that better distinguish
differences in plan quality and performance. Removing these measures in
a timely manner strengthens the Star Ratings program and supports
informed beneficiary choice.
Comment: A couple of commenters recommended changing measure
specifications or redesigning measures rather than removing measures.
Other commenters proposed alternative approaches to deal with a
``topped-out'' measure apart from removing it from Star Ratings,
including increasing the cut points, penalizing contracts if
performance is not maintained, creating a composite measure of
operational performance, and reassessing whether or how high-scoring
measures should impact payment.
Response: As discussed in the Contract Year 2027 proposed rule, the
Part C and D Star Ratings program continues to evolve and align with
the measures included in the Universal Foundation. As such, we proposed
simplifying and refocusing the measure set to focus on measures of
clinical care, outcomes, and patient experience 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 MAHA
initiative. Our proposal aimed to strike a balance between streamlining
the measure set and maintaining enough measures to assess performance
across the range of health care quality.
Comment: A commenter expressed concern that the removal of measures
will create a substantial shift in how the measures are weighted,
stating that 44 percent of the weighting would shift to member survey
results for CAHPS and HOS. The commenter stated that these surveys are
often unduly influenced by factors such as timing of the survey, memory
recall bias, and survey fatigue. The commenter also stated that there
is randomness, unpredictability, and volatility inherent in survey
measures and how they are scored does not correlate to actual plan
performance.
Response: We appreciate the commenter's concern regarding the
potential impact of removing certain measures on the weighting of
remaining measures, including the increased contribution of CAHPS and
HOS survey measures. We disagree that these survey measures are unduly
volatile or fail to reflect actual plan performance.
CAHPS and HOS are standardized, validated instruments designed to
capture beneficiary experience and health outcomes. CMS employs
multiple methodological safeguards, including standardized survey
administration, large sample sizes, and case-mix adjustment to ensure
reliable information that is comparable across contracts.
CAHPS and HOS measures provide information that complements
clinical and administrative measures. Incorporating beneficiary-
reported measures also aligns with CMS's commitment to evaluating
beneficiaries' experiences of care and ensures that quality measurement
reflects aspects of care that are best assessed by beneficiaries
themselves. Accordingly, we find that the weighting of CAHPS and HOS
measures remains appropriate.
Comment: A commenter stated that administrative measures were
within plan control rather than health care provider control and should
be retained. Another commenter recommended that CMS evaluate measures
based on the degree of plan-level control and overlap with existing
incentives in order to help prioritize measures where Star Ratings are
most likely to produce improvements.
Response: CMS does not agree that non-administrative measures are
not within plan control. The measures included in the Star Ratings are
evaluated at the contract level and reflect the collective performance
of the organization, including the organization's provider network. For
each of its contracts, MA organizations are responsible for
establishing provider networks, designing benefits, furnishing care
management and care coordination services, and implementing quality
improvement strategies to support measure performance.
Comment: A commenter supported the idea of simplifying the measure
set in concept but did not support the proposal because of the
associated increase in Medicare spending. The commenter stated that if
CMS streamlines the measure set in future rulemaking, it should do so
in a way that does not add cost.
Response: As we stated in the Contract Year 2027 proposed rule, 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 not implementing the HEI reward, along
with keeping the
[[Page 17500]]
historical reward factor, would generally increase ratings. While the
combination of these two proposals results in net costs, the measure
removal proposal on its own would result in savings.
Comment: A couple of commenters raised concerns about the ability
of I-SNPs to have data for enough measures to receive an overall Star
Rating. A commenter also stated that the measures proposed for removal
are in areas where these plans typically perform well, noting that
their removal would magnify the impact of the remaining measures which
the commenter believes are not well-suited for long-term care
populations.
Response: We appreciate this commenter's concerns about I-SNPs
having data for enough measures to qualify for an overall rating. We
will continue to monitor this and will consider what additional
measures may be available for I-SNP only contracts. With regard to I-
SNPs performing well on the measures proposed for removal, we note that
this is also true of plans more broadly because performance on many of
the measures is very high.
Comment: A commenter raised concerns that removing too many
operational and administrative measures may weaken the program's
ability to capture aspects of performance that are most relevant to
beneficiaries, and that removing the measures may shift focus away from
day-to-day experiences that shape beneficiary satisfaction and trust.
Another commenter disagreed that the measures proposed for removal are
not meaningful to beneficiaries.
Response: CMS will continue to closely monitor any measure removed
from Star Ratings through existing oversight and compliance activities
and will publicly report these measures on the display page. This
approach preserves transparency for beneficiaries and other interested
parties while allowing the Star Ratings program to focus on measures
that more meaningfully differentiate performance across contracts.
Comment: A commenter stated that some measures that appear topped
out are actually influenced by gaming among plans.
Response: We appreciate the commenter's concern. CMS is not aware
of evidence of widespread gaming across Star Ratings measures. However,
CMS agrees that measures that are vulnerable to manipulation or no
longer meaningfully differentiate plan performance are not appropriate
for continued inclusion in the Star Ratings.
Comment: A commenter recommended using statistical tests of
variation over time to determine whether a measure should be removed
and implementing a cap in the number of measures removed in a year.
Response: CMS appreciates this comment; however, we have evaluated
performance on the measures proposed for removal and find that it is
appropriate to remove them now in line with our goal of streamlining
and refocusing the measure set.
a. Plan Makes Timely Decisions about Appeals (Part C) and Reviewing
Appeals Decisions (Part C)
We proposed 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.
We solicited comment on removing the appeals measures from the 2029
Star Ratings. A discussion of Part C appeals measure removal comments,
along with our responses follows.
Comment: Many commenters opposed removing appeals-related measures
from the Star Ratings, emphasizing that these measures are essential
indicators of access to care. They argued that appeals measures capture
utilization management problems, including inappropriate denials,
delays in post-acute care, and failure to process or forward appeals
appropriately. Other commenters stressed that these measures are not
merely administrative but directly tied to care continuity, discharge
planning, transitions of care, and prevention of avoidable
complications, hospitalizations, or functional decline. Several
commenters emphasized that Star Ratings are the primary enforcement and
accountability mechanism for the appeals measures within MA. They
stated that because Star Ratings drive financial bonuses, enrollment
growth, and marketing advantages, they significantly influence plan
behavior. Some commenters also noted that appeals measures included in
Star Ratings create tangible incentives for plans to reduce
inappropriate denials, process appeals correctly, and comply with
beneficiary protection requirements. Removing these measures would, in
their view, erode accountability and shift reliance to oversight
mechanisms that may lack sufficient resources or enforcement power.
Some commenters raised concerns about vulnerable populations,
including individuals with complex medical needs, dually eligible
individuals, and patients requiring specialized or time-sensitive care
such as cancer treatment, post-acute services, or chronic disease
management. For these populations, delays in appeals decisions can lead
to irreversible harm. These commenters argued that maintaining appeals
measures is especially important to ensure these groups are not
disproportionately disadvantaged.
Response: CMS appreciates the thoughtful comments regarding the
removal of appeals-related measures from the Star Ratings. We agree
that the appeals process is a critical beneficiary protection and plays
an important role in ensuring access to medically necessary care for
all enrollees. Appeal rights are a core component of MA requirements,
and plans remain fully accountable for appropriately administering the
appeals process for all enrollees, regardless of whether specific
appeals measures are included in the Star Ratings.
While CMS is removing the appeals-related measures from the Star
Ratings, this action does not diminish plans' obligations under
existing regulations at 42 CFR part 422, subpart M to comply with
appeals requirements, including timely, accurate, and complete
processing of appeals. CMS will continue to actively monitor plans'
appeals adjudication through multiple oversight mechanisms, including
audits, monitoring activities, and compliance actions. Where CMS
identifies noncompliance, we will take appropriate compliance actions
per 42 CFR 422.504(m)(3), publicly post warning letters and corrective
action plan requests (CAPs), and if an organization receives too many
compliance actions may deny applications for new contracts or service
area expansions under 42 CFR 422.502(b)(1) for failure to perform in
accordance with CMS contractual requirements.
CMS recognizes commenters' concerns that appeals measures reflect
issues related to utilization management, inappropriate denials, and
[[Page 17501]]
care delays, and that failures in appeals processing can affect care
continuity, discharge planning, and transitions of care. CMS also
acknowledges the particular importance of an effective appeals process
for vulnerable populations, including individuals with complex medical
needs, dually eligible individuals, and those requiring specialized or
time-sensitive care. Plans are expected to appropriately administer the
appeals process for all enrollees, including these populations, as part
of their fundamental responsibility to provide access to covered
benefits.
Although Star Ratings serve as one mechanism to promote
accountability, they are not the sole means by which CMS ensures
compliance with MA requirements. CMS will continue to use its full
range of oversight and compliance authorities to hold plans accountable
for appeals-related failures and to protect beneficiaries' access to
care. Appeals are not optional administrative functions; they are a
core responsibility of MA plans, and CMS expects plans to administer
appeals processes appropriately, consistently, and in compliance with
all applicable requirements.
Comment: Some commenters supported removal of the appeals measures,
citing methodological concerns such as disproportionate impact on
smaller plans due to a smaller number of appeals and the lack of a
volume adjustment. Other commenters supported removing the measures
because they are operational, topped out, or poorly differentiated
across contracts. These commenters argued the measures no longer
meaningfully reflect quality, can be excessively burdensome, and are
better suited for compliance monitoring than Star Ratings. These
commenters supported shifting the Star Ratings program's focus toward
clinical outcomes and value-based measures, with appeals oversight
handled through audits, CAHPS surveys, or internal CMS monitoring
instead of financial incentives.
Response: We appreciate commenters' support for the removal of the
appeals-related measures from the Star Ratings program. CMS agrees that
these measures no longer meaningfully differentiate performance across
contracts due to consistently high performance levels and limited
variation, and can be burdensome in that small changes in performance
can have an impact on ratings given the measures are topped out.
Consistent with commenters' feedback, CMS agrees that these appeals
measures are better suited for compliance and program oversight rather
than inclusion in Star Ratings as quality measures tied to financial
incentives. Appeals processes remain an important safeguard for
beneficiaries; however, CMS will conduct oversight of these activities
through other monitoring efforts. By removing these measures from Star
Ratings, CMS intends to refocus the program on measures that more
effectively assess clinical care and beneficiary experience, while
continuing to ensure robust oversight of appeals processes through
other established channels.
Comment: Some commenters suggested that removing appeals measures
from Star Ratings could disadvantage smaller, regional, or single-state
plans that often excel in member experience, while benefiting large
national plans. Other commenters argued that the appeals measures
create uneven operational burden and do not reliably differentiate plan
performance, particularly for plans near minimum thresholds.
Response: CMS has found that the appeals measures generally have
high performance across all types of contracts which limits their
ability to meaningfully distinguish differences in plan performance
across contracts, regardless of plan size. For a measure to be useful
for a beneficiary choosing a contract, it needs to have variation
across contracts to be able to highlight differences in performance.
Nevertheless, it will be critical to still calculate, monitor, and
publicly report these measures since appeals processing is critical for
the success of the MA program. As a reminder, CMS calculates the scores
for the appeals measures from data contained in the Independent Review
Entity (IRE) data system; thus, there is no burden to plans in these
calculations.
Comment: Some commenters stated that high performance on appeals
measures may be misleading rather than proof that the measures are no
longer needed. Commenters described plan practices that artificially
inflate performance, such as overturning denials early to avoid
independent review, mislabeling valid beneficiary appeals as provider
disputes, or improperly asserting that certain denials are not
appealable. These tactics can block access to the IRE and obscure
inappropriate denials from CMS oversight.
Response: We appreciate commenters'concerns that high performance
on the appeals measures may not accurately reflect beneficiary
protections and that tying these measures to Star Ratings may create
incentives for plans to focus on appeals measure performance rather
than meaningful access to the appeals process. CMS strongly objects to
inappropriate practices by plans, such as overturning denials to avoid
independent review or misclassifying appeals that can obscure access
issues and limit visibility into inappropriate denials. Due to concerns
regarding gaming, CMS implemented scaled reductions for the appeals
measures to try to ensure all requisite appeals are sent to the IRE. By
moving the appeals measures to the display page, CMS intends to reduce
incentives to game measure performance while maintaining transparency
into plans' appeals performance for beneficiaries and other interested
parties. CMS will continue to monitor appeals and address inappropriate
denials outside of the Star Ratings and QBP programs and hold plans
accountable through compliance strategies as described in the section
about general comments regarding measure removals.
Comment: Some commenters expressed concern that plans may deny more
services, knowing fewer denials will be challenged or scrutinized. This
would increase administrative costs for providers, delay care, and
undermine CMS's goals of value-based care and program integrity. A few
commenters emphasized that the ``Reviewing Appeals Decisions'' measure
is particularly important for ensuring that plans do not shield
indefensible denials from independent oversight.
Response: CMS shares commenters' concerns about inappropriate
service denials and agrees that it is important to continue close
oversight of plan appeals processing. While CMS is removing the appeals
measures from the Star Ratings program, CMS will continue to monitor
appeals through program audits and other oversight and compliance
activities and will publicly report these measures on the display page.
Removing these operational measures from the Star Ratings reduces
administrative burden for CMS in the calculation of the ratings and
allows the Star Ratings program to focus on measures with greater
variation across contracts.
Comment: Several commenters argued that improved performance over
time should be viewed as evidence that these measures are working, not
as justification for elimination. These commenters suggested that
sustained increases in appeals timeliness and review scores are
attributed to the incentives created by Star Ratings. These commenters
suggested that removing the appeals measures risks reversing years of
progress and sending a signal that timely, fair appeals are no
[[Page 17502]]
longer a priority, even as utilization management and prior
authorization remain major sources of access barriers. These commenters
emphasized that removing the appeals measures would reduce plans' focus
on appeals timeliness and accuracy, likely leading to backsliding,
longer delays, and increased inappropriate denials. Several commenters
emphasized that when financial and reputational incentives are removed,
plans tend to redirect resources away from appeals processing.
Other commenters stressed that the high or ``topped-out''
performance on these measures reflects the success of the Star Ratings
program rather than evidence that oversight is no longer needed.
Commenters also noted recent declines in performance and persistent
outliers at the contract level, arguing these trends show it is
premature to remove the measures.
Response: CMS appreciates commenters' views that improved and
sustained performance on the appeals measures reflects the
effectiveness of the Star Ratings program and the incentives it
creates. CMS agrees that timely and accurate appeals processing remains
an important beneficiary protection and that continued oversight is
necessary. However, the consistently high performance and limited
differentiation across contracts indicate that these measures no longer
function effectively as Star Ratings quality measures. We have not seen
a decline in measure scores over the past year. For the 2026 Star
Ratings, Plan Makes Timely Decisions about Appeals had an average score
of 98%, and Reviewing Appeals Decisions had an average score of 97%, up
from 96% and 95%, respectively, from the prior year.
While CMS is removing the appeals measures from Star Ratings, this
does not diminish the importance of appeals timeliness or accuracy nor
does it mean that CMS will stop calculating these measures. CMS will
continue to closely monitor appeals processing and will publicly report
these measures on the display page. Existing MA oversight processes
such as program audits and contract monitoring will also continue to
apply to the appeals processing measures. This approach maintains
accountability and transparency while allowing the Star Ratings program
to focus on measures that better differentiate performance.
Comment: A number of commenters urged refinement rather than
removal of these measures from Star Ratings to help improve
differentiation across contracts. Some commenters focused on
methodological and data issues, acknowledging CMS's concerns about
small denominators and limited variation. Other commenters recommended
standardizing IRE determinations.
Response: CMS appreciates commenters' thoughtful suggestions to
refine the appeals measures to improve differentiation across
contracts. We will take these comments into consideration if we make
future changes to these measures after moving them to the display page.
The process of standardizing how the IRE makes decisions is outside the
scope of the Star Ratings program.
Comment: Several commenters advocated for expanded public reporting
and transparency if CMS proceeds with removal of the appeals measures,
including requiring plans to publish annual reports on appeals
timeliness, independent review outcomes, and overturned denial rates
with stratification by service type. Other commenters suggested that
CAHPS surveys and compliance monitoring cannot replace appeals measures
in Star Ratings. While CAHPS provides valuable high-level patient
experience data, commenters expressed it is lagged and lacks the
operational specificity needed to detect real-time access barriers or
improper plan practices.
Response: CMS appreciates commenters' recommendations regarding
expanded transparency and public reporting following removal of the
appeals measures from Star Ratings. CMS agrees that transparency
remains important and will continue to publicly report appeals-related
measures on the display page, while maintaining oversight and
compliance through various monitoring activities. While CMS
acknowledges commenters' views regarding limitations of CAHPS surveys
for identifying real-time operational issues, CMS will use a
combination of public reporting and existing oversight mechanisms to
provide appropriate visibility into appeals processing.
After considering the comments we received and for the reasons
outlined in the Contract Year 2027 proposed rule and our responses to
the comments, we are finalizing the removal of the Plan Makes Timely
Decisions about Appeals (Part C) and Reviewing Appeals Decisions (Part
C) measures beginning with the 2029 Star Ratings.
b. Special Needs Plan (SNP) Care Management (Part C)
We proposed 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 proposed removing 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.
We solicited comment on removing the SNP Care Management measure
from the 2029 Star Ratings. A discussion of SNP Care Management measure
removal comments, along with our responses follows.
Comment: Some commenters supported the removal of the SNP Care
Management measure, primarily because it is an administrative measure
that tracks the percentage of members with a completed a Health Risk
Assessment (HRA), as opposed to a more meaningful clinical outcome
measure. Several other commenters simply appreciated the simplification
of the Star Ratings measures, or recommended monitoring care management
through other mechanisms.
Response: We appreciate the support for removing the SNP Care
Management measure.
Comment: A number of commenters opposed removal of this measure
since they were concerned that removal would reduce plan oversight and
they claimed there is already underutilization of HRAs. Several
commenters were specifically concerned about how proposed Star Ratings
changes would impact SNP contracts, concerned that the removal would
have a negative impact on dually eligible individuals as well as I-SNP
enrollees, who are typically sicker and have more complex care needs.
There were also concerns expressed about specific groups, such as those
with kidney disease; commenters emphasized the importance of ensuring
access to services for all vulnerable populations.
Response: CMS recognizes that HRAs are an important tool for
providers and care teams in determining enrollee needs and ensuring
access to appropriate services, particularly for vulnerable
populations, including individuals with chronic or complex conditions
such as kidney disease. The removal of the SNP Care Management measure
from Star Ratings is not intended to reduce the use or importance of
HRAs, nor to diminish
[[Page 17503]]
the quality of care delivered to SNP enrollees.
The removal of this measure from Star Ratings does not eliminate
the requirement for SNPs to conduct HRAs at 42 CFR 422.101(f)(1)(i) and
(ii). HRAs remain a required component of SNP model of care
requirements and are critical for identifying enrollees' clinical,
functional, and cognitive needs, as well as for informing
individualized care planning and ongoing care management. Additionally,
the SNP Care Management measure will remain available on the display
page so performance information will continue to be publicly reported.
Comment: Some commenters suggested ways to modify the current
measure. For example, CMS could work with SNPs and other stakeholders
to develop a more meaningful measure, including a measure about whether
the care identified in the HRA was provided. Other suggestions included
expanding the SNP Care Management measure to all MA members and
reporting at the geographic level. Another commenter expressed the need
for clearer alignment between the NCQA Model of Care accreditation
process and any future measures in this area.
Response: We appreciate the suggestions regarding changes to the
SNP Care Management measure. We will take these suggestions into
consideration for any future updates to this measure after moving it to
the display page. We agree that it would be useful to measure whether
care was provided since currently the measure just notes whether an HRA
was completed and not if the information collected was used to develop
and deliver a care plan.
After considering the comments we received and for the reasons
outlined in the Contract Year 2027 proposed rule and our responses to
the comments, we are finalizing the removal of the SNP Care Management
measure beginning with the 2029 Star Ratings.
c. Call Center--Foreign Language Interpreter and TTY Availability (Part
C and D)
We proposed removing the Call Center--Foreign Language Interpreter
and TTY Availability (Part C and 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 and issue compliance actions, and the Star
Ratings would continue to capture similar issues related to customer
service through the CAHPS survey measures.
We solicited comment on removing the Call Center measures from the
2028 Star Ratings. A discussion of Call Center measure removal
comments, along with our responses follows.
Comment: Some commenters supported the removal of the call center
measures, noting that their continued inclusion in the Star Ratings
system does not meaningfully distinguish plan quality or drive further
improvement. Other commenters supported removal since performance is
topped out. Some commenters noted the reduction in administrative
burden with the removal of these measures and that the current high-
performance rates indicate that these measures may no longer be
necessary. A few commenters agreed that the focus of Star Ratings
should shift to measures that more directly impact clinical outcomes
and patient experience. A commenter mentioned that these measures
should be removed due to litigation around these measures and
volatility in scores due to small denominators.
Response: We appreciate the support for removing the Part C and D
Call Center--Foreign Language Interpreter and TTY Availability
measures.
Comment: A number of commenters opposed the removal of these
measures, stating that they are essential for ensuring meaningful
language access and communication for non-native English speakers and
those with disabilities. Some of these commenters emphasized the
importance of maintaining measures that assess beneficiary experience
with plan operations and policy. They stated that removing these
measures could reduce oversight and accountability, ultimately harming
beneficiary outcomes.
Response: CMS agrees that it is critical to continue to monitor
performance on these measures to ensure that enrollees who speak
languages other than English and those that are hearing impaired have
access to plan call centers. CMS plans to move these measures to the
display page so information on performance will still be publicly
available. We will also closely monitor performance, issue compliance
actions per 42 CFR 422.504(m)(3) and 423.505(n)(3), publicly post
warning letters and corrective action plan requests (CAPs), and if an
organization receives too many compliance actions may deny applications
for new contracts or service area expansions under 42 CFR 422.502(b)(1)
and 423.503(b)(1) for failure to perform in accordance with CMS
contractual requirements.
Comment: A handful of commenters highlighted the potential negative
impact on dually eligible individuals and I-SNP enrollees, who are
often sicker and have more complex care needs. They emphasized the
importance of maintaining transparency and accountability for measures
that ensure access to services for these vulnerable populations.
Response: We agree that it is important to continue to monitor
performance on these measures for all contracts, including those that
serve vulnerable populations. We will be adding these measures to the
display page so we can continue to monitor and make publicly available
information about how contracts perform.
Comment: Some commenters requested that CMS provide information on
how it will continue to monitor and ensure compliance with language
access and TTY requirements if the measures are removed. They urged CMS
to maintain robust monitoring and transparency to safeguard
beneficiaries' access to these critical services. Some commenters
suggested moving these measures to the display page. Some commenters
stressed the importance of ensuring equitable access to healthcare
services for non-native English speakers and individuals with
disabilities.
Response: CMS agrees that monitoring compliance with language
access and TTY requirements is critical and is committed to continuing
to monitor performance and utilize compliance processes per 42 CFR
422.504(m)(3) and 423.505(n)(3) in this area. We are planning to move
these measures to the display page and will continue to carefully
review performance and issue compliance actions as needed if we do see
poor performance on these measures.
Comment: Some commenters urged CMS to consider alternative
approaches to measuring performance that preserve accountability and
support meaningful access to language and communication services. A few
commenters suggested modifying the call center measures to address
concerns about small sample sizes rather than removing them entirely.
Other commenters offered specific recommendations for making changes to
the call center measures, such as using a multi-year approach for
scoring, setting revised minimum denominator rules, or combining Part C
[[Page 17504]]
and D measures into a single measure to improve stability and
consistency. Other commenters suggested that CMS consider regional
language prevalence and contract-level demographic composition when
assessing language access. A commenter suggested breaking contracts
into groups based on size and demographics to provide a more accurate
assessment of a plan's ability to support all of its members. Other
commenters suggested calling the current member line versus the
prospective member line or calling outside of the annual and open
enrollment periods.
Response: We appreciate the suggestions for potential future
changes to the Part C and D Call Center--Foreign Language Interpreter
and TTY Availability measures, but making changes to measure
specifications is out of scope for this final rule. We will take these
suggestions into consideration for any future updates to these measures
following moving them to the display page.
After considering the comments we received and for the reasons
outlined in the Contract Year 2027 proposed rule and our responses to
the comments, we are finalizing the removal of the call center measures
beginning with the 2028 Star Ratings.
d. Complaints About the Health/Drug Plan (Part C and D)
We proposed removing the Complaints about the Health/Drug Plan
(Part C and D) measure. We stated that this measure demonstrated
exceptionally high performance with limited variation across contracts.
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
minimal variation in performance 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.
We solicited comment on removing the complaints measure from the
2029 Star Ratings. A discussion of the complaints measure removal
comments, along with our responses, follows.
Comment: The majority of commenters opposed the removal of the
Complaints about the Health/Drug Plan (``complaints measure'') from the
Star Ratings. Many commenters expressed concern that removal would
weaken a key accountability mechanism and incentive for plan sponsors
to address issues impacting beneficiaries and providers, and stated the
measure is a transparent indicator of plan performance and insight into
beneficiary experience and access to care. Several commenters believed
that the complaints measure was not just an administrative process
measure but a beneficiary protection measure, and the complaints
process reflects the final recourse for beneficiaries when the plan
does not meet their needs.
A couple of commenters stated that oversight and quality incentives
are not mutually exclusive, but complement each other, as a reason to
retain the measure in the Star Ratings. Some cited CMS's changes to
ensure uniform entry of provider complaints into the Complaints
Tracking Module (CTM), and marketing and oversight reforms, as more
reasons to keep the measure. Some commenters defended the complaints
data as important information regarding providers' experience with
plans' utilization management tools. Some commenters stated the
complaints process fosters cooperation between plans and providers to
resolve beneficiary issues or emphasized the complaints measure
included direct feedback from beneficiaries and providers.
Other commenters said that uniformly high performance is evidence
of success and the measure's effectiveness in incentivizing plans to
improve their processes, rather than a justification for elimination.
Commenters expressed concern that CMS was removing a measure they do
well in, is within the plans' control, or that acted as a deterrent to
non-compliant behavior by plans.
A few commenters believed that removing the complaints measure
would weaken a key incentive for plans to maintain adequate staffing,
systems, and operational capacity to resolve complaints effectively.
One commenter stated that plans may be less likely to take proactive
actions to address beneficiary and provider issues if the complaints
measure is removed from the Star Ratings, which could unintentionally
increase burdens on beneficiaries, providers, and CMS.
Response: We appreciate the thoughtful comments regarding the
importance of the complaints measure for plan accountability and
beneficiary protection. We acknowledge that it has historically served
as an important tool for monitoring plan performance and promoting
member-centered customer service. However, the high performance across
contracts and minimal variation indicate that this measure no longer
effectively differentiates plan quality in the Star Ratings system. The
Star Ratings program is most effective when it focuses on measures
where meaningful performance differences exist that can inform
beneficiary choice and drive continued improvement.
Removal of this measure from Star Ratings does not eliminate CMS's
oversight of complaints or our commitment to beneficiary protections.
It also does not diminish plans' accountability for researching and
resolving complaints, which may include coordination with
beneficiaries, providers, or others.
CMS developed the CTM in the Health Plan Management System (HPMS)
to track complaints received by CMS from beneficiaries, providers, and
their representatives regarding specific MA organizations, Cost Plans,
and Part D sponsors. Complaints are recorded in the CTM and assigned to
the appropriate plan. Data may be populated into the CTM from various
sources, such as 1-800-MEDICARE, CMS staff or contractors, Medicare
Ombudsman, SHIPs, the Medicare.gov online complaint form for
beneficiaries at https://www.medicare.gov/my/medicare-complaint, or the
provider complaint form (regarding MA organizations) at https://www.cms.gov/medicare/health-drug-plans/provider-complaints-form.
As required under the contract provisions established at 42 CFR
422.504(a)(15) and 423.505(b)(22), plans are required to address and
resolve the complaints received by CMS against them in the CTM. Plans
must adhere to the timelines to resolve complaints in compliance with
42 CFR 422.125 and 423.129. The January 6, 2025 HPMS memorandum,
Updated Complaints Tracking Module Standard Operating Procedures,
provides information to sponsors on handling, resolving, and
documenting complaints. Given the time-sensitive nature of many of the
complaints, plans should continuously access, view, respond, and
resolve the complaint(s) assigned to their organization in the CTM. CMS
expects plans to enter periodic casework notes, including initial and
subsequent contacts, developments, or research.
Furthermore, requirements for resolution of complaints received in
the CTM do not override requirements related to the handling of appeals
and grievances set forth in 42 CFR part 422 subpart M (which apply to
cost plans as well as MA organizations per Sec. 417.600) and Part 423
subpart M, for Part D sponsors. Rather, CTM requirements
[[Page 17505]]
supplement the appeals and grievance requirements by specifying how
organizations must handle complaints received by CMS in the CTM and
passed along to the plan. In accordance with the regulations at 42 CFR
422.564 and 423.564, plans must provide meaningful procedures for the
timely hearing and resolving of enrollee grievances. As such,
beneficiaries are encouraged first to contact their plan directly to
file a complaint (i.e., grievance). See the Parts C & D Enrollee
Grievances, Organization/Coverage Determinations, and Appeal Guidance
\90\ for information about grievance procedures.
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\90\ Available at: https://www.cms.gov/medicare/appeals-grievances/managed-care.
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CMS will continue to closely monitor complaint trends, and how
complaints were resolved in CTM casework notes, to ensure that plans
maintain appropriate grievance and complaint processes regardless of
whether this measure is included in Star Ratings, and CMS will continue
to review plan practices for compliance. The complaints provide early
warning signs of problems through feedback from beneficiaries and
providers, and CMS will continue to calculate complaint rates and
resolution timeliness to identify plan outliers for corrective action
as necessary.
Comment: Several commenters supported the removal of the complaints
measure, agreeing that performance has reached high levels with minimal
variation among plans and that complaints are better suited for
compliance oversight. A commenter stated that the measure is heavily
influenced by factors outside of the plan control, and another pointed
out that the measure is prone to manipulation. A couple of commenters
agreed that the complaints measure is duplicative of CAHPS measurement.
A commenter felt that the measure has systemic biases, and that biases
due to plan design or geography could inflate performance.
Response: CMS appreciates the support for removal of the complaints
measure from the Star Ratings to focus on measures with meaningful
variation, which is consistent with recommendations from the Medicare
Payment Advisory Commission (MedPAC) \91\ and our broader goals of
reducing administrative burden while maintaining focus on outcome-
oriented quality measures.
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\91\ Replacing the Medicare Advantage quality bonus program--
MedPAC available at: https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/jun20_ch3_reporttocongress_sec.pdf.
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Comment: Multiple commenters asserted that CAHPS survey measures
capture general satisfaction but not specific or real-time feedback
about operational issues like the complaints measure. Commenters stated
CAHPS and complaints data are complementary rather than duplicative. A
few commenters noted that the CAHPS survey-based measures rely on
sampling and member recall, but the complaints measures capture direct
beneficiary feedback from all beneficiaries. A commenter pointed out
that the breadth and specificity of the CTM complaint categories
highlights that the CTM captures issues are not reflected in CAHPS.
Another commenter stated that measuring access to care and patient
experience through the CAHPS survey measures is not meaningful because
survey results are not actionable (like complaints are), as questions
are broad and ambiguous. A commenter did not want CMS to solely rely on
CAHPS survey measures as an indicator of beneficiary experience.
Response: We acknowledge that CAHPS survey measures and complaint
data capture feedback on member experience and access to care in
different ways. However, the complaints measure no longer supports the
purpose of the Star Ratings program, which is to differentiate plan
performance in areas where meaningful variation exists. As noted in the
response directly above, CMS will continue to monitor complaint data
outside of Star Ratings and use this real-time, actionable information
for compliance and oversight purposes. This approach allows us to
maintain robust oversight while focusing the Star Ratings program on
measures that effectively differentiate plan quality. Several measures
will remain in the Star Ratings that capture beneficiary satisfaction,
care coordination, and quality of care.
Comment: Several commenters recommended delaying the removal of the
complaints measure to allow for further evaluation of its impact on
plan behavior and beneficiary protection. Some commenters suggested
that CMS should implement enhanced monitoring or alternative
accountability mechanisms before removing the measure from Star
Ratings.
Response: We have carefully considered the timing of this change
and find that implementing the removal beginning with the 2029 Star
Ratings (based on 2027 measurement year data) provides adequate notice
to plans and stakeholders to prepare for the change.
CMS will continue to monitor complaint data and maintain robust
oversight mechanisms outside of the Star Ratings program. We do not
find that delaying implementation is necessary given the historically
low complaints volume and the continued availability of other
accountability tools.
Comment: Some commenters suggested changes to the CTM measure
specifications. For example, some commenters recommended CMS exclude
certain complaints, such as duplicates or provider complaints from the
measure; reflect root cause of beneficiary complaints; remove Tukey
outlier deletion when calculating this measure's cut points; calculate
complaint rates by geographic area instead of by contract; create a new
measure solely based on provider complaints or a measure that places a
higher weight on provider complaints; or distinguish complaints about
inpatient admissions, denials, and post-acute care delays from general
customer service issues.
Response: We appreciate the suggestions and will consider them for
future measure development or internal oversight metrics.
Comment: Some commenters urged CMS to make CTM complaint data more
publicly accessible, including the substance of complaints and plan
responses or total complaints stratified by complaint type, to help
showcase true beneficiary experience and assist prospective enrollees
in comparing plans.
Response: We appreciate these suggestions and recognize the value
of transparency in helping beneficiaries make informed enrollment
decisions. We will continue to evaluate opportunities to enhance the
transparency and accessibility of complaint data while balancing
privacy considerations and administrative feasibility.
However, these transparency efforts are separate from the Star
Ratings program and do not affect our decision to remove the complaints
measure from Star Ratings because of its limited value as a quality
measure in light of the lack of variability across contracts.
When the complaints measure is removed from the Star Ratings, the
measure will be moved to the display page and continue to be publicly
reported.
Comment: Some commenters requested that more information be shared
by CMS about the complaints process itself, so that beneficiaries and
providers are able to navigate the system effectively.
Response: Information on how to file a complaint with 1-800-
MEDICARE is available in multiple Medicare publications and online
references. An online complaints form is available, and CMS recently
released a provider
[[Page 17506]]
complaint form to improve consistent intake of those issues. We will
continue to work with stakeholders to improve the visibility of these
important avenues for beneficiaries and providers to contact CMS.
After considering the comments we received and for the reasons
outlined in the Contract Year 2027 proposed rule and our responses to
the comments, we are finalizing the removal of the complaints measure
beginning with the 2029 Star Ratings.
e. Medicare Plan Finder (MPF) Price Accuracy (Part D)
We proposed 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.
We solicited comment on removing the MPF Price Accuracy measure
from the 2029 Star Ratings. A discussion of the MPF Price Accuracy
measure removal comments, along with our responses, follows.
Comment: Many commenters supported the removal of this measure.
Most supporters mentioned their agreement with the reasons for removal
stated in the Contract Year 2027 proposed rule, such as high average
scores and limited variability across contracts, which limits ability
to distinguish between plan performance. A few commenters mentioned
that removal of this measure would reduce administrative burden, with a
couple mentioning resources could be redirected to patient outcomes.
Another commenter stated that the measure does not meaningfully reflect
quality.
Several commenters supportive of removal also noted that they
agreed with CMS's plan to continue to monitor these data outside of
Star Ratings. One commenter specifically stated that CMS's announcement
of MPF monitoring in the October 31, 2024 HPMS memorandum with the
subject ``Medicare Plan Finder Part D Drug Pricing Data Submission
Monitoring'' was an important step for drug price monitoring, and
recommended CMS continue to improve the methodology of this measure
when it is removed from the Star Ratings.
A couple of commenters stated that this measure has methodology
issues, with one offering ideas to improve the measure if it is not
removed. A commenter also stated there was potential ``gaming'' of this
measure through artificial adjustments of pricing files. Another stated
that several large national insurance providers ``control'' the measure
due to their dominance in the Pharmacy Benefit Manager (PBM) market, so
removal of the measure would create a more level playing field.
Response: We thank these commenters for their support.
Comment: Many commenters opposed the removal of this measure. Most
of these commenters noted the importance of accurate data on the MPF so
that beneficiaries can make informed choices about their drug coverage.
Several noted that the measure is important for holding plans
accountable for transparent and accurate pricing data. A commenter
noted that lower-income beneficiaries would be especially impacted by
removal of the measure since they are more sensitive to price changes.
A commenter stated that removing the financial incentive that this
measure provides for plans to provide accurate pricing data could
reverse progress toward beneficiary protection.
Response: We agree that transparent and accurate data on the MPF
are critical for all beneficiaries to make informed decisions about
coverage. We would like to assure commenters that CMS will continue to
monitor the accuracy of plans' MPF pricing data when this measure is
removed from the Star Ratings. This measure will be moved to the
display page, and CMS will explore potential future improvements to the
measure methodology. CMS will follow up with plan sponsors with poor
performance on the MPF price accuracy display measure as necessary.
CMS also performs validations when the pricing data are submitted
to CMS for the MPF. The May 27, 2025 HPMS memorandum titled ``Contract
Year (CY) 2026 Part D Pricing Data Submission Guidance'' states that
HPMS uses a multi-tiered approach when validating the in-bound drug
pricing file submissions from plan sponsors. These validations are
tools used by CMS to identify potential inaccuracies prior to display
on MPF and may prompt CMS to contact a sponsor for clarification of the
accuracy of its submission.
CMS will suppress the display of a sponsor's information when the
sponsor fails to correct its data, confirm the accuracy of its data, or
respond to a CMS inquiry. Sponsors may be subject to Part D program
compliance actions because of MPF suppressions or inaccurate data
submissions.
Validations may be added or updated based on CMS's monitoring of
the MPF drug pricing data.
Comment: A few commenters that opposed removal of the measure noted
that beneficiary experience with MPF in the 2025 Annual Enrollment
Period (AEP) was difficult due to the prices constantly changing from
week to week, and that this pricing information needs to remain
reliable.
Response: CMS notes that the MPF Price Accuracy measure does not
use data from AEP (October-December). CMS has a separate monitoring
initiative for price changes between AEP and the contract year (CY), as
announced in the HPMS memorandum dated October 31, 2024 with subject
``Medicare Plan Finder Part D Drug Pricing Data Submission
Monitoring''.
Comment: A commenter stated that this measure is important for
small plans to distinguish their plan performance for prospective
enrollees.
Response: This measure has high average scores and limited
variability across contracts, limiting its ability to distinguish
between plan performance.
After consideration of the comments we received and for the reasons
outlined in the Contract Year 2027 proposed rule and our responses to
comments, we are finalizing the removal of the MPF Price Accuracy
measure for the 2029 Star Ratings.
f. Diabetes Care--Eye Exam (Part C)
We proposed 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 proposed to move this measure
to the display page.
We solicited comment on removing the Diabetes Care--Eye Exam
measure from the 2029 Star Ratings. A discussion of the Diabetes Care--
Eye Exam measure removal comments, along with our responses follows.
Comment: Most commenters opposed the removal of the Diabetes Care--
Eye Exam measure from the Star Ratings. Some commenters noted that
diabetic retinopathy is a leading cause of preventable blindness and
that routine eye exams are essential for early detection of
asymptomatic disease and timely intervention preventing severe vision
loss. They also emphasized that the eye exam measure captures a
clinically distinct and non-duplicative aspect of diabetes care that is
not
[[Page 17507]]
addressed by other Star Ratings measures related to glycemic control,
medication adherence, or kidney health. Other commenters noted that
these exams serve as one of the most efficient and non-invasive tools
for identifying broader health concerns. A number of commenters argued
that preventing vision loss helps avoid expensive late-stage ophthalmic
treatment, caregiver and long-term services and supports costs,
functional decline and institutionalization.
Response: CMS appreciates the extensive feedback received on the
Diabetes Care--Eye Exam measure and agrees with commenters that routine
retinal screening is a critical component of comprehensive diabetes
care. We agree that retinal examinations can identify broader health
concerns and that preventing vision loss may help avoid costly late-
stage treatment, functional decline, caregiver burden, and long-term
services and supports. CMS also agrees that these considerations are
consistent with the goals of the Star Ratings program to promote
preventive care, preserve functional independence, and support whole-
person care.
After careful consideration of public comments, CMS is retaining
the Diabetes Care--Eye Exam measure in the Star Ratings program.
Continued inclusion of this measure will help maintain plan
accountability, support access to preventive screening, and encourage
care coordination and innovation in screening approaches, particularly
for high-risk and underserved populations.
Comment: Many commenters stated that removing this measure would
create a vision-care gap in the Star Ratings program, as this measure
is the only ophthalmic/vision-focused measure. They argued that
downgrading the measure to display-only would lead to fewer screenings
and more avoidable blindness, as well as other economic and public-
health repercussions.
Response: CMS acknowledges commenters' concerns regarding the
importance of monitoring vision-related preventive care for
beneficiaries with diabetes and agrees that diabetic eye exams are a
critical component of comprehensive diabetes management. Regardless of
whether the measure is included in the Star Ratings calculation, MA
plans and their contracted providers remain responsible for ensuring
beneficiaries have access to clinically appropriate preventive services
and supporting beneficiaries in obtaining recommended care, including
diabetes-related eye exams. After consideration of the comments
received, we are retaining this measure in Star Ratings.
Comment: Several commenters argued that Star Ratings measures drive
outreach, provider engagement, care-gap closing, benefit design, and
investment, whereas display-only measures receive far less operational
prioritization. Many commenters stressed that if the measure is no
longer included in Star Ratings, plans may redirect resources away from
screening programs even if coverage technically remains.
Response: CMS recognizes that inclusion as a Star Ratings measure
can influence plan prioritization, operational focus, and investment.
At the same time, the Star Ratings program cannot encompass every facet
of clinical care, and the absence of a specific measure from the
ratings calculation does not diminish the clinical importance of the
service. Eye exams are a critical component of high-quality diabetes
care regardless of whether the measure is included in Star Ratings. CMS
expects plans to support appropriate screening, outreach, and provider
engagement to ensure beneficiaries receive recommended diabetes-related
eye exams consistent with established standards of care.
Comment: Numerous commenters disputed that the measure is topped
out or no longer differentiates plans. They pointed to continued gaps
in screening rates and variation across plans, arguing plan performance
still has room to improve and the measure still functions as an
accountability lever.
Response: CMS agrees with commenters that performance on this
measure has not topped out and continues to show variation across
plans. As discussed in the Contract Year 2027 proposed rule, CMS
proposed to remove this measure as part of a broader effort to
streamline the Star Ratings measure set in areas where multiple
measures address diabetes care. However, after consideration of public
comments, CMS is retaining the Diabetes Care--Eye Exam measure in the
Star Ratings program because it captures a clinically distinct and
preventive aspect of diabetes care that is not fully addressed by other
measures.
Comment: Some commenters expressed concern that removing the
measure from the Star Ratings program could reduce MA plans' outreach,
care coordination, and investment in screening programs, potentially
leading to declines in screening rates. Commenters emphasized that the
measure is particularly important for SNP (D-SNP, C-SNP, and I-SNP)
populations with complex chronic conditions, as well as beneficiaries
in rural communities facing provider shortages, transportation
challenges, and other access barriers. Commenters also noted that
homebound, low-mobility, and underserved beneficiaries often rely on
in-home, mobile, and community-based screening programs, which are
frequently structured around closing Star Ratings measure gaps and may
be scaled back if the measure is no longer scored.
Response: CMS agrees that ensuring access to recommended diabetes-
related preventive services is especially important for beneficiaries
with complex needs and those facing access barriers, including SNP
enrollees and beneficiaries in rural or institutional settings.
Regardless of whether a measure is included in Star Ratings, plans
remain responsible for ensuring all beneficiaries have access to
appropriate preventive services and supporting timely diabetes-related
screenings. CMS will be keeping this measure in Star Ratings since
routine retinal screening is a critical component of comprehensive
diabetes care and can identify broader health concerns. As we have
considered the comments received, we agree this measure focuses on a
clinically distinct and preventive aspect of diabetes care that is not
fully addressed by other measures.
Comment: Many commenters stated that inclusion of this measure in
the Star Ratings program has been a significant driver of innovation in
care delivery. Commenters noted that the measure has incentivized MA
plans and providers to adopt new screening models such as
teleophthalmology, mobile and in-home screening services, point-of-care
retinal imaging in primary care settings, and FDA-cleared autonomous
artificial intelligence technologies to help expand access to diabetic
eye exams. Commenters emphasized that these innovations have helped
overcome workforce shortages, transportation barriers, and specialist
access challenges, particularly in rural and underserved communities,
while improving efficiency and reducing administrative burden. Several
commenters expressed concern that removing the measure from the Star
Ratings calculation could slow or reverse investment in these
innovative approaches.
Response: CMS appreciates commenters' perspectives on the role of
this measure in encouraging innovation and expanding screening access.
As previously explained, CMS is retaining this measure in the Star
Ratings program.
Comment: Several commenters offered alternatives to removal,
[[Page 17508]]
including refining or strengthening the measure rather than deleting it
(i.e., adjusting weighting, improving reporting alignment), adding
follow-up care or care coordination after abnormal results, adopting
hybrid or chart review approaches, and revisiting exclusions and/or
measurement scope for certain populations (e.g., ESRD patients and
members who receive optical care through other benefits or coverage).
These commenters suggest delaying removal until a suitable replacement
exists. A commenter supported moving the measure to the display page
but urged ongoing monitoring and possible reassessment if screening
rates decline.
Response: CMS appreciates the recommendations for potential future
refinements, including approaches related to follow-up care,
exclusions, and measurement methodology. We will take these suggestions
into consideration for potential future updates to this measure.
Comment: Some commenters supported removing this measure, stating
that diabetes care is already represented in Star Ratings through other
measures and that removing this process measure supports streamlining
and refocusing on outcome and patient experience measures.
Response: CMS appreciates support for streamlining the Star Ratings
measure set and focusing on measures that best reflect outcomes and
beneficiary experience related to diabetes care. We agree that several
existing diabetes measures capture important aspects of diabetes
clinical management and treatment outcomes. Collectively, these
measures provide meaningful insight into plan performance in managing
diabetes. At the same time, after consideration of public comments, CMS
is retaining the Diabetes Care--Eye Exam measure in the Star Ratings
program because it captures a clinically distinct and preventive aspect
of diabetes care that is not fully addressed by other measures.
Comment: A few commenters raised concerns about persistent data
gaps, challenges capturing eye exams completed outside MA plan networks
or channels, coding and interoperability limitations between primary
care and vision providers, and confusion regarding what services
qualify for measure compliance. Commenters stated that these issues may
limit the measure's ability to fully reflect true care delivery or plan
performance and may contribute to administrative burden.
Response: CMS appreciates the feedback regarding data collection,
measurement reliability, operational burden, and clarity of measure
specifications. CMS recognizes the challenges associated with capturing
services furnished across multiple care settings and providers,
including those outside plan-contracted networks, as well as coding and
interoperability limitations. CMS will continue to evaluate data
sources and measurement approaches and consider opportunities for
improvement.
After considering the comments we received and for the reasons
outlined in the Contract Year 2027 proposed rule and our responses to
the comments, we are not finalizing this proposal to remove the
Diabetes Care--Eye Exam measure from the Star Ratings.
g. Statin Therapy for Patients With Cardiovascular Disease (Part C)
We proposed 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. In light of this substantive change, the Statin
Therapy for Patients with Cardiovascular Disease measure was already
set for removal to the 2028 display page following the process
described at Sec. 422.164(d)(2), and any adoption of the updated
measure would need to be proposed and finalized through future
rulemaking. While Sec. 422.164(d)(2) gives CMS the discretion to
continue to use a legacy measure in Star Ratings while a substantively
updated version is on the display page, use of the legacy measure was
not feasible here due to the nature of the substantive changes. CMS
will monitor changes in performance for this measure, as updated and
included on the display page, since statin therapy is important in
lowering cholesterol and reducing the risk of cardiovascular disease.
We solicited comment on removing the Statin Therapy for Patients
with Cardiovascular Disease measure from the 2028 Star Ratings. A
discussion of the Statin Therapy for Patients with Cardiovascular
Disease measure removal comments, along with our responses follows.
Comment: Many commenters supported removing this measure due to
minimal performance variation and the availability of similar measures
already in Star Ratings, such as Medication Adherence for Cholesterol
(Statins). Commenters highlighted significant clinical limitations with
the measure, such as that it captures prescriptions but not adherence,
inadequately accounts for statin intolerance, creates administrative
burden, and encourages coding behaviors that conflict with clinical
judgment. A commenter also emphasized that a single prescription is
insufficient for cardioprotective benefits, with some commenters adding
that the measure excludes alternative cholesterol-lowering treatments,
such as diet, exercise, or alternative medications. Commenters also
noted the measure would remain on the 2028 display page as another
reason for their support.
Response: We thank these commenters for their support of our
proposal.
Comment: Some commenters opposed removing the measure, emphasizing
its importance for the health and quality of life of patients with
cardiovascular disease. Commenters noted that statin therapy is
evidence-based for this population and linked to reduced mortality.
Others urged CMS to delay removal until another validated outcome-based
measure is introduced.
Response: This measure will be on the display page so it will still
be publicly reported and used for monitoring. Given the substantive
change for the 2026 measurement year for this measure, the measure has
to be moved to the display page for at least two years following the
process described at Sec. 422.164(d)(2). The updated measure would
need to be proposed through rulemaking. We do not have data for the
legacy measure to continue to include in the Star Ratings.
Comment: Some commenters recommended replacing the Statin Therapy
for Patients with Cardiovascular Disease process measure with a low-
density lipoprotein cholesterol (LDL-C) control or LDL-C response
outcome measure. These alternative measures would account for statin
intolerance while expanding the denominator to include all patients who
could benefit from cholesterol-lowering therapy. Additionally, rather
than
[[Page 17509]]
removing the measure, a commenter recommended considering a
complimentary measure focused on medication access, affordability, and
utilization since statins remain underused in peripheral arterial
disease. Another commenter recommended that CMS eliminate the exclusion
of individuals aged 66 and above to align with the Statin Use in
Persons with Diabetes.
Response: We appreciate the suggestions and will take them into
consideration as we consider future measure changes. If we were to
introduce an alternative measure in the future, it would need to be
proposed and finalized through the rulemaking process. It is important
that providers and plans provide appropriate care for Medicare
beneficiaries with cardiovascular disease whether the Star Ratings
includes the Statin Therapy for Patients with Cardiovascular Disease
measure or not.
Comment: Some commenters noted that despite an apparent performance
ceiling for this measure at the contract level, substantial disparities
in statin initiation and adherence persist among older adults, women,
and racial/ethnic minorities, populations disproportionately
represented in MA organizations.
Response: This measure will be on the display page so performance
on this measure will still be publicly available. While Part C and D
Star Ratings cannot measure every aspect of care delivery, providers
and plans should still deliver clinically appropriate care to all
populations.
Comment: Some commenters argued that removal of this measure is
premature given NCQA's recent substantive specification changes
expanding the eligible population. They urged CMS to evaluate the
updated measure's performance before removal. Some commenters urged CMS
to reintroduce the measure after the two-year display period, with one
commenter arguing that the measure is more robust at identifying high
risk patients than the Statin Use in Persons with Diabetes (Part D)
measure and more methodologically sound as it includes clinically
justified exclusions.
Response: The measure will be on the display page starting with the
2028 Star Ratings due to the substantive change made by NCQA discussed
above. CMS is committed to continuing to monitor performance on the
updated measure. If CMS were to bring back this measure into Part C
Star Ratings, it would have to be proposed through future rulemaking.
After considering the comments we received and for the reasons
outlined in the Contract Year 2027 proposed rule and our responses to
the comments, we are finalizing the removal of the Statin Therapy for
Patients with Cardiovascular Disease beginning with the 2028 Star
Ratings.
h. Members Choosing To Leave the Plan (Part C and Part D)
We proposed removing the Members Choosing to Leave the Plan (Part C
and 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 proposed removing 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.
We solicited comment on removing the Members Choosing to Leave the
Plan measure from the 2029 Star Ratings. A discussion of the Members
Choosing to Leave the Plan measure removal comments, along with our
responses, follows.
Comment: Some commenters supported removing the measure,
emphasizing that disenrollment can be driven by non-quality factors and
can be hard for beneficiaries to interpret without context on why
members left. Common reasons for supporting removal included cost or
price shopping, broker or marketing dynamics, competitors, geographic
moves, policy changes, and other external forces.
Response: CMS appreciates these comments and agrees there can be
challenges in interpreting why beneficiaries may leave a plan and the
extent to which disenrollments may be influenced by factors not solely
related to plan quality.
Comment: Some commenters argued that voluntary disenrollment is one
of the most straightforward indicators of whether a plan is meeting
member needs so should remain in Star Ratings. They stated that
disenrollment rates serve as the best proxy for beneficiary
dissatisfaction by reflecting members' decisions to leave a plan. Many
of these commenters contrasted this measure with the CAHPS survey,
noting that CAHPS relies on survey sampling and captures reported
perceptions rather than observed enrollment behavior.
Response: CMS appreciates these comments regarding the value of
voluntary disenrollment as an objective, behavior-based indicator that
may reflect enrollee experience with the plan. Although the Members
Choosing to Leave the Plan measure may reflect beneficiary
dissatisfaction to an extent, it is difficult to interpret from an
overall disenrollment rate why beneficiaries are leaving a contract, so
it is less useful as a quality measure. Disenrollments do not
necessarily reflect issues with the quality of care provided. We know
that beneficiaries disenroll for many reasons, including financial
reasons, issues receiving needed care, coverage related to doctors,
hospitals, and prescriptions, and issues getting information and help
from the plan. The most common reasons for disenrollment are financial
reasons and doctors, clinics, and hospitals not belonging to the
enrollee's plan network. CMS plans to continue publicly reporting this
measure on the display page so overall information about voluntary
disenrollment remains transparent and available to beneficiaries and
other interested parties.
Comment: Some commenters noted that the Members Choosing to Leave
the Plan measure functions as an accountability and oversight
mechanism, and that reporting it on the display page does not create
the same incentive for plans to fix root causes.
Comment: Several commenters emphasized that the disenrollment
measure is especially important for high-need populations (particularly
individuals diagnosed with end-stage renal disease (ESRD) and SNP
enrollees) because disenrollment can indicate serious mismatches
between plan design and member needs. Some of these commenters urged
CMS to retain the measure and refine it with these vulnerable groups in
mind.
Response: CMS appreciates these comments. CMS will continue public
reporting of this measure on the display page and will take into
consideration recommendations for future measure updates.
Comment: Some commenters suggested that we retain the measure in
Star Ratings but modify the technical specifications to better measure
voluntary disenrollments. Several commenters argued that evaluating
disenrollment at the contract level can misclassify switching within
the same parent organization as negative performance. They encouraged
CMS to evaluate disenrollment at the parent
[[Page 17510]]
organization level. Other commenters urged CMS to refine exclusions by
excluding disenrollments tied to state Medicaid eligibility or policy
changes affecting dual status and using reason codes to better capture
true voluntary disenrollment.
Response: CMS appreciates these comments. CMS will publicly report
this measure on the display page and take into consideration
recommendations for future measure updates.
Comment: Some commenters raised concerns that if the Members
Choosing to Leave the Plan measure is removed from Star Ratings, plans
might face less pressure to avoid practices that frustrate members. A
commenter specifically warned that removing this measure could enable
plans to adopt policies that drive away members and could distort CAHPS
survey participation (since members who leave may not be captured as
intended).
Response: CMS disagrees that retiring this measure will
meaningfully reduce plan incentives to address disenrollment-related
issues, as plans have existing financial and operational incentives
separate from Star Ratings to retain enrollees and maintain high-
quality performance. Additionally, we will continue to monitor
performance on this measure over time.
After considering the comments we received and for the reasons
outlined in the Contract Year 2027 proposed rule and our responses to
the comments, we are finalizing the removal of the Members Choosing to
Leave the Plan measure beginning with the 2029 Star Ratings.
i. Customer Service and Rating of Health Care Quality (Part C)
We proposed 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 solicited comment on removing the Customer Service and Rating of
Health Care Quality measures from the 2029 Star Ratings. A discussion
of the Customer Service and Rating of Health Care Quality measure
removal comments, along with our responses, follows.
Comment: Some commenters supported the removal of the Customer
Service and Rating of Health Care Quality measures, noting there is
minimal variation in performance across contracts and that cut points
have been stable for many years. A couple of commenters noted that
these measures often reflect factors outside a health plan's direct
control.
Response: We appreciate the support for removing the Part C
Customer Service and Rating of Health Care Quality measures. As stated
in the Contract Year 2027 proposed rule, we are proposing removal as
part of an effort to streamline the Star Ratings. We disagree, however,
that these measures are outside of health plans' control. Consumer
experiences with customer service and perceptions of health care
quality are important aspects of a patient's experience. The MA and PDP
CAHPS surveys have been rigorously developed and tested to assess
enrollee experiences on domains that enrollees have reported to be
important to them in defining high quality care from Medicare health
and drug plans.
Comment: Many commenters opposed the removal of the Customer
Service and Rating of Health Care Quality measures, noting the
importance of measures that reflect member experience. Commenters
stated that excluding these measures from Star Ratings calculations
diminishes their value and ability to incentivize health plans to
invest in high-quality beneficiary experiences. Some commenters stated
these measures are important for individuals selecting a health plan to
consider, as well as for CMS to measure the overall quality of care
provided by plans.
Response: CMS agrees these measures capture important areas of plan
performance. The measures will still be collected through the MA and
PDP CAHPS Survey and results will be included in the CAHPS health plan
reports provided each year to plans to support their quality
improvement efforts and reported as display measures on CMS.gov. Also,
the Rating of Health Plan measure that will remain in the Star Ratings
will capture these areas of performance.
Comment: Many commenters expressed concern that removing the
Customer Service measure assessing beneficiary experience with MA plan
operations will reduce MA plan oversight to ensure enrollees are
receiving timely and quality access to their respective benefits and
coverage. Commenters recommend that CMS consider opportunities to
better measure customer service, rather than removing the measure
entirely from the Star Ratings program.
Response: CMS appreciates commenters' emphasis on the importance of
customer service and beneficiary experience with MA plan operations.
CMS agrees that timely, accurate, and high-quality customer service is
essential to ensuring enrollees' access to benefits, regardless of
whether such measures are included in the Star Ratings program.
Removing the Customer Service measure from Star Ratings does not reduce
CMS's expectations that MA plans will provide high-quality customer
service to their enrollees. CMS will continue to report this measure on
the display page and continue to monitor performance. CMS also remains
committed to evaluating opportunities to better measure beneficiary
experience and customer service.
After considering the comments we received and for the reasons
outlined in the Contract Year 2027 proposed rule and our responses to
the comments, we are finalizing the removal of the Customer Service and
Rating of Health Care Quality measures beginning with the 2029 Star
Ratings.
2. Adding Measure
a. Depression Screening and Follow-Up (Part C)
We are committed to continuing to improve the Part C and 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 as described at 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 proposed to add the Part C Depression
Screening and Follow-Up (DSF) measure to the 2029 Star Ratings
(measurement year 2027). CMS began 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 two 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.\92\ DSF
[[Page 17511]]
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,\93\ 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.
---------------------------------------------------------------------------
\92\ See page 162 at https://www.cms.gov/files/document/2024-announcement-pdf.pdf for a summary of comments.
\93\ https://www.uspreventiveservicestaskforce.org/uspstf/recommendation/screening-depression-suicide-risk-adults.
---------------------------------------------------------------------------
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 August 2021 through August 2023.\94\ 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.\95\
---------------------------------------------------------------------------
\94\ https://www.cdc.gov/nchs/data/databriefs/db527.pdf.
\95\ https://pmc.ncbi.nlm.nih.gov/articles/PMC7661597/ and
https://www.amjmed.com/article/S0002-9343(22)00524-1/fulltext.
---------------------------------------------------------------------------
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.\96\ 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 \97\ 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.
---------------------------------------------------------------------------
\96\ https://p4qm.org/sites/default/files/2025-02/PRMR-2024-2025-MUC-Recommendations-Report-Final.pdf.
\97\ 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.
---------------------------------------------------------------------------
We solicited comment on adding the Depression Screening and Follow-
Up measure to the 2029 Star Ratings. A discussion of the Depression
Screening and Follow-Up measure addition comments, along with our
responses, follows.
Comment: Many commenters supported adding the DSF measure to the
Star Ratings program. Commenters noted that this measure would
encourage MA plans to screen for depression and follow up with
appropriate care and to expand access to behavioral health services.
Some commenters noted that the DSF measure would fill a gap in the Star
Ratings program related to behavioral health and is aligned with the
Universal Foundation set of measures across quality programs.
Response: We thank the commenters for their support.
Comment: Some commenters were concerned with the administrative
burden related to the DSF measure, such as the investment needed to set
up the data structures and workflows to track and report depression
screening and follow-up data. Other commenters noted challenges
implementing the measure due to inconsistent availability of data and
issues with the interoperability of electronic data. Specifically, a
few commenters had concerns with the measure requiring the use of
Logical Observation Identifiers Names and Codes (LOINC) codes, which
they claimed are inconsistently used and not always transmitted to
plans. Some commenters recommended expanding the measure to include
hybrid reporting or use of any digital data source including both
claims and clinical data including CPT and HCPCS codes such as 96127,
96160, 96161, and G0444 (Annual Depression Screening). A commenter
further suggested that CMS should work with smaller practices and
community-based organizations to address technical barriers they face
with Electronic Clinical Data Systems (ECDS) reporting and LOINC codes.
Another commenter recommended that CMS: (1) publish detailed ECDS
specifications, including accepted standardized instruments, LOINC
tables, and mapping examples for common EMRs, (2) issue an electronic
medical records (EMR)/Health Information Exchange (HIE) readiness
checklist and provider toolkit that include clinical workflow,
documentation, and data flow, and (3) offer technical assistance with
measure testing, data ingestion pilots, and feedback on cases.
Response: We appreciate the feedback on the challenges of
implementing this measure. ECDS is a HEDIS reporting method for health
plans to collect and submit quality measures. The DSF measure uses the
ECDS reporting method, which was developed to allow for better tracking
of patient outcomes across systems and to reduce the burden on
providers to conduct manual chart reviews by pulling in data across
EHRs, HIEs, clinical registries, and claims data. While we understand
that this ECDS measure will require upfront investment in setting up
the IT and workflow infrastructure, over time the ECDS, rather than
traditional or hybrid reporting, will decrease the burden on providers.
The ECDS reporting method used in DSF requires the use of electronic
data standards and that all data be stored in structured fields in a
standard layout. The data sources for ECDS reporting include electronic
health records/personal health records, health information exchange/
clinical registry, case managements systems, and data from
administrative claims. Given the need for structured data, DSF requires
the use of LOINC codes. To allow some flexibility, HEDIS does allow
mapping to the measure's specified LOINC codes as appropriate. For
example, if the questions of a specified instrument are used, but are
labeled with the name of a different instrument (e.g., PHQ-2 questions
within the PHQ-A), mapping to one of the specified LOINC codes is
acceptable.
CMS appreciates the commenters' recommendations regarding
additional technical resources to support implementation of this
measure. The measure specifications are developed and maintained by
NCQA, the measure steward, and include the technical requirements
necessary for reporting. Detailed specifications, including
[[Page 17512]]
coding and data element guidance, are available through NCQA's
established measure maintenance processes. CMS encourages stakeholders
to refer to NCQA resources for the most current technical guidance. CMS
is not prescribing EMR- or HIE-specific implementation tools, workflow
guidance, or mapping examples through regulation, given the significant
variation in health IT systems, data sources, and clinical workflows
across MA organizations and provider settings. MA organizations remain
responsible for working with their providers and vendors to
operationalize measure reporting within their existing infrastructure.
Comment: Some commenters were concerned about their ability to
track whether follow-up care occurred, noting limitations such as
state-specific legal barriers to accessing behavioral health data and
limited visibility into care delivered outside their network. A couple
of commenters further suggested that CMS conduct an impact analysis of
how federal and state privacy laws may affect data availability given
stricter limits on sharing mental health records in some places.
Response: CMS acknowledges that data availability and access to
behavioral health information may vary based on state law, privacy
requirements, and whether care is furnished outside of a given
organization's network. However, CMS does not agree that these
considerations warrant modification of the finalized policy. This
measure does not require access to detailed psychotherapy or mental
health treatment records. The measure is designed to allow reporting
based on information reasonably available to health plans, including
documentation of referral, care coordination, or other appropriate
follow-up actions consistent with existing legal and operational
constraints. CMS notes that similar considerations apply broadly across
quality measurement and care coordination activities and are not unique
to depression screening or follow-up care.
Comment: A few commenters stated their belief that this measure
will disproportionately burden physicians and indicated that the
responsibility for strong performance is primarily the responsibility
of providers rather than MA plans. These commenters requested that CMS
hold MA plans accountable for providing support and increasing access
to behavioral health resources. Another commenter suggested that CMS
help ensure community mental health and substance use provider
organizations are seamlessly able to contract with MA plans.
Response: CMS does not agree that the measure inappropriately
places the burden of performance solely on physicians or other
individual providers. The DSF measure is reported at the MA contract
level and reflects the collective performance of the MA organization's
provider network. MA contracts are responsible for establishing
provider networks, designing benefits, furnishing care management and
care coordination services, and implementing quality improvement
strategies to support measure performance. Accordingly, MA
organizations retain primary accountability for ensuring that their
networks are equipped to conduct depression screening and facilitate
appropriate follow-up care.
MA organizations already have multiple mechanisms to support
providers and improve access to behavioral health services, including
network adequacy requirements, utilization management policies, care
coordination programs, supplemental benefits, and quality improvement
initiatives. The measure is intended to encourage MA organizations to
leverage these existing tools to strengthen screening and follow-up
processes, including addressing gaps in access to behavioral health
resources, and to collaborate with providers.
Comment: Some commenters request that CMS delay implementation of
this measure to give plans and providers more time to get systems and
processes in place to meet requirements. A commenter specifically asked
for phasing in follow-up requirements over time.
Response: This measure was reported on the 2026 display page. This
measure will be on display for three years prior to it being added to
the 2029 Star Ratings. This provides sufficient time for MA
organizations to prepare for inclusion of this measure in Star Ratings.
Comment: Some commenters were concerned about inadequate behavioral
health resources in communities that already face significant
behavioral health workforce and capacity shortages, potentially
limiting their ability to provide follow-up care for those who screen
positive for depression. These commenters requested that CMS monitor
behavioral health network adequacy before implementing this measure.
Response: We recognize the health care workforce shortages facing
many communities, particularly in the field of behavioral health.
Measuring depression screening and follow-up care will increase focus
on behavioral health and likely lead to MA plans expanding access to
behavioral health care. In addition, the measure specifications allow
for telehealth or virtual appointments so that enrollees with limited
access to follow-up care in their local vicinity may be able to access
services in a virtual setting.
Comment: Some commenters recommended that CMS report the depression
screening and follow-up rates separately because averaging the rates
may discourage depression screening since plans that screen fewer
people may more easily achieve high follow-up rates. A commenter also
suggested a higher weight for the follow-up rate.
Response: There is incentive to do well on both rates. For the
screening rate, performance will be worse if fewer individuals are
screened since the measure focuses on screening among the general
population. We will display the rates for screening and follow-up
separately on the display page so this information is publicly
available. For the Star Ratings program, CMS plans to take an average
of the rates to minimize the number of measures displayed on Medicare
Plan Finder. We will monitor the rates for both the screening and
follow-up measures and may propose changes over time if we see issues
with combining the rates.
Comment: Some commenters recommended including telehealth and home-
based depression screening and follow-up care in the measure.
Response: We clarify that telehealth visits and home-based visits
can count toward this measure if other requirements are met.\98\
---------------------------------------------------------------------------
\98\ NCQA HEDIS Measurement Year 2026 Volume 2.
---------------------------------------------------------------------------
Comment: A commenter recommended restricting the measure
denominator to the subset of patients with at least one valid encounter
during the measurement year to increase the likelihood of screening
being performed by a provider with an established relationship with the
patient and minimize the need for population-wide outreach by health
plans or other providers with no previously established relationship.
Response: We appreciate the commenter's recommendation to restrict
the measure denominator to patients with at least one valid encounter
during the measurement year. The inclusive denominator is intentionally
designed to encourage comprehensive preventive care for all enrolled
members, regardless of their recent utilization patterns. This
[[Page 17513]]
ensures that screening opportunities are not inadvertently limited to
only those individuals who have already accessed care during the
measurement year.
While we recognize the commenter's concern regarding the
administrative burden of outreach to members without established
provider relationships, proactive engagement with all enrollees is a
fundamental component of effective preventive care delivery. Members
who have not had recent encounters may represent a population at higher
risk for unmet health needs and would benefit most from targeted
outreach and screening initiatives.
Comment: A few commenters requested CMS provide clear guidance
about what counts as ``appropriate follow-up care.''
Response: Follow-up care includes outpatient, telephone, e-visits,
or virtual check-in follow-up visits; depression case management
encounters; behavioral health encounters including assessment, therapy,
collaborative care, or medication management; an encounter for exercise
counseling; or a dispensed antidepressant medication.\99\
---------------------------------------------------------------------------
\99\ NCQA HEDIS Measurement Year 2026 Volume 2.
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Comment: Out of concern for the impact of this measure on medically
complex individuals, a commenter recommended applying a case-mix
adjustment that includes geography, LIS/DE status, and other
demographic data. Another commenter recommended tracking rates across
demographic groups.
Response: Since this is a process measure, there is no case-mix
adjustment so as not to set different performance standards for
different groups or to mask differences in the quality of care across
parts of the country. We encourage contracts to analyze their data and
track and address differences in performance across subpopulations in
their contract.
Comment: A commenter requested flexibility as to who may administer
the screening, especially for rural and underserved areas.
Response: The HEDIS specifications for the depression screening
rate are focused on screening using a standardized instrument rather
than who administers the screening. The specifications also indicate
that depression screening captured in health risk assessments or other
types of health assessments are allowed if the questions align with a
specific instrument that is validated for depression screening.
Comment: A commenter recommended avoiding duplicative requirements
such as rescreening patients already diagnosed with depression.
Response: The HEDIS specifications for the DSF measure already
exclude individuals with a history of bipolar disorder or a current
diagnosis of depression.\100\
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\100\ NCQA HEDIS Measurement Year 2026 Volume 2.
---------------------------------------------------------------------------
Comment: As an alternative to the proposed measure, a commenter
recommended implementing the Follow Up After Hospitalization for Mental
Illness (FUH) measure. Another commenter recommended using a measure of
Medicare Annual Wellness Visit (AWV) since depression screening often
occurs at wellness appointments. Another commenter suggested moving to
an outcome performance measure such as improvement in depression as
measured by the Patient Health Questionnaire (PHQ-9).
Response: We appreciate the recommendations, but we disagree that
these measures are feasible alternatives. The DSF measure was chosen
over the FUH measure because of the focus on earlier identification and
intervention for depression in an outpatient setting. The DSF measure
is also part of the Universal Foundation set of measures across quality
programs, which focuses on improving the well-being of beneficiaries.
It is also aligned with MAHA priorities by encouraging MA health plans
to screen for depression and follow up with appropriate care. Wellness
visits are often an encounter where depression screening occurs, yet
this alone is an insufficient way to measure depression screening. It
also does not address a key component of DSF which is follow-up care
for those who screen positive for depression within 30 days. Although
DSF is a process measure, health outcomes can be improved by
identifying those with depression early and giving them access to
treatments for depression.
Comment: A few commenters recommend that CMS exclude patients with
Major Neurocognitive Disorder (dementia) from this measure because the
PHQ-9 is an invalid tool for this population. Another commenter
recommended that CMS incorporate clinically appropriate exclusions for
grief and loneliness, which may be prevalent in the Medicare
population.
Response: We appreciate the feedback from commenters. Depression is
prevalent among older adults, including individuals with Major
Neurocognitive Disorder (dementia), and appropriate screening and
treatment may improve quality of life, reduce morbidity, and help
manage symptoms. While the PHQ-9 is a commonly used and validated
screening instrument, it is not the only tool that may be used to meet
the depression screening requirement under the DSF measure. Clinicians
may use other standardized, validated depression screening instruments
that are appropriate for the patient's cognitive status and clinical
circumstances, consistent with accepted clinical practice.
We also acknowledge commenters' recommendations regarding grief and
loneliness. Grief and loneliness are recognized risk factors for
clinical depression and are prevalent in the Medicare population. Their
presence does not preclude depression screening; rather, it underscores
the importance of screening to identify individuals who may benefit
from further assessment, monitoring, or treatment. Accordingly, we do
not find that categorical exclusions for dementia, grief, or loneliness
are warranted, as the DSF measure is intended to support clinically
appropriate, whole-person care and relies on provider judgment to
determine the most suitable screening approach for each patient.
Comment: A commenter indicated the measure is misaligned with MAHA
principles and suggested using the MAHA Elevate model that emphasizes
lifestyle and prevention over medicalized screening.
Response: We thank the commenter for their feedback; however, we
disagree that the DSF measure is misaligned with MAHA principles. There
is a transparent process for adding measures to the Part C Star Ratings
described at Sec. 422.164(c). Any new measure first needs to go
through the Pre-Rulemaking Review process and initial input is
solicited through the Advance Notice process before being proposed
through formal rulemaking. New measures must be on the display page for
at least two years prior to inclusion in the Star Ratings. The DSF
measure supports MAHA priorities by promoting whole-person care through
early identification of depression and timely, appropriate follow-up,
which are foundational to prevention and long-term health. Depression
screening is a well-established, evidence-based preventive service that
enables clinicians to identify individuals who may benefit from a range
of interventions, including lifestyle-based, psychosocial, and clinical
approaches.
Follow-up care under the DSF measure is not prescriptive or one-
size-fits-all. Appropriate follow-up for individuals with a positive
depression screen may include outpatient, telephone, e-visits, or
virtual check-in
[[Page 17514]]
follow-up visits; depression case management encounters; behavioral
health encounters including assessment, therapy, collaborative care, or
medication management; an encounter for exercise counseling; or a
dispensed antidepressant medication. By supporting early detection and
flexible, patient-centered follow-up, the DSF measure advances
prevention, wellness, and individualized care consistent with MAHA
principles.
Comment: A commenter stated that the measure encourages MA plans to
interfere with the patient-physician relationship by incentivizing MA
plans to screen for depression and provide appropriate follow-up care.
Response: We thank the commenter for this feedback, yet we
disagree. This measure should encourage collaboration between the plan
and the provider to ensure the enrollee gets the care they need.
Comment: Several commenters request CMS align the DSF measure with
other CMS quality programs, such as the DSF measure used in the Merit-
based Incentive Payment System (MIPS), before implementation to avoid
conflicting specifications, duplicative reporting, and additional
administrative burden on providers.
Response: We agree with the efforts to align measures across CMS
quality programs. In the 2024 Pre-rulemaking Measure Review Process
(PRMR), the committee recommended that the MIPS program consider
replacing their measure with the one used for Medicare health plans to
improve alignment across quality programs.\101\ There are key factors
that make the NCQA-stewarded version of the DSF measure more
appropriate for the Star Ratings program, including that the
specification is at the health plan level. 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.
Regarding clinical exclusions, the MIPS version only excludes
individuals with a diagnosis of bipolar disorder, whereas the NCQA-
stewarded version excludes individuals with bipolar disorder or a
current diagnosis of depression.
---------------------------------------------------------------------------
\101\ https://p4qm.org/sites/default/files/2025-02/PRMR-2024-2025-MUC-Recommendations-Report-Final.pdf.
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Comment: A commenter stated that depending on the denominator
definition and exclusions, the DSF measure may disproportionately limit
applicability for I-SNP and Institutional Equivalent (IE)-SNPs, which
may exacerbate measurement gaps for these plan types.
Response: We thank the commenter for the feedback. As long as an I-
SNP only contract meets the denominator requirements for the measure,
it will have a score for this measure. If an I-SNP is part of a larger
contract that has non I-SNP enrollees, the measure score will include
I-SNP and non I-SNP enrollees.
Comment: A few commenters stated that the large number of measures
proposed for removal, as discussed in section V.B of this final rule,
may negatively impact plans and that CMS should not implement a new
measure at the same time.
Response: Removing multiple measures should help reduce burden for
plans and help them focus on new areas where there is significant room
for improvement in clinical care. Depression screening is a serious and
common mental disorder that occurs in people of all ages. The lifelong
prevalence of depressive disorders is estimated to range from 10 to 15
percent.\102\ 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.\103\ The addition of the DSF measure to the Star
Ratings program will encourage screening and follow-up care for
depression.
---------------------------------------------------------------------------
\102\ L[eacute]pine, J.P., M. Briley. 2011. ``The Increasing
Burden of Depression.'' Neuropsychiatric Disease and Treatment
7(suppl 1): 3-7.
\103\ O'Connor, E.A., E.P. Whitlock, T.L. Beil, B.N. Gaynes.
2009. ``Screening for Depression in Adult Patients in Primary Care
Settings: A Systematic Evidence Review.'' Annals of Internal
Medicine 151(11):793-803.
---------------------------------------------------------------------------
Comment: A commenter recommended implementing the DSF measure
through coordinated, interdisciplinary workflows that integrate
physical therapy (PT), occupational therapy (OT), and speech-language
pathology (SLP) due to their high frequency touchpoints with patients
and to leverage existing data sources to minimize administrative
burden. Another commenter recommended alternative screening options
such as voice-based and modality-agnostic tools, which may be
appropriate for older adults and those with limited English
proficiency.
Response: We thank the commenters for their recommendations. The
DSF measure is provider and team agnostic, so implementation through
coordinated interdisciplinary workflows is accepted and encouraged. For
alternative screening options, if there is evidence that alternative
screening mechanisms are clinically validated, these options will be
considered for inclusion in the future.
After considering the comments we received and for the reasons
outlined in the Contract Year 2027 proposed rule and our responses to
the comments, we are finalizing the addition of the Depression
Screening and Follow-Up measure to the Star Ratings beginning with the
2029 Star Ratings.
3. Summary of Measure Changes for the Part C and Part D Star Ratings
Table 4 summarizes the additional measure addressed in this final
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 final rule, CMS
does not codify the specific measures for the Part C and 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.
[[Page 17515]]
[GRAPHIC] [TIFF OMITTED] TR06AP26.033
C. Streamlining the Methodology, Further Incentivizing Quality
Improvement, and Suggestions for New Measures
Finally, we solicited 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 also solicited feedback on
additional measures that could be removed in future years.
Commenters broadly supported CMS's goal to streamline the Part C
and D Star Ratings program and shift towards more outcome-focused and
prevention-oriented measures, but many commenters cautioned against
rapid, large-scale changes that could destabilize plans, reduce
competition, and disproportionately harm plans serving high-need,
complex, or vulnerable populations (e.g., SNPs, dually eligible
individuals, and ESRD beneficiaries). Commenters urged CMS to phase in
changes slowly, preserve stability tools in the methodology
(guardrails, hold harmless, predictable cut points), and ensure fair
benchmarking through stratification by plan type, population, and
geography. Many commenters recommended reducing reliance on process and
survey-based measures that have small samples or high volatility, while
expanding outcome measures tied to chronic disease management,
functional status, behavioral health access, nutrition/food-as-
medicine, primary care investment, provider experience, and care
transitions. Across commenters, there are comments related to aligning
measures across programs, reducing administrative burden, improving
transparency, and ensuring that quality incentives reflect plan-driven
actions that improve beneficiary health, access, and well-being.
We will take all comments received into consideration as we
consider ways to streamline and modify the Star Ratings methodology and
continue to review the Star Ratings measure set. Any additional changes
to the methodology and measure set would need to go through the
rulemaking process.
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) (``Contract Year 2024
final rule''), we finalized the addition of the Health Equity Index
(HEI) reward (also called the Excellent Health Outcomes for All
(EHO4all) reward) \104\ along with the removal of the historical reward
factor at the same time. The HEI reward was intended to further
incentivize Part C and 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 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.
---------------------------------------------------------------------------
\104\ 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.
---------------------------------------------------------------------------
Since the Contract Year 2024 final rule, we have reviewed the HEI
reward consistent with the Executive Order 14192, ``Unleashing
Prosperity Through Deregulation'' and proposed to remove the HEI reward
from the Star Ratings methodology. We proposed 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 policy finalized in section V.B. of this
final 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 final 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.
[[Page 17516]]
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
proposed to keep the methodology consistent for now as we explore ways
to simplify the methodology in the future. See section V.C., where we
solicited comment 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 HPMS, to
reflect the temporary addition of the HEI reward and removal of the
historical reward factor. Therefore, we proposed to not 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 proposed 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.''
We invited public comment on this proposal and received several
comments. A discussion of these comments, along with our responses
follows.
Comment: Many commenters supported not implementing the HEI reward
and adding back the historical reward factor in the 2027 Star Ratings.
These commenters cited many reasons for support including:
perceived unfairness of the HEI reward enrollment
thresholds and not all contracts being able to qualify for the HEI
reward factor,
perceived disadvantage to smaller, regional, or provider-
owned plans in meeting enrollment thresholds compared to larger plans
and the potential for anti-competitive dynamics as a result,
perceived geographic bias against states that have not
expanded Medicaid, because of dual eligibility being one of the main
social risk factors included in the HEI,
state policies in some states requiring D-SNP only
contracts,
some states have expanded or more generous Medicaid
eligibility, while other states use a more limited definition of low
income;
continued recognition of consistent high performance on
the Star Ratings through inclusion of the historical reward factor,
inadequate understanding of methodology and performance
outcomes associated with the HEI,
request for predictability and stability of the Star
Ratings and associated QBPs while CMS considers broader simplifications
to the Star Ratings methodology,
reduced administrative burden and complexity,
exclusion of some groups with social risk factors such as
rural enrollees,
belief that the Star Ratings already incentivized plans to
invest in improving health outcomes for enrollees with social risk
factors,
perceived ability for plans to better maintain
supplemental benefits, have more resources for quality improvement
initiatives and member services, and avoid increasing premiums and
potential loss of coverage for some enrollees,
perceived ability for plans to invest in prevention and
management of chronic disease, and avoid placing additional strain on
local healthcare systems,
focus on overall quality for all members, and
belief that improvements made among the populations
included in the HEI will help overall Star Ratings performance.
Commenters also appreciated CMS's responsiveness to previous
stakeholder feedback recommending not implementing the HEI reward and
retaining the historical reward factor.
Response: CMS appreciates these commenters' support. We agree that
not implementing the HEI reward and continuing the historical reward
factor will result in more stability in the Star Ratings as we consider
other changes to refocus the measure set and simplify the Star Ratings
methodology. Additionally, we agree that any improvements made by
contracts among populations included in the HEI reward will only help
with performance on the Star Ratings more broadly, and such
improvements should be made regardless of the Star Ratings methodology.
We also feel it is important to be responsive to concerns raised by
commenters as we have received feedback consistent with these comments
over the past few years, including in response to 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 proposed rule and 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.
Comment: Some commenters encouraged CMS to continue to look for
ways to evaluate health equity and address social risk factors,
cultural competency, and complex care needs in the Star Ratings.
Commenters expressed that it is important to ensure vulnerable
populations do not have barriers to care and to hold MA plans
accountable for improving the care of vulnerable populations. A
commenter stated that future proposals in this area should be supported
by a clear policy rationale, transparent methodology, and robust
stakeholder engagement.
Response: CMS appreciates these comments and will take them into
consideration as we continue to consider future changes to the Star
Ratings methodology. Any changes to the Star Ratings methodology will
be proposed through the rulemaking process and would include a policy
rationale and impact analysis of the proposed changes and an
opportunity for stakeholder feedback.
Comment: Several commenters encouraged CMS to implement a one-year
or multiple-year hold harmless policy starting with the 2027 Star
Ratings where contracts would earn the better of the HEI reward and the
historical reward factor, or a phased transition for removing the HEI
reward.
Response: CMS does not agree that such a hold harmless or phased
transition is necessary, because any improvements contracts made among
the populations included in the HEI are consistent with existing
program goals and expectations to provide high quality care to all
enrollees, including those that are dually eligible (DE), receive a
low-income subsidy (LIS), or are disabled. Improvements made for these
populations are not isolated to the HEI reward and will only help
contracts in their performance on the Star Ratings more broadly.
Contracts can earn five stars for the overall rating without either the
HEI reward or the historical reward factor, and adding back the
historical reward factor does not penalize contracts because it is an
upside only reward. Additionally, implementing the
[[Page 17517]]
HEI reward for only one year would be operationally complex and it
would be potentially confusing for plans and beneficiaries for the
methodology to change for just one year only to then revert back to the
prior methodology. Additionally, all of this would happen at the same
time that we are considering ways to simplify the methodology in the
future.
Comment: A couple of commenters supported removing the HEI reward
but did not support adding back the historical reward factor. A few
other commenters suggested changes to the historical reward factor
methodology. A commenter stated their belief that some measures
included in the Star Ratings are flawed or may be influenced by
administrative scale, vertical integration, or extensive outreach, and
they argued for the historical reward factor to be sunset or narrowed.
The commenter also stated that the reward factor favors plans with
resources to optimize across a large measure set. A couple commenters
believed the historical reward factor should not be based on variance
in performance either because they believed this penalizes plans or
because the ratings are dynamic in terms of the measure set and cut
points. A commenter stated that the historical reward factor creates a
cliff problem, because it includes cut offs for mean and variance, and
further stated that CMS should develop a continuous reward that
incentives excellent performance.
Response: CMS will consider whether the historical reward factor
should continue to be part of the Star Ratings in the future. However,
performing consistently well across the full set of Star Ratings
measures is an indicator of overall plan quality. This is consistent
with the Star Ratings methodology as a whole, which emphasizes the
importance of performing well across a variety of measures and showing
improvements from the prior year. This is also reflected in how we set
cut points each year based on industry performance, include the
improvement measures, and include a measure set focused on a range of
clinical care, outcome, and patient experience measures. Contracts
should not focus on performing well on only a few measures.
CMS also appreciates the suggestions for changes to the historical
reward factor methodology. We are continuing to implement the
historical reward factor under the current methodology at this time
while we consider ways to simplify and modify the Star Ratings
methodology to further drive quality improvement. Any changes to the
historical reward factor methodology would need to be proposed through
rulemaking.
Finally, we note that the historical reward factor is intended to
reward consistent high performance across the Star Ratings measures. If
a contract has high variance in performance, it will not receive a
reward under the historical reward factor. Since the intent is to
reward contracts with both high mean and high variance, cut offs are
required to define high mean and high variance. CMS will take the
comments related to a continuous reward factor into consideration;
however, it would not be appropriate to assign a reward factor to all
contracts regardless of the level and consistency of performance as
this is inconsistent with the intent of the reward factor. We also note
that no contracts are penalized by the reward factor because it is
upside only.
Comment: A number of commenters opposed removing the HEI reward and
adding back the historical reward factor. Several commenters raised
concerns about the timing of this proposal since it is not in advance
of the measurement years for the HEI reward and historical reward
factor for the 2027 Star Ratings. Commenters argued plans have made
investments in improving care for populations included in the HEI
reward. A couple of commenters noted negative financial implications
for plans that invested in improving care as a result of the HEI
reward. Other commenters raised concerns about removing incentives for
plans to invest in care models, improved access, and high quality care
for populations with high needs and social risk factors. A few
commenters stated that plans are consistently denying patients needed
care and the historical reward factor does not address this, and that
therefore CMS should allow plans to move forward with efforts to
implement the HEI. A commenter stated that it reasonably relied on the
finalized HEI provisions in its planning.
Response: CMS expects that plans will invest in improving care for
all enrollees regardless of the Star Ratings and QBPs, including among
enrollees that may have higher needs, such as the populations included
in the HEI reward. This expectation is appropriate and consistent with
MA statutory and regulatory requirements under section 1852 of the
Social Security Act (the Act) and implementing regulations at 42 CFR
part 422. Under section 1852(a)(1)(A) of the Act and Sec. 422.101(a),
MA organizations must furnish, with limited exceptions, all Medicare-
covered benefits to enrollees. Section 1852(e) of the Act and Sec.
422.152 further require MA organizations to maintain ongoing quality
improvement programs designed to improve the quality of care provided
to all enrollees, while section 1852(d) of the Act and Sec. 422.112
require that MA organizations offering network-based coordinated care
plans ensure that covered services are available and accessible to each
enrolled individual with reasonable promptness and continuity of care.
Collectively, these provisions establish that MA organizations must
ensure equitable access to high-quality care for all enrollees,
including dually eligible, low-income, and disabled beneficiaries.
While CMS recognizes that plans have made investments to improve care
for populations included in the HEI reward, these investments should
not be viewed as contingent on the continuation of a specific reward
mechanism, as improvements in care delivery, access, and outcomes for
these populations are foundational to the MA program and remain
important regardless of the Star Ratings structure. Improvements in
performance among these populations will still contribute to higher
performance on the Star Ratings by increasing measure-level scores even
if the HEI reward is not implemented. Furthermore, as previously
explained, maintaining the historical reward factor instead of
implementing the HEI reward will incentivize improvement efforts on
clinical care, outcomes, and patient experience for all enrollees,
rather than incentivizing improvement for only certain populations.
This consideration outweighs concerns about any potential reliance by
plans on a future policy that had not yet been implemented. CMS expects
that plans will work to provide high quality care to all enrollees and
address instances where lower quality care may be provided to certain
groups of enrollees. CMS expects this regardless of the Star Ratings
methodology and incentives. Further, any improvements plans made in
anticipation of a future HEI reward are for the benefit of enrollees
and have the potential to boost the plan's Star Ratings performance,
whether the HEI reward is included in the Star Ratings or not. While
CMS acknowledges the commenter's statement regarding reliance on the
inclusion of the HEI reward, CMS notes that plans remain responsible
for meeting existing quality requirements and delivering appropriate
care to all enrollees. Removal of the HEI provisions do not negate or
undermine investments made to improve care, as such efforts continue to
advance quality improvement goals and overall
[[Page 17518]]
performance under the Star Ratings program.
Comment: A couple of commenters stated that removing the HEI reward
from the 2027 Star Ratings is impermissibly retroactive or a
retroactive policy change.
Response: CMS disagrees with the commenters' assertion that
removing the HEI reward from the 2027 Star Ratings is retroactive.
There are no retroactive effects on past Star Ratings. That is, all
Star Ratings that have already been calculated stay exactly the same.
This change only affects how Star Ratings will be calculated in the
future, starting with the 2027 Star Ratings.
Removing the HEI reward is a methodology change, not a measure
specification change. At Sec. Sec. 422.164(c) through (e) and
423.184(c) through (e), CMS lays out rules for adding, removing and
updating measures and what needs to be finalized prior to the
measurement year. In this case, we are not changing any measure
specifications or the data plans must collect or report to CMS. We are
updating how a reward will be calculated using existing data.
Pursuant to our authority under sections 1856(b) and 1860D-12 of
the Act to adopt standards to carry out the Part C and D programs, CMS
may update and improve the Star Ratings methodology over time. This
methodology change is being made through the notice-and-comment
rulemaking process, which means plans and other stakeholders were given
advance notice, had the chance to submit comments, and are receiving a
formal response in this preamble. CMS did take into consideration that
some plans may have made investments based on the HEI reward being
implemented; however, these investments should still be reflected in
the measure scores and benefit contracts that showed significant
improvement in the care that they provided to the populations includes
in the HEI reward.
Comment: A couple of commenters stated that removing the HEI and
continuing the historical reward factor risks allowing plans to improve
on average while not improving or potentially worsening disparities in
performance among high-need and socially disadvantaged populations. One
commenter stated if CMS does not move forward with the HEI it should
replace it with stratified reporting or weighting for dual eligible/LIS
enrollees so that plans can't improve on average while neglecting high-
need populations.
Response: CMS appreciates these suggestions for modifying the Star
Ratings methodology to account for dual eligible/LIS enrollees and will
take them into consideration as we consider future changes to the Star
Ratings methodology. CMS expects that plans will work to provide high
quality care to all enrollees and address instances where a lower
quality of care may be provided to certain groups of enrollees. CMS
expects this regardless of the Star Ratings methodology and incentives.
Plans remain responsible for meeting existing quality requirements and
delivering appropriate care to all enrollees.
Comment: A few commenters did not support rewarding historical
performance through the historical reward factor. A commenter stated
that tying incentives to historical performance may result in plans
focusing on preserving existing metrics rather than making forward-
looking investments in care coordination, preventive services, and
community-based supports that are important for socially complex
populations. The commenter further stated that without adjusting for
social risk, the historical reward factor may dampen incentives for
innovation among plans serving more complex populations.
Response: These commenters may have misunderstood what we meant by
historical reward factor. This reward factor does not rely on
historical data. The use of historical was meant only to clarify that
we were referring to the reward factor that has been in the Star
Ratings since the 2009 Star Ratings and to distinguish this reward
factor from the HEI reward. The historical reward factor uses the same,
most recently available data as the rest of the Star Ratings
calculations.
Comment: A commenter stated their belief that removing the HEI
would perpetuate D-SNPs being penalized by the Star Ratings as a result
of the impact of non-medical risk factors on enrollees' health. The
commenter supported continuing the HEI or making changes to the
Categorial Adjustment Index (CAI) for D-SNPs. The commenter also stated
the Star Ratings do not adjust for member mix effectively.
Response: CMS appreciates these comments and will take them into
consideration as we continue to consider future changes to the Star
Ratings methodology. CAHPS and HOS measures are adjusted for case mix,
and the Part D medication adherence measures will be adjusted for case
mix beginning with the 2028 Star Ratings. Other measures are included
in the CAI, as described at Sec. Sec. 422.166(f)(2) and 423.186(f)(2),
which adjusts for within-contract performance differences associated
with the percentages of beneficiaries that receive an LIS or are dual
eligible or have disability status.
Comment: Several commenters stated that the historical reward
factor embeds disparate quality standards that favor more resourced,
healthier populations. A couple of commenters also stated that removing
the HEI reward and adding back the historical reward factor would mask
gaps in care and remove the focus on fixing such gaps.
Response: CMS appreciates these comments and will take them into
consideration as we consider future changes to the Star Ratings
methodology. CMS expects that plans will work to provide high quality
care to all enrollees and address instances where a lower quality of
care may be provided to certain groups of enrollees. CMS expects this
regardless of the Star Ratings methodology and incentives. Plans remain
responsible for meeting existing quality requirements and delivering
appropriate care to all enrollees.
Comment: A commenter stated that without the HEI reward there is an
unfair advantage for larger plans compared to smaller regional plans
that results in perpetuating disparities and weakening incentives for
plans that serve vulnerable populations.
Response: CMS appreciates these comments and will take them into
consideration as we consider future changes to the Star Ratings
methodology.
Comment: A couple of commenters stated that removing the HEI reward
and adding back the reward factor is not consistent with the objective
of shifting the Star Ratings toward outcome-based measures and away
from operational incentives, because the reward factor is unrelated to
improving clinical care, outcomes, or patient experience.
Response: CMS disagrees that the reward factor is unrelated to
clinical care, outcomes, and patient experience. The reward factor
incentivizes high, consistent performance across all measures included
in the Star Ratings, including those focused on clinical care,
outcomes, and patient experience. As we consider how to simplify and
modify the methodology and refocus the measure set, we will continue to
focus on how to incentivize improvements in clinical care, outcomes,
and patient experience.
Comment: A commenter did not support adding back the historical
reward factor, stating that it benefits a small subset of plans and
does not recognize improvement because it is intended to only reward
plans that have consistently high Star Ratings across multiple years.
Another commenter
[[Page 17519]]
stated that the reward factor may distort ratings by making them less
responsive to changes in quality.
Response: The reward factor is not based on multiple years of
performance; it is based on consistent, high performance across
measures in a single Star Ratings year. As such, the historical reward
factor was in fact intended to incentivize improvement because plans
must have high performance during the measurement year across the
measure set in order to qualify.
Comment: A commenter stated that the only rationale provided for
removing the HEI reward is that it aligns with our focus on exploring
ways to simplify and modify the Star Ratings methodology. A few
commenters stated that simplicity should not be the key factor in
performance measure selection or come at the expense of meaningful
measurement.
Response: Our rationale for removing the HEI reward, as stated in
the Contract Year 2027 proposed rule, is to incentivize improvement
efforts on clinical care, outcomes, and patient experience in line with
our proposed changes to the measure set, rather than incentivizing
improvement among certain populations. We also noted that we are
exploring ways to simplify and modify the methodology, and we proposed
to keep the methodology consistent for now while we conduct this
exploration. Finally, as we explained in our responses to comments
above, we are also being responsive to stakeholder feedback received
over the past several years.
When we consider changes to the methodology and measure set, the
key factors we consider are consistent with the guiding principles for
making enhancements and updates to the Star Ratings we stated 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 at 83 FR 16521. The MA and Part D Star Ratings are designed
to align with CMS's Quality Strategy and to fairly, accurately, and
transparently reflect plan quality and beneficiary experience, using
reliable data and consensus-based measures that are stable over time
and largely within plans' control. The system is intended to support
public accountability, informed beneficiary choice, and quality
improvement while minimizing unintended consequences and incorporating
meaningful stakeholder input.
In addition, the Star Ratings methodology has become more complex
over time, prompting us to consider ways to simplify and modify the
methodology to maintain statistical rigor while making the methodology
easier to understand and implement. Simplifying the methodology may
also improve how well the Star Ratings incentivize quality improvement.
Comment: A commenter opposed our proposal to not implement the HEI
reward and add back the historical reward factor, stating that policies
should support, not penalize, clinicians and plans serving high-risk
populations and should encourage investment in primary care, care
coordination, and community-based interventions.
Response: CMS appreciates these comments; however, the historical
reward factor is an upside-only reward that encourages consistent, high
performance across Star Ratings measures and does not penalize plans or
clinicians. CMS expects that plans will invest in improving care for
all enrollees regardless of the Star Ratings and QBPs, including among
enrollees that may have higher needs, such as the populations included
in the HEI reward. This expectation is appropriate and consistent with
MA statutory and regulatory requirements under section 1852 of the
Social Security Act (the Act) and implementing regulations at 42 CFR
part 422. Under section 1852(a)(1)(A) of the Act and Sec. 422.101(a),
MA organizations must furnish, with limited exceptions all Medicare-
covered benefits to enrollees. Section 1852(e) of the Act and Sec.
422.152 further require MA organizations to maintain ongoing quality
improvement programs designed to improve the quality of care provided
to all enrollees, while section 1852(d) of the Act and Sec. 422.112
require that Medicare organizations offering network-based coordinated
care plans ensure that covered services are available and accessible to
each enrolled individual with reasonable promptness and continuity of
care. Collectively, these provisions establish that MA organizations
must ensure equitable access to high-quality care for all enrollees,
including dually eligible, low-income, and disabled beneficiaries.
After consideration of the public comments we received and for the
reasons outlined in the Contract Year 2027 proposed rule and our
responses to comments, we are removing the paragraphs at Sec. Sec.
422.166(f)(3) and 423.186(f)(3) and modifying 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 proposed 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 Contract
Year 2019 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
proposed 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).
We solicited comment on this proposal. In this section, we
summarize the comments we received and provide our responses and final
decisions.
Comment: A majority of commenters expressed support for CMS's
proposal to codify its current practice of providing sample data during
the plan preview periods. Some commenters stated that increased
transparency will help plans more accurately review, validate, and
understand their Star Ratings calculations, ultimately improving the
integrity of Star Ratings and leading to improved quality assurance and
better outcomes for beneficiaries.
Response: CMS appreciates the support for the proposed codification
of
[[Page 17520]]
our current practice of providing sample data for one measure of each
type during the second plan preview period. CMS agrees this approach
aligns with our goals of promoting accountability, improving the
integrity of Star Ratings, and leading to better outcomes for
beneficiaries.
Comment: Several commenters recommended CMS expand the current
practice of providing sample data for one of each measure type by
providing sample data for all measures. They stated that without full
access to the underlying data for all measures, plans cannot fully
validate CMS's methodologies and calculations. Another commenter noted
that much of the data already exists and asked that CMS provide a list
on the HPMS Star Ratings website of all data sets available to plans
and where to obtain them.
Response: As stated in the Contract Year 2027 proposed rule, CMS
provides de-identified contract-level sample data for one measure of
each type so MA organizations and Part D sponsors can replicate
calculation of the measure-level cut points. Because the same cut point
programming is used for all measures of the same type, only de-
identified contract-level data for the sample measures are needed to
validate CMS's cut point methodology. Adding de-identified contract-
level data for all measures would be burdensome to implement, and data
provided during the plan preview are preliminary. The purpose of the
plan preview is for Part C and D sponsors to closely review their own
Star Ratings data, including preliminary Star Rating assignments.
Contracts are not entitled to review other contracts' preliminary Star
Ratings data before they are public. Adding a list of all data sets
available to plans and where to obtain them may be easier to implement
and CMS will take this suggestion under consideration as a future
enhancement.
After consideration of the public comments we received and for the
reasons outlined in the Contract Year 2027 proposed rule and our
responses to comments, we are finalizing Sec. Sec. 422.166(h)(2) and
423.186(h)(2) as proposed without modification.
F. Impact of Proposed and Finalized 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 the Contract Year 2027 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 final rule, we are adding and removing certain
Star Ratings measures. The new measure entails moving an existing
measure from the display page to Star Ratings, which would have no
impact on plan burden. The measures being removed are either calculated
from administrative data \105\ or would still be submitted by plan
sponsors and, as such, there would be no decrease in plan burden. The
finalized 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 are not making changes under any of the
aforementioned control numbers.
---------------------------------------------------------------------------
\105\ 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.
---------------------------------------------------------------------------
We solicited feedback on the impact of these proposed changes.
Comment: A commenter requested that CMS conduct an impact analysis
that separates out SNP from non-SNP plans. The commenter also requested
an analysis broken out by region and size of enrollment. The commenter
stated that these analyses would ensure that the proposed changes do
not inadvertently harm vulnerable populations.
Response: In the tables below, we break out the impacts for MA
contracts by SNP-only contracts, partial SNP contracts (those with both
SNP and non-SNP plans), and non-SNP contracts and by contract
enrollment size. These tables show the impacts of the changes finalized
in this final rule (i.e., removing 11 measures as finalized in section
V.B. of this final rule, removing the HEI reward, and keeping the
historical reward factor). We do not provide a breakout of the impacts
by region because some contracts have broad service areas.
[GRAPHIC] [TIFF OMITTED] TR06AP26.034
[[Page 17521]]
[GRAPHIC] [TIFF OMITTED] TR06AP26.035
After consideration of the public comments we received, and for the
reasons outlined in the Contract Year 2027 proposed rule and our
responses to comments, we are finalizing all Star Ratings proposals
from the Contract Year 2027 proposed rule, except for the removal of
the Diabetes Care--Eye Exam (Part C) measure. The impact of the
finalized changes based on the simulations using data from the 2025
Star Ratings and accounting for changes implemented in the 2026 Star
Ratings, as explained at the beginning of this section, show most
contracts (63 percent) would have no change in their overall rating.
The overall rating would increase by a half star for 13 percent of
contracts, and would decrease by a half star for 24 percent of
contracts. Four percent of contracts would gain QBPs, and three percent
of contracts would lose QBPs.
G. Contract Consolidations (Sec. Sec. 422.162(b)(3) and 423.182(b)(3))
In 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 proposed rule, which
appeared in the Federal Register on December 10, 2024, we proposed a
technical clarification of existing policy at Sec.
422.162(b)(3)(iv)(A)(2) and (B)(2) and Sec. 423.182(b)(3)(ii)(A)(2)
and (B)(2) to provide details about how the enrollment-weighted measure
score is calculated when a consumed or surviving contract is missing
data for a measure. In the first year of the consolidation when a
measure score for a consumed or surviving contract is missing as a
result of not having enough data to meet the measure technical
specification or for a CAHPS measure having reliability less than 0.6,
CMS proposed to treat this measure score as missing in the calculation
of the enrollment-weighted measure score. Similarly, in the second year
of the consolidation for all measures, except HEDIS, HOS, CAHPS, and
call center measures, when a measure score for a consumed or surviving
contract is missing as a result of not having enough data to meet the
measure technical specification, CMS proposed to treat this measure
score as missing in the calculation of the enrollment-weighted measure
score. For Sec. 423.182(b)(3)(ii)(A)(2) and (B)(2) we also removed
reference to Sec. 423.184(g)(1)(ii) since it was reserved 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 (pages 30639- 30642).
We solicited comment on this proposal.
Comment: A couple commenters supported this technical
clarification, noting that it is consistent with other similar
approaches for calculations and will help prevent gaming. No commenters
opposed the clarification.
Response: We thank these commenters for their support.
Comment: A commenter encouraged CMS to continue to take a uniform
and consistent approach to data standards for contract consolidations.
Response: We thank this commenter for their support of a uniform
and consistent approach to data standards for consolidations and find
that the current methodology for consolidations and the proposed
technical clarification align with this approach.
Comment: A commenter requested clarification that CMS will exclude
missing data from the weighted average calculation, noting that some
software will give missing values as the final output when missing data
are included in calculations.
Response: CMS confirms that missing data would be excluded
consistent with the proposed technical clarification.
Comment: A commenter requested CMS assess potential impacts and
confirm the clarification accurately reflects plan performance and
quality of care for impacted populations.
Response: Excluding missing data from the calculation of measure
scores for the surviving contracts of consolidations for measures with
low reliability or that do not have enough data to meet the measure
technical specifications more accurately reflects plan performance and
the quality of care provided.
After consideration of the comments we received and for the reasons
outlined in the Contract Year 2026 proposed rule and our responses to
comments, we are finalizing the technical clarification at Sec. Sec.
422.162(b)(3) and 423.182(b)(3). As this is a technical clarification,
CMS is applying it immediately on the effective date of the final rule
and to the 2027 Star Ratings.
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
[[Page 17522]]
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.\106\
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\106\ For more discussion of the history of SNPs, please see
Chapter 16B of the Medicare Managed Care Manual (MMCM).
---------------------------------------------------------------------------
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 proposed
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 will
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 will split that period to accommodate the operational needs of
CMS and NCQA as staff review initial and annual MOC submissions.
CMS expects there will be no change in the estimated burden from
this changed timeline for SNPs submitting off-cycle MOC changes.
Additionally, there will be no new collection of information for this
rule, only maintenance of past expectations around the off-cycle MOC
process.
CMS invited public comment on this proposal and received several
comments in support. CMS received no comments opposing this proposal,
but several commentors offered support with suggested modifications.
The comments and responses are as follows:
Comment: Several commenters supported CMS' proposed change, but
requested CMS continue to look at greater alignment with state Medicaid
contracting windows where possible.
Response: CMS appreciates the commenters' support of this proposed
change and agrees that the timing of MOC deadlines should align with
state Medicaid contracting windows when possible. The shift in timing
of the annual renewal and initial MOC submission process reflects
feedback CMS has received over the years from plans and state Medicaid
agencies. In some instances, CMS is restricted by the operational
practicalities related to NCQA's review and approval of SNP MOCs in
relation to finalizing all MA plan requirements for the upcoming
contract year. However, CMS will continue to review the MOC submission
process and its impact on plans and state partners.
Comment: Several commenters supported the proposal but suggested
keeping the SNP MOC submission portal open year-round to give SNPs more
time to make corrections and submit changes. They noted that this is
particularly necessary when there are significant policy changes or
mandates made at the state level. Commenters stated that an enhanced
open portal timing would further reduce burden since plans are
prohibited from making care management and some operational changes
until NCQA has approved the SNP's off-cycle MOC submission. Another
noted that the window should remain open from October 1st to March 31st
of the next contract year.
Response: CMS appreciates the commenter's concerns and have taken
plan burden into consideration when developing this proposal. As noted
in the previous comment response, however, CMS is limited by
operational considerations specific to NCQA's review process in
relation to finalizing all MA plan requirements for the upcoming
contract year. While this proposal represents the best balance of all
these considerations, CMS will continue to review the MOC review
process for future refinement opportunities.
Regarding the potential extension of the off-cycle window from
October 1st to March 31st of the next contract year, this proposal is
essentially providing the opportunity the commenter is
[[Page 17523]]
seeking. The text of the proposal is written to align with current
regulatory practices in mind as many of our current regulations are
consistent with a contract year framework, which is why CMS framed the
proposal around two separate portions of the same contract year.
After reviewing and responding to all comments, CMS is finalizing
revisions to Sec. 422.101(f)(3)(iv)(B) and (G) without modification.
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 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 met 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 (hereafter referred to as August
2018 HPMS memo) that provided technical guidance on how we would assess
for substantially similar networks.\107\ 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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\107\ 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, in the
Contract Year 2027 proposed rule, we proposed 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 proposed 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 noted that this proposed requirement would not affect a
receiving integrated D-SNP's requirement to meet network adequacy
standards per Sec. 422.116, or potential compliance actions that may
result from a failure to meet those requirements. We also proposed 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
[[Page 17524]]
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 (HRAs)
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 proposed 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 proposed 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 specifically tied the proposed amendment in Sec.
422.60(g)(2)(ii) to Sec. 422.112(b)(8)(i)(B), which currently requires
MA coordinated care plans to provide a minimum 90-day transition period
for basic benefits when an enrollee currently undergoing treatment
switches to a new MA plan. This provision requires 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. A more detailed discussion of this proposal
is available at 90 FR 54971 of the proposed rule.
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 proposed 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
was 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 also proposed to remove the language that
requires the receiving plan to have substantially similar Medicare and
Medicaid-covered benefits as the relinquishing integrated D-SNP.
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. As such, 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 did not propose 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 did not
propose 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 welcomed comments on the changes we proposed at Sec.
422.60(g)(2)(i) and (ii). Similarly, we solicited 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 did not define a minimum staffing capacity
threshold in order to give integrated D-SNPs flexibility in
implementing this proposed change. We invited comment on the
feasibility of this proposed requirement and requested suggestions for
potential refinement.
We received the following comments on this proposal and respond to
them:
Comment: Many commenters, including MedPAC and MACPAC, generally
supported the proposal to remove the requirement for the receiving D-
SNP and the relinquishing D-SNP to have substantially similar networks
and instead replace it with a period of continuity of care of 120 days
as well as the requirement that the receiving D-SNP have care
coordinator staffing capacity to receive dually eligible enrollees
through passive enrollment. The commenters noted that these changes
would allow for the passive enrollment option to be more readily used
and facilitate continued enrollment in an integrated plan for eligible
beneficiaries. Some commenters also noted that the proposed changes to
passive enrollment would safeguard integrated coverage for dually
eligible individuals and would allow passive enrollment to function as
intended without imposing unrealistic alignment standards on States
with complex delivery systems. A few commenters mentioned the effect of
market changes and State re-procurement decisions on the landscape of
integrated care and noted that passive enrollment between a non-
renewing integrated D-SNP and a comparable D-SNP can help increase
enrollment and retention in integrated D-SNPs.
Response: We appreciate the comments and support for the proposed
changes to the passive enrollment process. We agree with the commenters
that these changes will help streamline the passive enrollment process
and help retain enrollment in integrated D-SNPs.
Comment: Some commenters opposed our proposal based on their
assertion that CMS's proposal to remove the requirement for
substantially similar networks due to not being able to implement such
a requirement is an indication that passive enrollment should not be
used, and that a slightly extended period for continuity of care does
not make up for a future inability to see chosen providers. These
commenters further reasoned that allowing passive enrollment could lead
to override of an individual's plan enrollment decision, and that the
noticing provided to enrollees alerting them that they are being
passively enrolled in a new D-SNP with the option to opt out is not
enough. A commenter also opined that there is no research to provide
evidence that D-SNPs provide improvement in care
[[Page 17525]]
coordination for dually eligible enrollees.
Response: We acknowledge the commenters' perspectives on the
proposal. We would like to reiterate that passive enrollment is an
opportunity for enrollees in an integrated D-SNP to transition to
another integrated D-SNP when their original plan is non-renewing or
terminating. As we stated in preamble to the proposed rule (90 FR
54971) and as set forth in Sec. 422.60(g)(1)(iii) and described in the
April 2018 final rule, and in the August 2018 HPMS memo \108\ that
provided further technical assistance to D-SNPs on passive enrollment,
such a transition would only occur 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. Under the notice requirements at Sec. 422.60(g)(4),
enrollees who are passively enrolled will receive a first notice from
the integrated D-SNP receiving enrollment at least 60 days before the
first day of enrollment in the receiving D-SNP, and a second notice at
least 30 days before the first day of enrollment in the receiving D-
SNP. Each of these notices will alert enrollees that they have the
opportunity to opt out of the enrollment into the receiving integrated
D-SNP. In the Contact Year 2027 proposed rule, we did not propose
amendments to Sec. 422.60(g)(5), which describes an enrollee's access
to the special enrollment period (SEP) at Sec. 423.38(c)(10). We
stated that Sec. 422.60(g)(5) would still be in effect. As such, this
SEP would also be accessible to enrollees who are interested in
switching their coverage (90 FR 54972). Enrollees in D-SNPs also have
access to the one-time-per month SEP for dually eligible individuals
and other LIS eligible individuals to elect Original Medicare and a
standalone PDP and the integrated care SEP which allows full-benefit
dually eligible individuals to elect an integrated D-SNP on a monthly
basis. We believe that the passive enrollment mechanism, coupled with
ample opportunity for an enrollee to switch coverage, does not amount
to override of enrollee decision making.
Further, since the inception of the passive enrollment process at
Sec. 422.60(g)(1)(iii), CMS's decision to implement passive enrollment
has been discretionary, not mandatory, and subject to a deliberative
process. As we noted in the August 2018 HPMS memo, in order to
implement D-SNP passive enrollment under Sec. 422.60(g)(1)(iii), CMS
must consult with the applicable State, CMS must determine that passive
enrollment will promote integrated care and continuity of care, and the
receiving integrated D-SNP must meet certain requirements. Though our
proposal will amend some of the requirements, we did not intend to, nor
do we believe that we proposed an amendment to the passive enrollment
process that will, dilute our goal to promote integration and
continuity of care. We continue to believe that 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.
Although research has not yet uniformly shown an advantage for
dually eligible individuals enrolling in D-SNPs 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.\109\ In their March 2024 Report to
Congress, MedPAC highlighted a HEDIS measure to exemplify care
coordination. MedPAC's review of HEDIS data on follow-up after
emergency department visits for people with multiple high risk chronic
conditions showed that coordination-only D-SNPs, HIDE SNPs and FIDE
SNPs performed better than other MA plans for enrollees ages 65 years
and older and HIDE SNPs and FIDE SNPs performed better than other MA
plans for enrollees ages 18-64 years.\110\
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\109\ 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.
\110\ MedPAC. Report to Congress: Medicare Payment Policy,
Chapter 14, March 2024. Retrieved from: https://www.medpac.gov/wp-content/uploads/2024/03/Mar24_Ch14_MedPAC_Report_To_Congress_SEC.pdf.
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Comment: We received many comments supporting our proposal to amend
Sec. 422.60(g)(2)(ii) to require that the D-SNP receiving passive
enrollment provide continuity of care to all incoming enrollees for 120
days, with some commenters noting that the proposed amendment would
reduce the risk of disrupting patient-provider relationships and help
ensure that enrollees continue to receive essential medications and
treatments during their plan transition.
Response: We thank commenters for their support.
Comment: We received some comments opposing our proposal to amend
Sec. 422.60(g)(2)(ii) to require that the D-SNP receiving passive
enrollment provide continuity of care to all incoming enrollees for 120
days. The commenters cited State requirements, and that 120 days would
be operationally difficult to achieve. Some of these commenters
suggested changing the 120-day proposed requirement to a requirement of
90-to-120 day transition period, suggesting that a period of 90 to 120
days would enable receiving D-SNPs to work with transitioning enrollees
without an across-the-board minimum exposure for non-contracted and
potentially unmanaged care. A commenter opined that an additional 30-
day requirement of continuity of care beyond the currently required 90
days per Sec. 422.112(b)(8)(i)(B) could result in unaccounted for cost
trends for the receiving D-SNP. Some commenters requested that CMS
further define expectations related to continuity of care and provide
clear guidance on how D-SNPs should operationalize continuity
requirements, especially in States with multiple Medicaid product types
to help ensure that passive enrollment policies advance integration
goals without causing confusion or disruption for beneficiaries. For
example, one commenter questioned whether, during the continuity of
care period, D-SNPs receiving passive enrollment would be required to
enter into single case agreements with providers unwilling to join
their network.
Commenters further requested that CMS remind all MA plans of their
obligations regarding continuity of care under this policy and take
enforcement action when MA plans fail to comply. Finally, some
commenters suggested that CMS consider strengthening the continuity of
care policy by mandating a requirement for the relinquishing D-SNP to
provide timely exchange of
[[Page 17526]]
clinical and care management information to the receiving D-SNP,
including current treatment plans, authorizations, medications, etc.
Response: We welcome these perspectives. We remind commenters that
our proposal relates to passive enrollment under a narrow set of
circumstances when a State has a non-renewing or terminating integrated
D-SNP with full-benefit dually eligible enrollees and seeks to
transition these enrollees to another comparable integrated D-SNP with
the goal of maintaining integrated coverage. Furthermore, we would like
to make the distinction that our proposed amendment to the passive
enrollment process at Sec. 422.60(g)(2) is specific to D-SNPs and
would not affect enrollees in other types of MA plans, including I-
SNPs. We understand that under the Financial Alignment Initiative
(FAI), full-benefit dually eligible individuals in some States were
able to be passively enrolled into Medicare-Medicaid Plans (MMPs) from
different types of plans. That authority was specific to MMPs under the
FAI and is separate from the existing D-SNP passive enrollment
regulation at Sec. 422.60(g)(2), which we proposed to amend. Section
422.60(g)(2) only applies to integrated D-SNPs where the D-SNP is non-
renewing or terminating and the State affirms its interest in
transitioning these enrollees to another comparable integrated D-SNP
with the goal of maintaining integrated coverage.
Given that the integrated D-SNP is terminating or non-renewing,
there is no opportunity for an enrollee to remain in that D-SNP. We
defer to D-SNPs receiving passive enrollees on approaches to contract
with providers during the continuity of care period, but a single case
agreement would be one such option. We appreciate the commenters'
perspectives on potential unforeseen cost trends associated with the
proposed 120-day continuity of care requirement. In the August 2018
HPMS memo, we stated that the applicable MA plan must meet certain
requirements related to, among other things, coverage, cost, and
operational capacity, and agree to receive passive enrollments. If a
potential receiving D-SNP does not believe it is able to meet these
requirements, it is under no obligation to accept passive enrollment if
presented the option.
As stated earlier in this section, enrollees subject to passive
enrollment would receive notices 60 days and 30 days in advance of the
effective date of enrollment in the receiving integrated D-SNP,
providing notice of their ability to opt out of the passive enrollment
and choose different coverage. Further, as we discussed earlier in this
preamble and in the preamble to the Contract Year 2027 proposed rule,
we did not propose amendments to Sec. 422.60(g)(5), which describes an
enrollee's access to the SEP at Sec. 423.38(c)(10). As such, this SEP
would also be accessible to enrollees who are interested in switching
their coverage (90 FR 54972). Enrollees in integrated D-SNPs also have
access to the one-time-per month SEP for dually eligible individuals
and other LIS eligible individuals to elect Original Medicare and a
standalone PDP and the integrated care SEP, which allows full-benefit
dually eligible individuals to elect an integrated D-SNP on a monthly
basis. An individual passively enrolled has ample opportunities to make
a different election should they choose not to enroll or remain
enrolled in the receiving integrated D-SNP. Any integrated D-SNP that
agrees to accept passively enrolled full-benefit dually eligible
individuals will be required to comply with the continuity of care
requirements.
Finally, we appreciate the comment regarding mandating a
requirement to provide timely exchange of clinical and care management
information. Such a requirement does not currently exist and was not
proposed in the Contract Year 2027 proposed rule, but we note that
Sec. 422.119 requires an MA plan to implement and maintain a
standards-based application programming interface (API) that--with
enrollee approval and direction--allows third party applications to
retrieve certain information as specified in Sec. 422.119(b).
Additionally, in some instances, State Medicaid agency contracts
(SMACs) may require an exchange of information as well. While we are
not finalizing any additional requirements under this rule, we may take
this comment into consideration in future rulemaking.
Comment: Some commenters suggested that CMS extend the proposed
continuity of care provisions beyond 120 days for residents of nursing
facilities and assisted living communities, or other high-need groups.
Response: While we appreciate the request for lengthening the
proposed continuity of care requirement to beyond 120 days, we believe
increasing the existing 90-day continuity of care requirement to 120
days allows D-SNPs receiving passive enrollment sufficient time to
maintain an existing course of treatment and educate providers outside
of their networks about joining the D-SNP provider network.
Comment: We received some comments that supported our proposal to
remove the requirement that receiving integrated D-SNPs meet the
requirement in current Sec. 422.60(g)(2)(ii) to have provider networks
and facility networks that are substantially similar to those of the
relinquishing integrated D-SNP. Some commenters noted that removing the
substantially similar network requirement would remove the imposition
of unrealistic alignment standards on complex delivery systems, and
that this change represents a practical, beneficiary-centered way to
maintain continuity of enrollment in integrated care when the D-SNP
landscape changes within a State, minimizing disruptions and preserving
the benefits of aligned Medicare-Medicaid coverage and care
coordination.
Response: We thank the commenters for their support of this
proposed revision. We agree that the proposed changes to Sec.
422.60(g)(2)(ii) will allow D-SNPs to use passive enrollment as
intended and safeguard integrated coverage for full-benefit dually
eligible individuals when their existing D-SNP terminates or does not
renew, and CMS determines, after consulting the State Medicaid agency,
that passive enrollment will promote integrated care and continuity of
care.
Comment: Similarly, we received some comments that opposed our
proposal to remove the requirement that receiving integrated D-SNPs
have provider and facility networks that are substantially similar to
those of the relinquishing integrated D-SNP. A few commenters
encouraged CMS to consider how passive enrollment may cause enrollees
to lose access to their existing provider networks, asserting that the
value of passive enrollments does not outweigh the value of beneficiary
access to the facility network they chose, and that enrollee choice
should be maximized during any passive enrollment. Another commenter
expressed how this provision may affect a State, noting that a State
may have focused on aligning the Medicaid and Medicare provider
networks in a way that ensures dually eligible enrollees have continued
access to services as they transition from Medicaid into Medicare and
that the provider networks are fully available to the populations.
Response: We appreciate the commenters' perspectives on this issue.
Our intention in proposing changes to the D-SNP passive enrollment
process is to provide a process by which full-benefit dually eligible
enrollees are able to maintain access to integrated care. As passive
enrollment would only be used in situations where an enrollee's
[[Page 17527]]
integrated D-SNP is terminating or non-renewing, and considering the
required opt out language and the SEPs that were discussed previously
in this section, we believe that those enrollees who wish to select
their enrollment based on specific providers or facilities will still
be able to do so.
We note that more States are including provisions in their SMACs
that address alignment of Medicaid and Medicare provider networks
between a Medicaid MCO and its affiliated D-SNP. This alignment of
provider networks is distinct from the existing substantially similar
network language that we proposed to remove at Sec. 422.60 and replace
with an extended continuity of care period. The substantially similar
network requirement sought to compare networks between different MA
organizations offering integrated D-SNPs whereas the alignment the
commenter referenced is specific to the provider network between
affiliated entities. As such, we do not believe that the change in the
D-SNP passive enrollment provision will have any impact on how States
are assessing the alignment of Medicaid and Medicare provider networks.
Comment: We received some comments in support of our proposal to
require that an integrated D-SNP receiving passive enrollment have the
care coordinator staffing capacity to receive dually eligible enrollees
through passive enrollment. Some commenters noted that effective care
coordination is essential and that flexibility in staffing models
allows D-SNPs to tailor care coordination approaches to the unique
needs of dually eligible enrollees, State-specific integration
requirements, and existing Medicaid managed long-term services and
supports (LTSS) delivery systems, while still ensuring that D-SNPs are
appropriately resourced to support new enrollees. Commenters noted that
integrated D-SNPs receiving passive enrollment would need adequate
notice of the impending passive enrollment in order to meet any
staffing update requirements and recommended that CMS provide notice of
at least 90 days to the receiving D-SNP prior to the passive enrollment
effective date, which would allow sufficient time to increase care
coordinator staff levels. Other commenters requested that CMS provide
additional information on how it would measure and evaluate adequate
care coordination capacity under the proposed requirement.
Response: We appreciate the commenters' support of this proposal.
We agree that if a D-SNP were to receive passive enrollment, it should
be appropriately resourced to support new enrollees and to tailor care
coordination approaches to the unique needs. As noted earlier in this
preamble and outlined in the August 2018 HPMS memo, CMS's decision to
allow passive enrollment for D-SNPs under Sec. 422.60(g)(1)(iii) is
intended to be a deliberative process done in consultation with the
respective State. We decline the suggestion for CMS to provide a 90-day
notice to potential receiving D-SNPs because we do not find it
necessary. Potential receiving D-SNPs will be in communication with CMS
and the State to determine if the receiving D-SNP meets the regulatory
criteria, has the capacity, and agrees to take on the additional
enrollment. We do not intend to establish specific standards for care
coordination, but we do highlight the necessity of care coordination
when transitioning new enrollees who may or may not have high level of
need.
Comment: A few commenters opposed our proposal to require that an
integrated D-SNP receiving passive enrollment have the care coordinator
staffing capacity to receive dually eligible enrollees through passive
enrollment. These commenters noted that there are already care
coordination requirements outlined at Sec. 422.107(c) and the
potential for additional care coordination requirements that State
Medicaid agencies include as part of their SMAC arrangement or
establish as an expectation in their policy guides. Another commenter
suggested that CMS refrain from issuing policies that dictate care
coordination staffing ratios. Commenters further requested that CMS
clarify the definition of ``care coordinator staff.''
Response: We appreciate the thoughtfulness of the commenters'
responses to this proposed provision. We note that our proposal did not
define a minimum staffing capacity threshold to give integrated D-SNPs
flexibility in implementing this proposed change, and we are not
intending to prescribe a specific standard or ratio at this time.
Further, as the commenters noted, there are already care coordination
requirements outlined at Sec. 422.107(c). It was not our intention to
amend how care coordination requirements are implemented by D-SNPs as
required per Sec. 422.107(c), including how many staff would be enough
to fit the needs of the D-SNP's beneficiaries. We did not propose nor
are we finalizing any additional language in this regard.
Comment: A few commenters specifically objected to our overall
proposal to amend the passive enrollment regulation at Sec. 422.60(g)
based on their understanding of how it would affect enrollment in
institutional special needs plans (I-SNPs) or enrollees that reside in
nursing facilities and assisted living communities. The commenters
noted that passively enrolling these enrollees into D-SNPs without
comparable networks would undermine these investments and disadvantage
I-SNPs that have demonstrated strong performance in serving high-need
populations. Commenters also suggested that CMS use tags on enrollment
processes as an exclusion criterion for passive enrollment. Commenters
advised that if applied, then the enrollment flag or facility site of
care should be used to ensure that beneficiaries residing in nursing
facilities or assisted living communities are only passively enrolled
into plans that can maintain continuity of care within their current
care setting. In addition, some commenters recommended that CMS
simplify opt-out processes and allow beneficiaries who have opted out
of passive enrollment to remain in their chosen plan without having to
re-opt-out annually.
Response: We thank the commenters for their perspectives and
appreciate the consideration paid to vulnerable populations. As we
discussed previously in this preamble, we would like to make the
distinction that our proposed amendment to the passive enrollment
process at Sec. 422.60(g)(2) is specific to D-SNPs and would not
affect enrollees in other types of MA plans, including I-SNPs. We
understand that under the FAI, full-benefit dually eligible individuals
in some States could be passively enrolled into MMPs from different
types of plans. That authority was specific to MMPs under the FAI and
is separate from what we proposed in the Contract Year 2027 proposed
rule, which only applies to integrated D-SNPs where the D-SNP is non-
renewing or terminating and the State affirms its interest in
transitioning these enrollees to another comparable integrated D-SNP
with the goal of maintaining integrated coverage. Under Sec.
422.60(g), CMS implements D-SNP passive enrollment only after
consulting with the State Medicaid agency that contracts with the D-
SNP, and requires the MA organization receiving passive enrollment to
provide two notices of opt-out opportunities to enrollees at least 30
and 60 days prior to the enrollment effective date. Under our proposed
amendment to Sec. 422.60(g)(2), the MA organization must also provide
continuity of care with a minimum
[[Page 17528]]
transition period of 120 days. We do not believe an opt-out flag is
needed since we expect any passive enrollment under Sec.
422.60(g)(1)(iii) would be a one-time occurrence in response to an
integrated D-SNP non-renewing or terminating. Individuals passively
enrolled have multiple opportunities to switch their enrollment to
align with their preferred provider or facility, if they so choose, as
detailed earlier in this section.
Comment: Some commenters suggested ideas for involving the State
Medicaid agency in passive enrollment. Some of these commenters
recommended that CMS clarify the flexibilities available to State
Medicaid agencies when permitting passive enrollment, including
opportunities for the States to establish higher standards for D-SNPs
to participate in passive enrollment. Other commenters advised CMS to
amend the proposal to allow passive enrollment if State-specific
requirements for continuity and transitions of care, detailed in SMACs,
are met. The commenters further suggested that CMS defer to States for
individual beneficiary assignments, as States are in the best position
to understand which D-SNP provides the least disruptive transition
option for its members. Some of the commenters recommended that CMS
establish clear criteria for integration, such as aligned enrollment,
robust Medicaid contracts, coordinated care management, and shared data
systems. The commenters believed that passive enrollment should be
permitted when the State Medicaid agency confirms that the receiving D-
SNP maintains or improves integration compared to alternatives.
Commenters also encouraged CMS to collaborate closely with States to
ensure enrollees are informed of any enrollment changes due to the
passive enrollment process and have meaningful opportunities to select
their preferred plan, such as through State-based actions to waive any
Medicaid managed care lock-in policies and issuing notices that outline
the remaining integrated D-SNP options.
Response: We appreciate these suggestions. As we mentioned earlier
in this preamble, since the inception of the passive enrollment process
at Sec. 422.60(g)(1)(iii), CMS's decision to implement passive
enrollment has been discretionary, not mandatory, and subject to a
deliberative process. We expect the circumstances for passive
enrollment under Sec. 422.60(g)(1)(iii) to generally occur when a
State selects a new Medicaid MCO that has an affiliated D-SNP. When the
State selects a new Medicaid MCO, an existing Medicaid MCO with an
affiliated D-SNP may not be selected. In this circumstance, the State
may want to passively enroll full-benefit dually eligible individuals
from the relinquishing D-SNP into the receiving D-SNP. As we noted in
the August 2018 HPMS memo that provided further technical assistance to
D-SNPs on passive enrollment, in order to implement D-SNP passive
enrollment under Sec. 422.60(g)(1)(iii), CMS must consult with the
applicable State, CMS must determine that passive enrollment will
promote integrated care and continuity of care, and the receiving
integrated D-SNP must meet certain requirements. In light of these
requirements and our own longstanding practice, we have every intention
of working with States to ensure that passive enrollment is in line
with State goals and promotes integrated care. To this end, we note
that the proposed amendment at Sec. 422.60(g)(2) does not preclude a
State from including in their SMAC additional criteria for passive
enrollment from an integrated D-SNP that meets the criteria at Sec.
422.60(g)(2). The additional SMAC criteria could include some of the
suggestions advanced by the commenters. Further, a State could include
such criteria in its request for proposal that is used to select
Medicaid MCOs.
Comment: We received several comments suggesting that we include
specific information regarding provider or facility types that would be
included in the proposed continuity of care requirement. These comments
included setting specific requirements for physical therapists,
occupational therapists, speech language pathologists, facility-based
rehabilitation, home health and hospice providers. A commenter
suggested that passive enrollment should emphasize flexibility to allow
States and U.S. Territories, particularly those facing ongoing provider
shortages in key service areas, such as behavioral health, long-term
services and supports, or specialty care, to better protect continuity
of care and avoid passive enrollment into plans with weaker or less
adequate networks. A commenter suggested CMS clarify that, for therapy,
continuity of care includes continuity of the therapeutic relationship,
providers, and locations subject to medical necessity and consistent
with the plan of care. Other commenters suggested that CMS implement
stronger requirements around wait-times for new appointments and/or
provider availability. The commenter further suggested that CMS could
require any D-SNPs receiving passive enrollment to conduct a provider
disruption analysis and share it with the State Medicaid agency prior
to passive enrollment. Other commenters requested that CMS require D-
SNPs to make reasonable efforts to contract with providers with which
they have entered into continuity of care arrangements, to improve the
provider network.
Response: We appreciate these commenters' perspectives. We note
that the continuity of care period included in the proposed amendment
to Sec. 422.60(g)(2)(ii) would require any integrated D-SNP receiving
passive enrollment to provide continuity of care consistent with Sec.
422.112(b)(8)(i)(B) for a minimum of 120 days. Section
422.112(b)(8)(i)(B) applies to any active course(s) of treatment when
an enrollee has enrolled in an MA plan after starting a course of
treatment, even if the service is furnished by an out-of-network
provider. Under our proposal, the integrated D-SNP receiving passive
enrollment must not disrupt or require reauthorization for an active
course of treatment for new plan enrollees for a period of at least 120
days. To that end, any integrated D-SNP receiving passive enrollment
should not impose new administrative hurdles (e.g., new evaluations
solely for coverage purposes) that functionally delay care transitions
and undermine continuity of care. We emphasize that enrollees who are
passively enrolled from a non-renewing or terminating integrated D-SNP
into a comparable integrated D-SNP may opt out of the passive
enrollment or choose other coverage via an SEP. We believe that the
specific suggestions for establishing additional provider network and
continuity of care requirements are out of scope for this rulemaking
and we are not making any changes to the final rule related to those
suggestions.
Comment: A few commenters suggested that CMS establish additional
opportunities around when a dually eligible individual who is passively
enrolled into a D-SNP can enroll in another plan, and that CMS
establish processes to monitor functional outcomes for these dually
eligible enrollees. These comments included suggestions for CMS to
allow movement from integrated plans to Original Medicare, rather than
only to another integrated D-SNP, or to create additional SEPs to allow
enrollment in MA. A commenter specifically requested that CMS clarify
in regulation that the exemption at Sec. 422.60(g)(3)(ii) applies to
individuals who have affirmatively selected a standalone prescription
drug plan. Other commenters emphasized the continued
[[Page 17529]]
importance of enrollees having sufficient notification about upcoming
passive enrollments, the opportunity to make active plan selections
during the passive enrollment process and through any applicable SEP.
Response: We agree with the commenters' perspectives about the
importance of advance notification to enrollees during the D-SNP
passive enrollment process as well as the opportunities to make other
coverage selections. As articulated earlier in this section, D-SNP
passive enrollment under Sec. 422.60(g)(1)(iii) is only implemented
after CMS consults with the State Medicaid agency that contracts with
the D-SNP, and requires the MA organization receiving passive
enrollment to provide enrollees with two separate notices, at least 30
and 60 days prior to the enrollment effective date, of the opportunity
to opt out. If a passively enrolled full-benefit dually eligible
individual wanted to make a change after the effective date of
enrollment into the receiving integrated D-SNP, they could do so
through the one-time-per month SEP for dually eligible individuals and
other LIS eligible individuals to elect Original Medicare and a
standalone PDP or the integrated care SEP which allows full-benefit
dually eligible individuals to elect an integrated D-SNP on a monthly
basis. Further, as we discussed earlier in this preamble and in the
preamble to the Contract Year 2027 proposed rule, we did not propose
amendments to Sec. 422.60(g)(5), which describes an enrollee's access
to the SEP at Sec. 423.38(c)(10). As such, this SEP would also be
accessible to enrollees who are interested in switching their coverage
(90 FR 54972).
Comment: We received several comments offering support for our
proposal that receiving D-SNPs operate as applicable integrated plans.
Other suggestions included establishing a definition for ``new
integrated plan'' and allowing all D-SNPs that meet strong integration
standards, not just AIPs, to be eligible for passive enrollment,
arguing that non-AIP D-SNPs can still provide significantly better
coordination of Medicare and Medicaid services than other MA plans or
Medicare FFS. Commenters also recommend that CMS clarify how the level
of integration would be assessed if provider network adequacy and
benefits are no longer criteria for passive enrollment and suggested
adding to the proposed requirement that the receiving D-SNP must offer
a substantially similar service array. A commenter recommended that CMS
consider distributing enrollment among remaining qualified D-SNPs when
a D-SNP exits the market.
Response: We proposed to amend Sec. 422.60(g)(2)(i) to describe
the integrated D-SNPs that can receive passive enrollment as plans that
operate as an AIP as described at Sec. 422.561 in an effort to use
consistent and accurate language throughout our processes and
documentation. We proposed this change since, as stated in the Contract
Year 2027 proposed rule (90 FR 54970) and earlier in this section, AIPs
meet higher standards of integration, quality, and performance
benchmarks than non-AIPs, and have 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 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 HIDE SNPs that are not AIPs or coordination-only D-
SNPs that are not also AIPs. Under our proposal, any integrated D-SNPs
that meet the requirements in proposed Sec. 422.60(g)(2) could receive
passive enrollment from the non-renewing or terminating D-SNP.
Additionally, in the August 2018 HPMS memo that provided further
technical assistance to D-SNPs on passive enrollment, we did not state
that only one plan may be selected to receive enrollees through passive
enrollment. As we work with the State through the process, it could be
possible for multiple integrated D-SNPs to receive passive enrollment.
Further, as we discussed in the Contract Year 2027 proposed rule,
since integration levels are defined both in statute at section
1859(f)(8)(D) of the Act 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 or service array 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 (90 FR 54972). For example, if a HIDE SNP that is
an AIP is non-renewing in the upcoming plan year, if the State agrees
to a passive enrollment process, the receiving D-SNP would most likely
also be a HIDE SNP that is an AIP. In the same State, the array of
benefits offered by HIDE SNPs that are AIPs would most likely not be
meaningfully different.
Comment: We received a few comments that were outside of the scope
of this proposal. Commenters suggested that CMS should require D-SNPs
serving beneficiaries with serious mental illness to include licensed
mental health professionals--whether mental health counselors, marriage
and family therapists, clinical social workers, or other qualified
behavioral health specialists--directly in care coordination teams or
ensure immediate access to behavioral health consultation for care
managers. Some commenters suggested using Medicaid managed care
contracts to require Medicaid managed care plans to offer HIDE SNPs.
Other commenters requested more information about default enrollment.
The commenters opined that there is very little public data about
default enrollment including total numbers of individuals default
enrolled and whether default enrollment opt-out notices follow language
and disability preferences of the enrollee. Commenters request data to
understand whether default enrollment is working for people and truly
reflecting their preferences.
Response: We thank the commenters for their input. While we
consider the comments outside the scope of this rulemaking, we take the
opportunity to point commenters to information we made available
regarding default enrollment. We provide data on the number of D-SNPs
approved to participate in default enrollment under Sec. 422.66(c)(2)
and the annual number of individuals default enrolled https://www.cms.gov/medicare/enrollment-renewal/managed-care-eligibility-enrollment.
After considering the comments we received and for the reasons
outlined in the proposed rule and our responses to comments, we are
finalizing the proposed amendments to Sec. 422.60(g)(2) without
modification.
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
[[Page 17530]]
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.
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
422.514(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 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 lowering the risk of inappropriate billing.
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 the
suggestions put forth by commenters. 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 enrolled in
both a D-SNP and affiliated Medicaid MCO offered under the same
[[Page 17531]]
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 continued to receive feedback from stakeholders on some
challenges in implementing these provisions in States without mandatory
Medicaid managed care for the dual eligible population. For example,
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. The requirements at Sec. 422.514(h) do not
apply to MA organizations in a State that only offers coordination-only
D-SNPs if these MA organizations, their parent organizations, or any
entity that shares a parent organization with the MA organization does
not also contract with the State as a Medicaid MCO that enrolls full-
benefit dually eligible individuals. However, the Sec. 422.514(h)
requirements do apply to a State's HIDE SNPs if the MA organization
also contracts with the State as a Medicaid MCO that enrolls full-
benefit dually eligible individuals. In the Contract Year 2027 proposed
rule, we provided a specific example in Pennsylvania to describe how
Sec. 422.514(h) requirements would potentially be disadvantaging to MA
organizations offering coordination-only D-SNPs and HIDE SNPs that both
enroll full-benefit dually eligible individuals in the same service
areas. Please refer to 90 FR 54974 for the full discussion, and to our
response to comments later on in this preamble which provide a
correction to this example.
In 2027, in a State 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 the State 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 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.
In the Contract Year 2027 proposed rule, we proposed 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. In the Contract Year 2027 proposed rule
at 90 FR 54974, we explained that 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 start disenrolling those members in
2030 as currently required under Sec. 422.514(h).
We proposed to amend SMAC requirements at Sec. 422.107(d)(1)
through adding a new (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, 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) would permit
coordination-only D-SNPs that enroll full-benefit dually eligible
individuals to enroll full-benefit dually eligible individuals who are
enrolled in Medicaid FFS.
At Sec. 422.514(h)(3), we proposed to add new (iii) and (iv). For
any SMACs that permit full-benefit dually eligible individuals to
enroll in (a) a coordination-only D-SNP per the 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. We explained that
our belief was that 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
[[Page 17532]]
proposed adding a new (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 considered 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 did not propose 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 solicited 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.
In the Contract Year 2027 proposed rule, we stated our position
that 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. The intent of our proposed changes was to remove
the disadvantage some 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, our proposed changes were
intended to 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 FFS enrollees. We
explained in the Contract Year 2027 proposed rule that 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 (MSPs), 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 plan benefit packages 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 proposed an exception at
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 acknowledged in the Contract Year 2027 proposed rule that this
proposal is a change from what we previously stated in response to
comments in the April 2024 final rule. We also acknowledged 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.
[[Page 17533]]
We solicited 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 stated that we were 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 in the Contract Year 2027 proposed rule we identified a few
States that we expected would benefit from our proposals, we invited
commenters to identify other States that could benefit or be negatively
impacted. As outlined earlier in this section, we also solicited
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. Further, we
solicited 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 also stated our
interest in perspectives on how limiting D-SNPs in the U.S. Territories
would affect enrollees and the consumer choice in U.S. Territories.
We received the following comments on this proposal and respond to
them below:
Comment: Many commenters, including MACPAC, expressed their support
for our proposal 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. Commenters opined
that this proposal accommodates diversity in State Medicaid managed
care requirements while preserving opportunities for integrated care
for all dually eligible individuals. Commenters expressed that while
significant integration cannot be achieved for dually eligible
enrollees in Medicaid FFS, D-SNPs might still provide helpful support
to Medicaid FFS enrollees, including in obtaining Medicaid-covered
services and navigating Medicaid appeals and grievances processes.
MACPAC explained that the proposal recognized CMS's efforts to
accommodate States' varying managed care landscapes and the challenges
States and plans face as they work toward greater integration of
Medicare and Medicaid benefits.
Response: We thank the commenters for their support for this
proposal. As we stated in the Contract Year 2027 proposed rule, our
intention in proposing this exception was to 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 unaligned members in 2030 as currently
required under Sec. 422.514(h). We appreciate the commenters'
confirmation of our understanding that the varied Medicaid managed care
landscapes necessitate an exception for when Medicaid FFS is available
and exclusively aligned enrollment cannot be achieved.
Comment: Some commenters objected to the proposal to amend
Sec. Sec. 422.107(d)(1) and 422.514(h). These commenters expressed
their belief that this proposal would reduce the scope of or limit
enrollment in coordination-only D-SNPs or that this proposed language
could result in a D-SNP having more than one health plan under the same
MA organization operating in the same service area with different
networks, offering different benefits, and requiring different
premiums, causing market confusion for dually eligible individuals.
Response: We thank the commenters for their attention to this
proposal, and we appreciate the opportunity to clarify aspects of what
we proposed. We would like to reiterate that the intention of this
proposal is to address the challenges that some MA organizations may
have in complying with the requirements at Sec. 422.514(h) in States
where there is no mandatory Medicaid managed care program for all full-
benefit dually eligible enrollees. As our stated goal has been to
promote integrated care, the purpose of the proposal put forth in the
Contract Year 2027 proposed rule is to avoid the need for MA
organizations in States without mandatory Medicaid managed care to
cease enrolling full-benefit dually eligible individuals who are in
Medicaid FFS starting in 2027 and disenroll those members in 2030 as
would be required under existing Sec. 422.514(h). Further, under our
proposal at Sec. 422.514(h)(3), 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.
Also, the proposed amendment to Sec. 422.107(d)(1) would permit
coordination-only D-SNPs that are affected by the requirements at Sec.
422.514(h) to enroll full-benefit dually eligible individuals who are
enrolled in Medicaid FFS. We respectfully disagree with the commenters'
assumptions that the proposed rule would limit coordination-only D-SNPs
in any way. In fact, we believe that this policy would have positive
implications for coordination-only D-SNPs that are affected by the
current Sec. 422.514(h) language. We also emphasize that the
requirements at Sec. 422.514(h) do not apply to MA organizations in a
State that only permits plans to offer coordination-only D-SNPs if
these MA organizations, their parent organizations, or any entity that
shares a parent organization with the MA organization does not also
contract with the State as a Medicaid MCO that enrolls full-benefit
dually eligible individuals.
Comment: We received a few comments from States and advocates on
how the proposed provisions would affect populations that are excluded
from mandatory Medicaid managed care enrollment, or who have the choice
to enroll in Medicaid managed care, in a particular State. Commenters
were supportive of the proposal to allow these populations to enroll,
or continue to be enrolled, in a D-SNP affected by requirements of
Sec. 422.514(h), but noted that the ``majority of'' threshold proposed
at Sec. 422.514(h)(3)(iii) may not have the intended impact for
beneficiaries in States where carve-outs are for a small population,
and would be unable to meet the ``majority of'' threshold.
Response: We appreciate the responses from commenters illuminating
how some States carve certain populations out of mandatory Medicaid
managed care. Our intention in proposing this provision was to remove
the disadvantage that MA organizations that offer coordination-only D-
SNPs with an affiliated Medicaid managed care plan and HIDE SNPs could
encounter starting (a) in 2027, when they would need to stop enrolling
full-benefit dually eligible
[[Page 17534]]
individuals into the D-SNP that enrolls Medicaid FFS enrollees and (b)
in 2030, when they would need to disenroll full-benefit dually eligible
individuals from the D-SNP that enrolls Medicaid FFS enrollees. We
agree that the inclusion of ``majority of'' in the proposed language at
Sec. 422.514(h)(3)(iii) could cause HIDE SNPs in States with small
populations of full-benefit dually eligible individuals carved out of
mandatory Medicaid managed care to not qualify for the proposed
exception. For example, States that have carved-out individuals with
intellectual and development disabilities from mandatory Medicaid
managed care may have a coordination-only D-SNP or HIDE SNP enrolling
the carved-out population. Because the carved-out population is
relatively small, the HIDE SNP would not likely meet the proposed
``majority of'' requirement, and these D-SNPs would need to cease
enrolling these 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). In light of these concerns,
we are modifying the language proposed in Sec. 422.514(h)(3)(iii) that
would require a ``majority of'' HIDE SNP enrollees to be full-benefit
dually individuals enrolled in Medicaid FFS in order to qualify for the
proposed exception. We provide more detail on this proposed
modification below.
Comment: We received many comments on our proposed amendment to
Sec. 422.514(h)(3), which would add new paragraph (iii) stipulating in
part that the MA organization, its parent organization, or an entity
that shares a parent organization with the MA organization that has a
HIDE SNP with a majority of individuals enrolled in Medicaid FFS, would
be able to offer one or more additional D-SNPs for full-benefit dually
eligible individuals in the same service area. Commenters expressed
their belief that the proposed exception at Sec. 422.514(h)(3)(iii)
extends beyond the stated intent in the preamble and may create
confusion for States and health plans, since the proposed amendment did
not include corresponding limitations or qualifiers.
Some commenters requested clarification on the use of the term
``majority,'' while other commenters suggested removing the
``majority'' threshold altogether. Commenters who suggested its removal
stated that such a requirement could create operational challenges for
D-SNPs whose enrollment fluctuates near the threshold or it could
create unintended incentives for D-SNPs to avoid transitioning eligible
members into integrated D-SNPs. Other commenters suggested that we
revise the ``majority'' threshold requirement to avoid impeding aligned
enrollment efforts if States transition their Medicaid FFS enrollees to
Medicaid managed care.
Response: We thank the commenters for their thoughtful opinions and
questions. As we explained in the Contract Year 2027 proposed rule, our
intention with the proposed language at Sec. Sec. 422.514(h)(3)(iii)
and 422.107(d)(1)(i) was to 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 for full-benefit
dually eligible individuals 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) (90
FR 54974). We proposed that this exception would apply where enrollment
of full-benefit dually eligible individuals represents a majority of
the HIDE SNP's enrollees, to avoid the proposed exception applying to
HIDE SNPs with only small proportion of enrollees in Medicaid FFS.
Upon consideration of the numerous comments received on the impact
of the proposed ``majority'' threshold for HIDE SNPs and to clarify the
scope of the proposal, we are modifying some of the language at Sec.
422.107(d)(1)(i) and finalizing as proposed other portions of Sec.
422.107(d)(1)(i). First, we are finalizing as proposed the language at
Sec. 422.107(d)(1)(i) providing that in order to trigger the
stipulation requirement described in Sec. 422.107(d)(1)(i), the SMAC
must include language allowing enrollment of full-benefit dually
eligible individuals into the D-SNP. Second, we are finalizing as
proposed the language at Sec. 422.107(d)(1)(i) that the SMAC must
stipulate that such full-benefit dually eligible individual 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. Third,
based on comments we received, we are modifying the proposed language
at Sec. 422.107(d)(1)(i) to specify that such an exception is
available to a HIDE SNP as well as a coordination-only D-SNP that
operates in a State where the State Medicaid agency does not mandate
enrollment in Medicaid managed care for all full-benefit dually
eligible individuals. We believe that this language appropriately
addresses D-SNPs that are subject to Sec. 422.514(h) requirements and
operate in a State with voluntary Medicaid managed care and addresses
the concerns expressed by commenters on this proposal.
In response to numerous comments we received and to more
effectively achieve the intent of the proposal, we are modifying some
of the language at Sec. 422.514(h)(3)(iii) and finalizing as proposed
other portions of Sec. 422.514(h)(3)(iii). We are finalizing as
proposed that the MA organization, its parent organization, or an
entity that shares a parent organization with the MA organization
subject to this new exception may offer one or more additional D-SNPs
for full-benefit dually eligible individuals who are enrolled in
Medicaid FFS. We are modifying the provision by removing the threshold
requirement that the majority of HIDE SNP enrollees must be enrolled in
Medicaid FFS in order to qualify for the new exception. We are
replacing the majority threshold with language specifying that (1) if
the MA organization subject to Sec. 422.514(h)(1) holds a State
Medicaid agency contract with a State that does not mandate enrollment
in Medicaid managed care for all full-benefit dually eligible
individuals and (2) if the State Medicaid agency contract allows
enrollment of full-benefit dually eligible individuals who are enrolled
in Medicaid FFS, the MA organization may enroll, in a coordination-only
D-SNP or HIDE SNP, full-benefit dually eligible individuals who are
enrolled in Medicaid FFS. This modification will remove the proposed
majority threshold that raised concerns for the commenters, while
ensuring that the exception is only available to the extent a D-SNP
operates in a State that does not require mandatory Medicaid managed
care for all of its dually eligible enrollees and is allowed, via the
State Medicaid agency contract, to enroll Medicaid FFS enrollees. This
change is consistent with our intent, as stated in the proposed rule,
to allow HIDE SNPs and coordination-only D-SNPs to continue enrollment
of dually eligible individuals in a D-SNP in service areas where those
individuals are enrolled in Medicaid FFS (90 FR 54974). As we stated in
the proposed rule, we did not want to inadvertently prevent integrated
D-SNPs from continuing to enroll full-benefit dually eligible
individuals who are enrolled in Medicaid FFS. Additionally, in response
to public comments seeking clarification on which enrollees D-SNPs
subject to this exception may enroll, we are adding language stating
that (3) D-SNPs may not enroll full-benefit dually eligible individuals
who are enrolled in
[[Page 17535]]
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. This language mirrors the
language we are finalizing at Sec. 422.107(d)(1).
We are making these modifications in light of concerns raised by
many commenters that the ``majority of'' threshold was ambiguous and
difficult to achieve. Having considered these comments in light of the
intent of the exception as described in the proposed rule, we have
determined that the modified language for Sec. 422.514(h)(3)(iii)
would more effectively result in the desired outcome, as it would allow
enrollment of smaller populations that States exclude from Medicaid
managed care enrollment, or who have a choice to enroll in Medicaid
managed care. Commenters noted that such enrollees may only represent a
minority of coordination-only D-SNP or HIDE SNP enrollees and thus
tying the new exception to a ``majority of'' enrollees in Medicaid FFS
would exclude such full-benefit dually eligible individuals from
enrolling into a HIDE SNP as set forth in State policy. As stated in
the proposed rule, our goal is to 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 avoid the need
to disenroll those members in 2030 as currently required under Sec.
422.514(h) in States that do not mandate enrollment in Medicaid managed
care. (90 FR 54974) Furthermore, the requirements set forth in the SMAC
will ensure that only coordination-only D-SNPs and HIDE SNPs with
Medicaid FFS enrollment operating in States that do not mandate
Medicaid managed care for all full-benefit dually eligible individuals
and are approved by the State would have the option to use the
exception finalized at 422.514(h)(3)(iii) for Medicaid FFS enrollees.
Moreover, consistent with CMS's stated intent to allow D-SNPs to
continue enrolling Medicaid FFS enrollees, the exception would not
allow for the enrollment of individuals enrolled in unaligned Medicaid
managed care. Thus, we do not believe it is necessary to limit the
exception to HIDE SNPs that have a majority of its enrollees in
Medicaid FFS.
Taken together, the modifications that we are finalizing at
Sec. Sec. 422.107(d)(1)(i) and 422.514(h)(3)(iii) more effectively
alleviate the concerns documented in the Contract Year 2027 proposed
rule with regard to Sec. 422.514(h) requirements potentially
disadvantaging MA organizations offering coordination-only D-SNPs and
HIDE SNPs that enroll full-benefit dually eligible individuals in the
same service areas where those individuals are enrolled in Medicaid FFS
(90 FR 54974). Based on the numerous comments we received, we would
like to reiterate that this exception is only applicable to 1) D-SNPs
that are subject to the requirements of Sec. 422.514(h) and that 2)
operate in a State that does not mandate that all full-benefit dually
eligible individuals enroll in Medicaid managed care.
Comment: Other commenters questioned our inclusion, in the Contract
Year 2027 proposed rule, of Pennsylvania as an example of a State that
does not mandate Medicaid managed care for full-benefit dually eligible
individuals. Commenters clarified that although the State does not have
100-percent mandated Medicaid managed care, most Medicaid beneficiaries
are enrolled in mandated managed care, and very few Medicaid
beneficiaries are in FFS. Those enrolled in Medicaid FFS are limited to
individuals under a particular Medicaid waiver authority, enrolled in
PACE, or residents of State hospitals and intermediate care facilities.
Response: We thank the commenters for their clarification of
Pennsylvania's landscape. As discussed earlier in this section, we are
modifying the scope of the provisions to apply to coordination-only D-
SNPs and HIDE SNPs that are subject to the requirements of Sec.
422.514(h) and that operate in a State that does not mandate enrollment
in Medicaid managed care for all full-benefit dually eligible
individuals. As finalized, the exception at Sec. 422.514(h)(3)(iv)
would allow MA organizations that offer both a coordination-only D-SNP
and HIDE SNP in Pennsylvania to continue to enroll full-benefit dually
eligible individuals that are in Medicaid FFS should the State allow
such enrollment in the SMAC.
Comment: We received other comments seeking clarification on the
intended impact of this proposal. Some commenters sought clarification
on what was proposed in the Contract Year 2027 proposed rule, including
whether CMS intends for the proposed language at Sec.
422.514(h)(3)(iii) to allow enrollment of full-benefit dually eligible
individuals in Medicaid FFS to also include full-benefit dually
eligible individuals who are enrolled in a Medicaid MCO through a
parent company that differs from the coordination-only D-SNP or HIDE
SNP.
Response: We appreciate the opportunity to clarify what types of
enrollees would be eligible for enrollment under this exception. As we
discussed earlier in this preamble, if the State Medicaid agency
contract allows enrollment of full-benefit dually eligible individuals
who are enrolled in Medicaid FFS, the MA organization may enroll, in a
coordination-only D-SNP or HIDE SNP, full-benefit dually eligible
individuals who are enrolled in Medicaid FFS. Additionally, we are also
finalizing language at Sec. 422.107(d)(1)(i) and adding similar
language at Sec. 422.514(h)(3)(iii) stating that D-SNPs may not enroll
full-benefit dually eligible individuals who are 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. We further note that this
language would allow eligible D-SNPs to enroll new Medicaid FFS
enrollees and continue enrollment for any current enrollees who also
have Medicaid FFS.
Comment: We received a few comments seeking clarification or making
recommendations about whether this proposed exception at Sec.
422.514(h)(3)(iii) would be a permanent exception. Commenters
questioned whether the proposed flexibilities end in 2030 and suggested
that this proposal be a time-limited transition mechanism, rather than
a permanent policy solution.
Response: While we appreciate the commenters' interest in making
the proposed exception at Sec. 422.514(h)(3)(iii) a time-limited
transition mechanism, our proposal was to make this exception
permanent. We appreciate the consideration that commenters paid to
evolving landscapes in States and how this may affect future
enrollment. As we discussed previously in this preamble, coordination-
only D-SNPs and HIDE SNPs subject to Sec. 422.514(h)(3)(iii) will be
allowed to retain full-benefit dually eligible enrollees in Medicaid
FFS and newly enroll full-benefit dually eligible enrollees in Medicaid
FFS to the extent that such enrollment is allowed via the State
Medicaid agency contract per Sec. 422.107(c)(2) and the contract is
with a State that does not mandate Medicaid managed care for all full-
benefit dually eligible individuals. States retain the option to
stipulate enrollment and eligibility requirements in their State
Medicaid agency contracts. Nothing in this final rule precludes a State
from adding requirements to their State Medicaid agency contracts
through Sec. 422.107(c) that would prohibit or
[[Page 17536]]
place a time limit on the enrollment of full-benefit dually eligible
individuals enrolled in Medicaid FFS by the D-SNP.
Comment: We received several comments in response to our proposal
to add specific language at Sec. 422.514(h)(3)(iv) regarding the
proposed requirement that MA organizations with D-SNPs subject to
paragraph (h)(3)(iii) must comply with responsibilities at existing
Sec. 422.562(a)(5). Also, commenters responded to our request for
comment on whether to 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 in
Sec. 422.562(a)(5). A few commenters requested that we provide more
specificity regarding potential reporting requirements. Many other
commenters were opposed to the suggestion of additional reporting
requirements, with a commenter stating that there could be confusion
among plans as to what is required, given that Sec.
422.562(a)(5)(i)(A) is currently applicable to all D-SNPs. A commenter
objected to our proposal to add language at Sec. 422.514(h)(3)(iv),
stating their belief that such an action would require CMS to pursue
Congressional action to redefine these Medicaid FFS coordination-only
D-SNPs and HIDE SNPs separate from D-SNPs in statute.
Response: We thank the commenters for their consideration of the
proposed regulation text at Sec. 422.514(h)(3)(iv) and the request for
comment considering potential reporting requirements for obligations
proposed in Sec. 422.514(h)(3)(iv). Our intention in proposing to add
text at Sec. 422.514(h)(3)(iv) stating that MA organizations with D-
SNPs subject to proposed Sec. 422.514(h)(3)(iii) must comply with
responsibilities at Sec. 422.562(a)(5) was to underscore the
obligation that D-SNPs have to assist an enrollee in their plan 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. This obligation applies to all D-SNPs
and their enrollees regardless of enrollment in Medicaid managed care
or Medicaid FFS. Upon further review, we agree with commenters that
adding a reference to Sec. 422.562(a)(5) at Sec. 422.514(h)(3)(iv)
would be redundant since all D-SNPs are subject to the existing
requirements at Sec. 422.562(a)(5), so we are not finalizing our
proposal to add that language in Sec. 422.514(h)(3)(iv). We further
appreciate the comments received in response to our request for comment
on whether to 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 in
Sec. 422.562(a)(5). We are not taking any action on this comment
solicitation in this rulemaking, but we may consider exploring
opportunities for potential future rulemaking on this topic.
Finally, we appreciate the viewpoint that the proposed regulatory
amendment may be perceived as defining coordination-only D-SNPs and
HIDE SNPs with Medicaid FFS enrollees as a separate type of D-SNP.
However, we do not believe this to be the case. Through this proposal,
we are providing an exception for coordination-only D-SNPs and HIDE
SNPs that are subject to the requirements of Sec. 422.514(h) and that
operate in a State that does not mandate all full-benefit dually
eligible individuals to enroll in Medicaid managed care. We are neither
proposing nor finalizing another category of integration. As such, we
respectfully disagree with commenters that Congressional action would
be needed.
Comment: We received many other comments seeking clarification on
the intended impact of this proposal. Some commenters sought
clarification on how this proposed policy would be operationalized, if
finalized. Commenters sought clarification on who is eligible to enroll
in a D-SNP under this proposed exception, including how individuals
enrolled in prepaid inpatient health plans (PIHPs) and prepaid
ambulatory health plans (PAHPs) would be factored in. Other commenters
sought information on how these proposed changes would affect how many
PBPs a MA organization could have, whether plans would be allowed to
consolidate existing coordination-only D-SNP PBPs into their HIDE-SNP
PBPs in their Medicaid MCO service areas, whether plans would be
required to create new coordination-only D-SNPs or MA organization
contracts or use existing coordination-only D-SNPs and MA organization
contracts to take advantage of the proposed exception in addition to
whether MA organizations could expand their coordination-only D-SNPs
into areas outside of their Medicaid MCO service area. We also received
questions regarding crosswalking enrollees between coordination-only D-
SNPs and HIDE SNPs, and how proposed changes would affect segmented
PBPs. Commenters expressed concern that the proposed language could be
read to impose an overall limit on enrollment of individuals in
coordination-only D-SNPs and non-affiliated Medicaid MCOs, including
those in non-overlapping service areas.
Response: We appreciate the questions raised by the commenters. We
would like to reiterate that 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 dually 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. If a D-SNP, or the
D-SNP's parent organization, does not contract with the State as a
Medicaid MCO, then the D-SNP would not be affected by the provisions in
Sec. 422.514(h) and would be able to enroll anyone eligible for their
plan per the provisions at Sec. 422.107(c)(2). To the extent that a
State does not require enrollment of all full-benefit dually eligible
individuals into Medicaid managed care and to the extent that
enrollment of full-benefit dually eligible enrollees in Medicaid FFS is
allowed via the State Medicaid agency contract per Sec. 422.107(c)(2),
the MA organization would be permitted to have coordination-only D-SNPs
or HIDE SNPs that enroll or continue to enroll such individuals who are
in Medicaid FFS. We therefore disagree with concern that the proposed
language could be read to impose an overall limit on enrollment of
individuals in coordination-only D-SNPs and non-affiliated Medicaid
MCOs, including those in non-overlapping service areas.
We appreciate commenters' concern regarding the application of this
proposed exception. We note that we will respond to some of the more
detailed operational questions in an updated version of the Frequently
Asked Questions (FAQs) and
[[Page 17537]]
Enrollment Scenarios for Sec. 422.514(h).\111\ However, we appreciate
the opportunity to offer some clarification in terms of scope. In
response to comments in the April 2024 final rule, we noted that we
believed that applying the provisions at Sec. 422.514(h) to D-SNPs
where there is an affiliated PIHP or PAHP could create incentives that
are disruptive yet do not significantly further the goals of our
proposals. As a result, we did not extend the enrollment limitation
policies in Sec. 422.514(h)(1) and (2) beyond Medicaid MCOs or beyond
D-SNPs that enroll full-benefit dually eligible individuals, meaning
that an MA organization offering a D-SNP in the same area where it, its
parent organization, or an entity (or entities) that share a parent
organization with the MA organization contracts with the State only as
a PIHP or PAHP, would not be subject to the enrollment limitations at
Sec. Sec. 422.503(b)(8), 422.504(a)(20), or 422.514(h). Following the
reasoning from the April 2024 final rule, D-SNPs with an affiliated
PIHP or PAHP not subject to Sec. 422.514(h) would have no need to take
advantage of the proposed exception at Sec. 422.514(h)(3)(iii).
---------------------------------------------------------------------------
\111\ Frequently Asked Questions (FAQs) and Enrollment Scenarios
for Sec. 422.514(h). Found at: https://www.cms.gov/files/document/cy2025madsnpsfaqs.pdf.
---------------------------------------------------------------------------
We would also like to take this opportunity to note that if the
exception we are finalizing at Sec. 422.514(h)(3)(iii) is applicable
to a D-SNP, the State in the State Medicaid agency contract should,
through existing requirements at Sec. 422.107(c)(2), specify if there
must be a separate PBP for enrollees who are enrolled in Medicaid FFS.
Comment: A few commenters recommended that CMS provide technical
assistance to States and urged CMS to produce enrollee-facing materials
for individuals to understand their D-SNP enrollment choices.
Response: We thank the commenters for their suggestion. We intend
to continue to provide technical assistance on all aspects of D-SNP
policy, including implementation of Sec. 422.514(h), to interested
States. We will update CMS-produced enrollee-facing materials with
appropriate information reflecting the exceptions to Sec. 422.514(h)
finalized in this rule.
Comment: Numerous commenters supported the proposed exception at
Sec. 422.514(h)(3)(v), which would exempt MA organizations operating
in U.S. Territories that have not adopted MSP from the requirements at
Sec. 422.514(h)(1)(i). Some commenters noted that this proposed
exception recognized the unique Medicare and Medicaid landscapes in the
U.S. Territories, including them not having adopted MSP and using their
MA rebate to reduce Part B premiums and provide supplemental benefits.
Several commenters mentioned that the proposed exception would maintain
beneficiary choice, minimize beneficiary disruption, preserve
operational flexibility in the Puerto Rico D-SNP market, in particular.
A few of these commenters suggested that CMS consider other standards
to trigger the exception to Sec. 422.514(h)(1)(i), allowing the
proposed exception to still apply should Puerto Rico adopt MSP in the
future. A commenter offered the example of CMS applying the proposed
exception in regions where state or local law requires D-SNPs to be
fully integrated.
Response: We appreciate these perspectives and agree that the
unique landscape in the U.S. Territories, including Puerto Rico,
necessitates the proposed exception from the requirements at Sec.
422.514(h)(1)(i). Without the proposed exception, beginning in contract
year 2027, the MA organizations offering D-SNPs to full-benefit dually
eligible individuals in the U.S. Territories that have not adopted MSP
could 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 believe that triggering the
proposed exception to Sec. 422.514(h)(1)(i) based on participation in
MSP is appropriate since should a U.S. Territory, such as Puerto Rico,
adopt MSPs there would be less need for D-SNPs to differentiate their
plan benefit packages by level of Part B premium reduction amount and
supplemental benefits. We are not persuaded to change the requirements
for the proposed exception. We clarify that for purposes of this
exception, U.S. Territory means any Territory of the United States,
including the Commonwealth of Puerto Rico, the Virgin Islands of the
United States, Guam, the Commonwealth of the Northern Mariana Islands,
and American Samoa.
Comment: A commenter opposed the exception proposed in Sec.
422.514(h)(3)(v), explaining that MA organizations that do not adopt
MSP may have higher premiums and cost sharing, making care less
affordable for dually eligible individuals. The commenter further
stated that allowing MA organizations to offer multiple D-SNPs in the
same service area could cause market confusion and lead to less robust
plan benefit packages, forcing individuals to choose between the
benefits they need in different plans based on affordability rather
than one plan that offers all services needed.
Response: Given the unique landscape of the U.S. Territories with
no adoption of MSPs, we believe more flexibility is needed to
differentiate D-SNP plan benefit packages. We believe the benefits of
additional differentiation by level of Part B premium reduction and
supplemental benefits outweigh the additional plan benefit packages
full-benefit dually eligible individuals would need to review. We will
continue to monitor the D-SNP market in the U.S. Territories and
consider future rulemaking, as needed.
Comment: Additionally, we received several comments that were out
of scope of this proposal, including suggestions on how to support the
success of D-SNPs in rural and remote areas, enrollment periods,
arguments against exclusively aligned enrollment, upcoding and
truncating services, requiring States to align enrollment timelines
during the transition to integrated enrollment, and incorporating
Federal quality reporting. We received a suggestion that the Medicaid
FFS model should be required to coordinate care, but that the State
remain responsible for coverage and reimbursement.
Response: We thank the commenters for their questions and concerns
and appreciate the breadth of engagement. We appreciate the
recommendations; however, these comments are outside the scope of this
rulemaking. We will consider exploring opportunities for potential
future rulemaking to address some of these issues.
After considering the comments we received and for the reasons
outlined above and our responses to comments, we are finalizing our
proposal with a few modifications. First, we are finalizing proposed
language at Sec. 422.107(d)(1)(i) with modifications to specify that
such an exception is available to a HIDE SNP as well as a coordination-
only D-SNP that operates in a State where the State Medicaid agency
does not mandate enrollment in Medicaid managed care for all full-
benefit dually eligible individuals. Second, we are finalizing portions
of the language at Sec. 422.514(h)(3)(iii) as proposed; this exception
would allow an eligible 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 who are enrolled in Medicaid fee-for-service. We
[[Page 17538]]
are also finalizing other modifications: we are removing the language
referring to a ``majority of'' enrollees and replacing it with language
specifying that (1) if the MA organization subject to Sec.
422.514(h)(1) holds a State Medicaid agency contract with a State that
does not mandate enrollment in Medicaid managed care for all full-
benefit dually eligible individuals and (2) if the State Medicaid
agency contract allows enrollment of full-benefit dually eligible
individuals who are enrolled in Medicaid FFS, the MA organization may
enroll in a HIDE SNP or coordination-only D-SNP, full-benefit dually
eligible individuals who are enrolled in Medicaid FFS. We are also
adding language stating that (3) D-SNPs may not enroll full-benefit
dually eligible individuals who are 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. Third, we are not
finalizing the proposed language at 422.514(h)(3)(iv). Fourth, we are
finalizing our exception to Sec. 422.514(h)(3)(v) as proposed, which
will be located at Sec. 422.514(h)(3)(iv).
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 State Medicaid agency contracts (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. The timeline and
duration for these procurements is distinct to each State and may
operate off-cycle from MA contracting at the Federal level, meaning
that 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.
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 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.
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 first proposed 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
was 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 proposed 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 proposed 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
[[Page 17539]]
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 stated 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 noted
that our proposed amendments to Sec. Sec. 422.510(a)(4)(xvii) and
(b)(2)(i)(D) did not preclude a MA organization from seeking
termination of a contract by mutual consent, per Sec. 422.508.
We noted that when an MA organization has multiple plans under one
contract, per 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 stated 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 proposed 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 requested comment on this proposal, including but not limited to
whether this package of provisions would accomplish the goals we have
laid out in this preamble and whether there should be any other
additional modifications to consider.
We received the following comments on this proposal and respond to
them below:
Comment: Many commenters supported CMS' proposal to codify in
regulation at Sec. 422.510(a)(4) 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). Commenters expressed their
appreciation for CMS clarifying the administrative process in such
situations and stated that the proposed provision would provide clarity
and codify necessary Federal authority when State contract terminations
occur off-cycle from MA contracting.
Response: We thank the commenters for their support of this
proposal and agree that the proposed language provides clarity on the
administrative process when an MA organization is no longer eligible to
offer a D-SNP due to not holding the required SMAC.
Comment: A few commenters opposed our proposal, stating that
immediate terminations would cause disruption of care for vulnerable
populations and create obstacles for beneficiaries to transition to new
plans. Commenters further opined that CMS should establish reasonable
transitional periods to ensure beneficiaries' continued access to
medical services.
Response: We appreciate the commenters' concern for possible
disruption of care and beneficiary well-being. We would like to
reiterate that the purpose of this proposal was to codify that loss of
a SMAC is a valid basis for contract termination under CMS authority
per section 1859(f)(3)(D) of the Act. As we discussed in the preamble
to the Contract Year 2027 proposed rule, in some instances where a SMAC
was terminated by a State during the plan year, 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. This is a process
by which CMS, the State and the D-SNP are able to mutually 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. (90 FR 54976). This process
will continue to be available. Our goal in adding new (xvii) at Sec.
422.510(a)(4) is to establish a an express pathway by which CMS may
immediately terminate contracts based on termination of a SMAC, since,
as discussed in preamble to the Contract Year 2027 proposed rule, an MA
organization with a terminating SMAC is not required to seek a mutual
termination of its MA contract with CMS. (90 FR 54977). Our proposed
language does not preclude an eligible plan from seeking mutual
termination, per Sec. 422.508. 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 and could limit
potential disruption of beneficiary access to integrated care.
Further, we would like to take the opportunity to clarify that
while we refer to this process as an ``immediate termination,'' as
stated previously in this section and in the Contract Year 2027
proposed rule, we generally receive advance notice when a State is
terminating or ending a Medicaid MCO contract or their SMAC contract.
In instances where an MA organization does not agree to a mutual
termination, or where the timeline of a mutual termination would pose
risks to beneficiaries, an immediate termination allows us to
accommodate an orderly shutdown of operations. An immediate termination
does not mean that a termination would occur without notice but rather
allows for a more expedited process when necessary to protect enrollee
health and safety.
Comment: A few commenters expressed their view that the provision
that was proposed was too broad. Commenters believed that there was not
a clear enough connection between the preamble language and the
regulatory text, stating that the preamble language
[[Page 17540]]
that used Medicaid MCO procurement timelines presented a narrower scope
than the language proposed in regulation at Sec. 422.510(a)(4)(xvii).
Response: We thank the commenters for their feedback on this,
though we respectfully disagree. In the Contract Year 2027 proposed
rule, we emphasize that D-SNPs are statutorily required to have a SMAC
to operate in a State per section 1859(f)(3)(D) of the Act. In the
preamble to the Contract Year 2027 proposed rule, we used Medicaid MCO
procurement timelines as an example to illustrate how the relationship
between the State and the D-SNP and the provision and continuation of
SMAC, are sensitive to State policy changes and operational choices.
(90 FR 54976) However, our use of State procurement decisions as an
example of a scenario in which a D-SNP may lose its SMAC does not mean
that that is the only process by which a SMAC can be terminated, or in
turn, an MA contract can be terminated. Ultimately, per Sec.
422.107(a), a SMAC is a contract between an MA organization and the
State Medicaid agency. If the State or the MA organization terminate
the contract, then the MA organization is statutorily prohibited from
operating that D-SNP in the State.
Further, in the Contract Year 2027 proposed rule, we pointed to 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 to draw
attention to previous preamble that discussed how States have
significant control over the availability of D-SNPs in their markets.
(see 90 FR 54976 (citing 87 FR 27763)) Therefore, we do not believe
there to be a mismatch between our proposed regulatory text and the
preamble in the Contract Year 2027 proposed rule.
Comment: We received several comments objecting to the proposed
provision, stating that while the regulatory language ties immediate
termination to the loss of a SMAC, the preamble suggests that CMS
intends to apply immediate termination authority when an affiliated
Medicaid MCO contract is terminated, even where the SMAC itself remains
in effect. Commenters suggested that termination of the affiliated
Medicaid MCO contract would not necessarily prevent the D-SNP from
continuing to meet its obligations to coordinate Medicare and Medicaid
benefits under Sec. 422.2 or from supporting CMS' broader goals of
continuity of coverage and beneficiary stability. Other commenters
suggested that this proposal should only apply to AIP D-SNPs.
Response: We thank the commenters for engaging with this proposal.
As we explained in the Contract Year 2027 proposed rule, 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 (90 FR 54976). If the Medicaid MCO is terminated and
is not an affiliated entity with a D-SNP, then it would not trigger a
SMAC termination, since there would be no SMAC to terminate.
Additionally, we respectfully disagree with the commenters that suggest
that this proposal only be applicable to AIP D-SNPs. Per section
1859(f)(3)(D) of the Act, all MA organizations offering D-SNPs must
have a contract with the State Medicaid agency to provide benefits, or
arrange for benefits to be provided, for individuals entitled to
Medicaid. Therefore, this policy would apply to all D-SNPs.
Comment: Many commenters opined on the concept of immediate
termination. Commenters noted that immediate termination of a D-SNP
contract has the potential to increase the risk of beneficiary
confusion or disruption in care and access, and that alternatively,
mutual termination allows CMS, States, and MA organizations to prepare
for enrollee transitions and reduce care disruptions. Other commenters
recommended that CMS wait until the end of the plan year for a contract
termination to take effect, or at the very least, CMS should work
closely with the State Medicaid agencies to determine a reasonable
termination date and consider defining ``immediate'' as a mutually
agreed upon termination date between CMS and the D-SNP. Other
commenters encouraged CMS to avoid immediate contract terminations and
only invoke the ability to immediately terminate a D-SNP contract after
significant efforts have been made to collaborate with the State
Medicaid agency and the respective MA plan.
Response: We appreciate the commenters' concern and share their
interest in minimizing risk of beneficiary confusion or disruption in
care and access. As discussed previously in this preamble, the preamble
to the Contract Year 2027 proposed rule included reference to actual
instances where a SMAC has been terminated by a State during the plan
year, and CMS has worked with the respective State and the MA
organization whose SMAC was being terminated to mutually terminate the
contract per Sec. 422.508. This is a process by which CMS, the State
and the D-SNP are able to agree on a timeline for termination and
notice to enrollees of such termination, in an effort to create a
smooth transition to an alternative plan for the plan's enrollees (90
FR 54976). Our goal in proposing paragraph (xvii) at Sec.
422.510(a)(4) is to codify an express pathway by which CMS may
immediately terminate contracts based on termination of a SMAC, since,
as discussed in preamble to the Contract Year 2027 proposed rule, an MA
organization with a terminating SMAC is not required to seek a mutual
termination of its MA contract with CMS (90 FR 54977). As stated
previously in this section, an immediate termination allows for a more
expedited process when necessary to protect enrollee health and safety
and accommodate an orderly shutdown of operations.
Our intent is to minimize enrollee disruption to the extent
possible and collaborate with the State Medicaid agency and the
respective MA plan in instances where a contract must be terminated.
Our proposed language does not preclude an eligible plan from seeking
mutual termination, per Sec. 422.508, which would be our preference,
and we welcome working with State Medicaid agencies and plans to
minimize enrollee disruption where possible.
Comment: We received many comments regarding the relationship
between States and plans. Several commenters supported the overall
proposal, noting that finalizing such a provision would improve a
State's ability to engage in D-SNP oversight or empower States to have
more control over which D-SNPs are offered in their State and support
further Medicare-Medicaid integration and increased enrollment in
integrated D-SNPs. These commenters noted that when plan performance
leads to low quality of care, States should be able to terminate that
D-SNP. A few commenters objected to our proposal, opining that the
proposed provision could provide States with additional motivation to
negotiate midyear changes to the terms of the SMAC with the penalty of
rescinding the SMAC if the new terms are not accepted. The commenters
strongly urged CMS to view this proposal considering the negotiation
dynamics between health plans and States.
[[Page 17541]]
Response: We appreciate the commenters' thoughts on this matter.
However, we would like to take this opportunity to underscore that this
proposed language does not confer any new or different power on the
State with regard to their ability to contract with D-SNPs. As
discussed in preamble to the Contract Year 2027 proposed rule, 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 (90 FR 54976). Federal requirements
for SMACs are codified in CMS regulations at Sec. 422.107, but as
stated at Sec. 422.107(a), the SMAC is an agreement between an MA
organization and the State Medicaid agency. At Sec. 422.510(a)(4), we
proposed 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). We note
that under Sec. 422.510(a)(4)(ix), CMS already has the authority to
terminate a contract for failure to comply with regulatory requirements
in 42 CFR part 422. Our goal in adding this new clause is to
specifically 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. We did not propose nor are we finalizing any new language
with regard to how SMACs are negotiated, carried out, or entered into.
Comment: A few commenters opposed our proposal to not apply
noticing requirements if CMS executes an immediate contract
termination. Commenters noted that noticing requirements could help to
avoid beneficiary confusion, and immediate termination of a D-SNP
contract could create significant beneficiary disruption, especially if
termination occurs before enrollment transitions or communications are
complete. Another commenter recommended that CMS include some form of
beneficiary notification requirement even if that process must be
abridged and aligned with State Medicaid notification requirements in
the circumstance of an immediate contract termination. Commenters
mentioned that contract terminations should be implemented with
appropriate transition protections to preserve beneficiary stability.
Response: We thank the commenters for their responses and
appreciate the attention regarding enrollees in a terminating D-SNP
contract. We reiterate our previous responses to comments where we
noted that our proposed language at Sec. 422.510 does not preclude an
eligible D-SNP from seeking mutual termination, per Sec. 422.508, and
we prefer working with State Medicaid agencies and D-SNPs on mutual
terminations to minimize enrollee disruption, where possible. However,
as an MA organization with a terminating SMAC is not required to seek a
mutual termination of its MA contract with CMS, we proposed language
that would codify CMS's ability to provide an immediate termination of
the contract the D-SNP has with CMS. In an instance where an MA
organization with a terminating SMAC does not seek mutual termination
when the affiliated Medicaid MCO contract and/or SMAC terminates and
CMS immediately terminates the MA organization's MA contract, pursuant
to 42 CFR 422.510(b)(2)(iii), CMS notifies the MA organization's
Medicare enrollees in writing of CMS's decision to terminate the MA
organization's contract. This notice occurs no later than 30 days after
CMS notifies the plan of its decision to terminate the MA contract. CMS
simultaneously informs the Medicare enrollees of alternative options
for obtaining Medicare services, including alternative MA organizations
in a similar geographic area and original Medicare.
Comment: A couple of commenters suggested that CMS align the
effective date of the Medicare contract termination with the SMAC
termination date established by the Medicaid agency and consult with
the Medicaid agency when such terminations occur.
Response: We thank the commenters for their consideration for the
operational aspects of this policy proposal. We reiterate our previous
responses to comments where we noted that our proposed language at
Sec. 422.510 does not preclude an eligible D-SNP from seeking mutual
termination, per Sec. 422.508, where applicable, and we welcome
working with State Medicaid agencies and plans on mutual terminations
to minimize enrollee disruption where possible. However, an MA
organization with a terminating SMAC is not required to seek a mutual
termination of its MA contract with CMS, and there are circumstances in
which a State may immediately terminate a SMAC, such as where there is
beneficiary harm. Thus, we proposed language that would codify CMS's
ability to provide an immediate termination of the contract the D-SNP
has with CMS, as it is our belief that a delay in D-SNP contract
termination could disrupt access to Medicaid benefits for those who are
eligible. (90 FR 54978)
Comment: A couple of commenters encouraged CMS to work with States
to better structure Medicaid procurement opportunities. Commenters
noted that State Medicaid procurement processes are not subject to
Federal procurement rules or CMS oversight and can be opaque. Another
commenter suggested that for a D-SNP designated as an AIP, where there
is an aligned Medicaid MCO or D-SNP that is implemented after a
procurement award, there be a run out period to prevent any unintended
beneficiary disruption.
Response: We appreciate the opinions expressed by commenters. State
Medicaid procurement processes are not subject to Federal procurement
rules or CMS oversight, and thus these suggestions are outside of our
purview. If a State requested our input on their Medicaid MCO
procurement timelines and processes, we would provide any insight we
may have at that time.
Comment: We received a few comments that were out of scope. Some
commenters expressed concern regarding how the proposed provision would
affect MA contract lockout periods for the terminated plan, suggesting
that CMS should have the discretion to not impose a lockout period at
all.
Response: We thank the commenters for their suggestion. We believe
the commenters are referring to regulations, such as those at Sec.
422.502, where CMS may deny an application for a new MA contract or
service area expansion based on the applicant's substantial failure to
comply with the requirements of the Part C program. The parameters for
application denials are outside the scope of the proposed regulation.
After considering the comments we received and for the reasons
outlined above and our responses to comments, we are finalizing
language at Sec. 422.510(a)(4)(xvii), (b)(2)(i)(D), and (c)(2)(iv) as
proposed.
E. Limitation on D-SNP-Only Contracts Submitting Materials Under the
Multi-Contract Entity and Multi-Plan Process (Sec. Sec. 422.2261 and
423.2261).
Sections 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
[[Page 17542]]
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
HPMS for purposes of oversight and information sharing for these D-SNP-
only contracts. 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
managed care organization (MCO), prepaid inpatient health plan (PIHP),
prepaid ambulatory health plan (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 proposed 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
stated that we do not expect this update to add burden for any MA
organizations; the current process will not change.
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 proposed 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 received the following comments on our
proposal and our responses are as follows:
Comment: Numerous commenters supported our proposal at Sec. Sec.
422.2261(a)(3) and 423.2261(a)(3). They appreciated that it supports
joint reviews of materials and integrated care. They stated it would
allow States to provide better oversight of D-SNP-only contracts and
take actions necessary to ensure enrollees receive quality materials. A
commenter noted that the requirement would help ensure that MA
organizations can better meet tight deadlines to provide materials to
enrollees.
Response: We appreciate the commenters' support for our proposal to
require that D-SNPs with exclusively aligned enrollment subject to
Sec. 422.107(e) submit all materials for the contract in HPMS under
the MA organization's contract number. We believe that the proposal
will help clarify the material submission process in HPMS for D-SNP-
only contracts and help streamline the State and CMS material review
process for these D-SNPs.
[[Page 17543]]
Comment: A few commenters suggested that CMS consider ways to
encourage states to adopt consistent, streamlined review timelines to
improve the timeliness of reviews. They noted inconsistent use of HPMS
across States with some States implementing multi-step submission
processes through both a State portal and HPMS. These commenters
suggested that CMS consider a universal 45-day deeming period across
all States and a 5-day file and use approach or a 10-day review period
for all required materials. They also recommended increased education
to States on how to use HPMS to improve their understanding and ability
to review materials in HPMS as well as the ability for States to be
exempt from the process if they choose.
Response: We thank the commenters for their perspectives. Only
those States with D-SNP-only contracts can utilize the joint review
process in HPMS if they choose to do so. States are not required to
utilize this process. Each State Medicaid program is different, so the
States that do participate in the process can determine which materials
they want to review and if they want to review them in 10 days or 45
days, or as file and use which are the same review periods as for other
MA materials per Sec. Sec. 422.2261(b) and 423.2261(b). This is
similar to the review process used for Medicare-Medicaid Plans under
the Financial Alignment Initiative demonstration. Also, for States
utilizing the joint review process, we provide education on the use of
HPMS marketing module annually and are available to provide technical
assistance to States throughout the year. We will continue to provide
this training and focus on areas where we find further education is
needed.
Comment: A commenter noted that for States that have multiple plan
benefit packages (PBPs) for the D-SNP-only contract, materials are
submitted to the State for the D-SNP PBP designated as an AIP. These
States do not require submission of materials when the PBP is not an
AIP. The commenter also stated that HPMS's review is at the PBP level
and not at the contract level. The commenter articulated that
submitting materials for AIP PBPs and non-AIP PBPs when States do not
need to review the non-AIP PBP materials can create an administrative
burden for both plans and the State. The commenter noted that it would
welcome working with CMS to improve the process going forward.
Response: We appreciate the commenter's perspective on this issue.
It is true that MA organizations with D-SNP-only contracts must submit
materials under the contract ID number in HPMS for all PBPs within the
contract and that States with D-SNP-only contracts to date have chosen
not to review the non-AIP PBP materials. However, the plans still must
submit materials for every PBP within the contract for State review
because there is no technical mechanism within HPMS to have the State
only review one PBP within a contract and not the other PBP. As a
workaround, States have been approving the non-AIP PBP materials and
noting that they did not review the remaining PBP materials since they
are for a non-AIP PBP.
While this is an extra step for States, the majority of the
material categories for D-SNP-only contract States are submitted at the
contract level and not PBP level. For example, for the State of South
Carolina, MA organizations with D-SNP-only contracts can submit
materials for 12 out of 47 material categories at the PBP level.
Materials for the other 35 categories are submitted at the contract ID
level. In addition, for any non-AIP PBPs, D-SNPs only have to submit
into HPMS those materials for which CMS review is required for MA
plans. There are 5 material categories that CMS reviews for MA where
plans can submit materials at the PBP level. Two of these material
categories are for errata documents that MA plans rarely submit. As a
result, we understand that while this process may be an extra step for
States, the extent of the PBP level submissions is limited. We
appreciate the commenter's offer to work with CMS to improve the
process going forward.
Comment: A commenter requested that CMS not require MA plans to
file national D-SNP marketing materials that do not include State-
specific elements in HPMS under each individual contract number. The
commenter stated that this approach would result in multiple
submissions of identical materials under different contract numbers and
material IDs, significantly increasing the volume of duplicate
materials subject to CMS review without corresponding regulatory
benefit. The commenter also opined that managing feedback from multiple
States while attempting to produce a single unified material would be
operationally challenging and burdensome. The commenter noted that even
if all States were to agree on a single document version through
separate reviews, it remains unclear how plans should reflect multiple
material IDs. The commenter recommended that CMS consider adding unique
category codes or creating an AIP D-SNP MCE contract number that could
be used for national AIP D-SNP materials that do not contain State-
specific content. If CMS finalized this regulation as proposed, the
commenter suggested that CMS enhance HPMS to allow users to select
multiple States from a dropdown menu and bundle submissions for
standard templates, rather than requiring individual State submissions.
Response: We appreciate the commenter's perspective on this issue.
For D-SNP-only contracts, States can only review those materials that
are submitted under the D-SNP-only contracts that are located within
their State. While a specific material may not contain State-specific
content, we believe that every State has a right to review all
materials submitted for the contract if they choose to do so. We
understand that this may result in duplicate submissions of certain
materials, however, organizations have a contract with both CMS and the
State Medicaid agency for these exclusively aligned plans, and every
State has different areas of focus for materials. If there are
materials reviewed under multiple contracts that have no difference
after review, the MA organization can add multiple material ID numbers
to the bottom of the material. As a result, we disagree with adding
unique category codes to HPMS or creating an AIP D-SNP MCE contract
number. We will consider for the future the commenter's recommendation
to allow MA organizations to select multiple States from a drop-down
menu and bundle submissions for standard templates in HPMS.
Comment: A commenter questioned whether ``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'' will be the exact language used for
the proposed requirements at Sec. Sec. 422.2261(a)(3) and
423.2261(a)(3). The commenter believed the intent to be ``subject to
Sec. 422.107(e)'' was meant to be ``subject to Sec. 422.107(e)(1)''
as the former largely focuses on the relationship between State
Medicaid agencies and CMS, whereas the latter is specific to MA
organizations with exclusively aligned enrollment.
Response: We thank the commenter for their question. We will be
finalizing the regulation text as proposed as we believe that it is
beneficial to use Sec. 422.107(e) as it describes all aspects of D-
SNP-only contracts, such as State access to HPMS which allows for joint
reviews of materials, whereas Sec. 422.107(e)(1) only includes some of
[[Page 17544]]
the steps that States must take for D-SNP-only contracts in the State.
Comment: A few commenters provided comments that were out of scope
of this proposed provision. Commenters requested that CMS require all
D-SNPs to register under their own contract number and not be grouped
together with other D-SNPs or MA plans. The commenter suggested that
such a structure would allow for greater transparency for States, as
well as better monitoring for compliance and better-quality metric
reporting. The commenters asserted that combining D-SNPs with other
plans in the same contract number muddles data and accountability.
Response: We thank the commenters for their suggestion. We
appreciate these recommendations; however, these comments are outside
the scope of this rulemaking. We will consider exploring opportunities
for potential future rulemaking to address some of these issues.
After considering the comments we received and additional review,
we are finalizing the provisions proposed at Sec. Sec. 422.2261(a)(3)
and 423.2261(a)(3) with an update. In the Contract Year 2027 proposed
rule, we inadvertently referred to the number for TPMO submissions in
HPMS as the MCE number whereas it is a Multi-Plan number. We are
correcting this technical error to clarify that MA organizations may
not submit materials for the contract under the organization's MCE
number and third-party marketing organizations may not submit materials
under the Multi-Plan number as described in Sec. Sec.
422.2262(d)(2)(i) and 423.2262(d)(2)(i). This change does not alter the
intended scope of the regulatory requirement.
F. Request for Information: C-SNP and I-SNP Growth and Dually Eligible
Individuals
In the Contract Year 2027 proposed rule (90 FR 54978 through
54984), we included a request for information regarding growth of
chronic condition special needs plans (C-SNPs) and institutional
special needs plans (I-SNPs) and dually eligible enrollment in those
plans. This section summaries the RFI.
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 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 and the number of
dually eligible individuals enrolled in C-SNPs increased from CY 2021
through CY 2025 as outlined at 90 FR 54979. Over the same timeframe,
the number of C-SNPs with a high proportion of dually eligible
enrollees increased as shown at 90 FR 54979 through 54980. Per Sec.
422.514(d), we defined 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. At 90 FR 54979 through 54980, we provided
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.
2. Growth in I-SNPs With High Proportion of Dually Eligible Enrollees
At 90 FR 54981, we noted that compared to C-SNPs, the number of I-
SNPs offered by MA organizations has remained relatively consistent in
recent years. Dually eligible individuals represented the vast majority
of I-SNP enrollees at approximately 90 percent of total enrollment each
year. For a more detailed discussion of dually eligible individuals
enrolled in I-SNPs, see 90 FR 54981.
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 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) to ensure full implementation of requirements for D-SNPs, such
as SMACs, a minimum integration of 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. Through their annual SMACs, States are
implementing intentional strategies to better coordinate care for
dually eligible individuals.
As discussed in the Contract Year 2027 proposed rule at 90 FR 54982
[[Page 17545]]
through 54983, C-SNPs could be serving as a workaround to Federal and
State integration efforts. Like D-SNPs, C-SNPs and I-SNPs must have
approved MOCs and develop HRAs and individualized care plans (ICPs),
but 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.\112\
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\112\ 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 eligible enrollees without meeting
D- SNP requirements. In their comments on the Contract Year 2025
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.
4. Potential Policy Changes for Comment Solicitation
We solicited 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 solicited comment on establishing a SMAC requirement
similar to the existing requirement for D-SNPs. We solicited comments
on whether or not we should adopt a SMAC requirement for C-SNPs and/or
I-SNPs with high concentrations of dually eligible individuals as well
as potential Federal requirements for those SMACs.
Second, we solicited comments on methods to increase care
coordination for dually eligible individuals enrolled in C-SNPs and I-
SNPs. At 90 FR 54983, we stated that we were 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 solicited 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.
Third, we solicited comment on three approaches to applying the D-
SNP look-alike contracting limitations at Sec. 422.514(d) through (g)
to C-SNPs. We solicited 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 welcomed 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 requested 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 welcomed comments on the policy ideas outlined in this
section to help inform potential future regulatory action.
Finally, we noted our interest 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). We
invited 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 welcomed 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 invited 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 welcomed 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.
We received numerous comments in response to this request for
information from a broad array of stakeholders, reflecting the strong
interest in the issue of C-SNP and I-SNP growth and enrollment of
dually eligible individuals in those plans. We appreciate commenters
sharing these perspectives. While we will not be responding to the
comments submitted in this final rule, we will consider the comments
and suggestions for future rulemaking.
VII. Reducing Regulatory Burden and Costs in Accordance With Executive
Order (E.O.) 14192
As noted previously, we sought public input on approaches and
opportunities to streamline regulations and reduce administrative
burdens on providers, suppliers, beneficiaries, and other interested
parties participating in
[[Page 17546]]
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).\113\
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\113\ 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),\114\ 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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\114\ https://www.federalregister.gov/documents/2005/01/28/05-1321/medicare-program-medicare-prescription-drug-benefit.
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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,\115\ which are arrangements that are paid
solely by the employer, reimburse employees only for their, their
spouse's, and their dependents' medical care expenses \116\ (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),\117\ 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.
---------------------------------------------------------------------------
\115\ 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.
\116\ 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.
\117\ 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. Given that account-based
entities do not offer such coverage, we proposed to revise Sec.
423.56(b)(3) so that account-based entities are not required to provide
the creditable coverage disclosures. Furthermore, 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) while the individual's plan that
directly offers the prescription drug benefit coverage discloses that
it does offer creditable coverage, the recipient of the information
could find the dual messaging potentially contradictory and confusing.
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. 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. We
proposed to exclude account-based plans from making these disclosures
as
[[Page 17547]]
these account-based plans do not offer prescription drug coverage and
to provide clarity for Medicare-eligible individuals regarding whether
their coverage is creditable. The proposal also aligned 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 proposed 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.
We received comments from health plans, professional organizations,
benefit specialist advisors, SHIPs, and a State Department of Insurance
on our proposal to exclude account-based medical plans from creditable
coverage disclosure requirements. The comments we received on this
proposal and our responses follow.
Comment: Most commenters supported our proposal to exclude account-
based medical plans from the creditable coverage disclosure
requirements. Commenters cited several reasons for their support of
this proposal. Commenters stated that these disclosures are not
appropriate for account-based arrangements because such plans do not
provide comprehensive prescription drug coverage and therefore do not
function as substitutes for Part D coverage. Several commenters
indicated that the proposal appropriately aligns disclosure
requirements with the nature of the coverage offered.
Many commenters further noted that applying creditable coverage
disclosure requirements to account-based medical plans creates
confusion for beneficiaries and imposes administrative burden without a
corresponding consumer benefit. One commenter explained that the
purpose of creditable coverage disclosures is to inform beneficiaries
about the equivalency of prescription drug coverage, and that extending
these requirements to account-based arrangements goes beyond that
intent and diminishes the usefulness of the disclosures.
A couple of commenters also stated that codifying the exclusion
would promote greater consistency and clarity across stakeholders. A
commenter representing beneficiary assistance programs reported that
SHIP counselors frequently encounter beneficiary confusion resulting
from disclosures associated with account-based plans and must spend
significant time clarifying that these arrangements do not replace Part
D coverage. The commenter stated that exempting account-based medical
plans from the disclosure requirement would reduce unnecessary
counseling complexity and improve efficiency. Another commenter noted
that beneficiaries would remain protected because group health plans
that provide prescription drug coverage, including those that also
offer account-based arrangements, would continue to be subject to the
creditable coverage disclosure requirements.
Response: We appreciate the commenters' support of this proposal
and agree with the points the commenters raise.
Comment: One commenter supported the proposal but recommended that
CMS revise Sec. 423.56(b)(3) to clarify that any group health plan
offering prescription drug coverage, including plans that also include
account-based medical coverage, must comply with the disclosure and
notification requirements in paragraphs (c) through (g) of that
section.
Response: We appreciate the commenter's suggestion. We agree that
group health plans offering prescription drug coverage, including those
that also include account-based medical coverage, remain subject to the
creditable coverage disclosure and notification requirements under
Sec. 423.56(c) through (g). We believe existing regulations
sufficiently reflect this requirement and therefore are not making
additional regulatory changes at this time.
Comment: A small number of commenters opposed the proposal to
exclude account-based medical plans from the creditable coverage
disclosure requirements. These commenters stated that disclosures help
beneficiaries distinguish between coverage that does and does not
satisfy Medicare requirements and expressed concern that exempting
account-based plans could reduce beneficiary awareness of whether such
coverage meets Medicare creditable coverage standards. One commenter
noted that it is not obvious to beneficiaries that account-based
arrangements used to pay for prescription drugs do not constitute
creditable prescription drug coverage. Another commenter asserted that
the administrative burden on account-based plans is minimal, as plan
sponsors already know that these arrangements do not meet creditable
coverage standards.
Response: We appreciate the commenters' concerns. As discussed
above, account-based medical plans do not provide comprehensive
prescription drug coverage and therefore do not satisfy Medicare
creditable coverage standards. We agree that disclosures play an
important role in informing beneficiaries; however, we believe that
applying creditable coverage disclosure requirements to arrangements
that are not, and cannot be, creditable has contributed to
beneficiaries receiving potentially contradictory and confusing
information. Beneficiaries will continue to receive creditable coverage
disclosures from group health plans that provide prescription drug
coverage, including plans that also offer account-based arrangements.
After consideration of the comments received on this provision by a
broad range of stakeholders, we are finalizing this policy as proposed
without modification.
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 dually eligible
population. Such benefits may include nonskilled nursing services,
personal care services, and other long-term care services and supports
designed to keep dually 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,
[[Page 17548]]
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.\118\ CMS codified this standard at Sec.
422.100(c)(2)(ii)(A).
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\118\ 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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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.
We noted in the Contract Year 2027 proposed rule that, in recent
years, few MA plans have used Sec. 422.102(e) to provide supplemental
benefits. A table showing supplemental benefits offered through Sec.
422.102(e) for contract years 2013-2026 can be found at 90 FR 54986.
Our analysis of the bid data from 2013 to 2026 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.\119\
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\119\ 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.
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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 believed that
Sec. 422.102(e) was no longer needed and proposed 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 explained in the Contract Year 2027 proposed rule that we did
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. We anticipated
that deregulating Sec. 422.102(e) could streamline the bid submission
process for D-SNPs and us by simplifying the avenues for offering
supplemental benefits.
We solicited comments on our proposal. We requested 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 solicited comments on whether Sec. 422.102(e) provides any
advantages in D-SNPs offering supplemental benefits previously offered
under VBID.
We received the following comments on this proposal and respond to
them below:
Comment: Some commenters outlined support to remove Sec.
422.102(e), referencing low utilization of the Sec. 422.102(e) pathway
and the availability of other pathways for D-SNPs to provide
supplemental benefits, such as primarily health related supplemental
benefits and SSBCI. A few of these commenters stated that removing the
Sec. 422.102(e) pathway would reduce regulatory complexity without
constraining benefit design. While supporting the proposal, a commenter
emphasized that when States do not provide Medicaid benefits for dually
eligible individuals, D-SNPs need flexibility to provide additional
benefits to enrollees with complex needs and such benefits cannot
always be provided through primarily health related supplemental
benefits or SSBCI. A commenter suggested that CMS develop a publicly
shared document that displays benefits historically offered under Sec.
422.102(e) with other supplemental benefits pathways and provide
guidance for D-SNPs to operationalize any transition away from the
Sec. 422.102(e) pathway.
Other commenters opposed removing Sec. 422.102(e), noting lack of
D-SNP awareness of the Sec. 422.102(e) supplemental benefits pathway
and that removing the Sec. 422.102(e) pathway could constrain
innovation in State and D-SNP supplemental benefits design to advance
more integrated D-SNPs. A commenter stated that the Sec. 422.102(e)
pathway may not have been used previously due to the VBID model and
could be useful to D-SNPs now that the VBID model is no longer
available. Another commenter recommended that CMS issue guidance to
plans that reinterprets Sec. 422.102(e) to allow additional
supplemental benefits, such as food and grocery allowances, that are
responsive to the needs of dually eligible individuals. The commenter
also suggested that CMS consider ways to expand Sec. 422.102(e) beyond
its applicability to HIDE SNPs and FIDE SNPs. In addition, a commenter
raised concerns that removing the Sec. 422.102(e) pathway could
negatively impact D-SNP enrollees.
Response: We appreciate the commenters perspectives on our proposal
to remove Sec. 422.102(e) as an additional pathway for D-SNPs to offer
supplemental benefits. Although a small number of D-SNPs have offered
supplemental benefits through Sec. 422.102(e), we are persuaded by
comments regarding the lack of awareness of Sec. 422.102(e), the
potential for Sec. 422.102(e) to be an alternative to the recently
ended VBID program, and the potential for Sec. 422.102(e) to provide
[[Page 17549]]
a pathway to develop innovative supplemental benefits for dually
eligible individuals. We will retain the Sec. 422.102(e) supplemental
benefits pathway and monitor utilization of this pathway in future bids
to inform future rulemaking.
After considering the comments we received and for the reasons
outlined previously and our responses to comments, we are not
finalizing the proposal to remove Sec. 422.102(e) and instead
retaining Sec. 422.102(e) as a pathway for D-SNPs to offer
supplemental benefits.
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 30561). The notice, referred to as
the Mid-Year Notice, was to list any supplemental benefits not utilized
by the enrollee during the first six 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, CMS later determined that the frequency of
utilization was higher than previously believed. CMS also developed
concerns about the administrative and financial burden, especially on
smaller MA organizations, and determined the new requirement was
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 proposed in the
Contract Year 2027 proposed rule to rescind the Mid-Year Notice of
Supplemental Benefits requirement established in Sec. Sec. 422.111(l)
and 422.2267(e)(42) (90 FR 54987).
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 reviewed this
regulation in accordance with E.O. 14192 and determined that it was
unnecessary and 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 necessitated 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 then required 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 predicted 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 risked
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 the proposal was 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 already 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 was to
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 six 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 \120\ 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 using them, although CMS acknowledges that at this time,
information on MA enrollee use of supplemental benefits is limited. It
should be noted, however, that CMS is working to address this data gap;
the Agency introduced the Supplemental Benefit Utilization and Costs
section in the Part C Reporting Requirements for contract year (CY)
2024 and made additional changes effective for CY 2025 and subsequent
years. This will allow CMS to review and compare a chronological
sequence of CY data sets to help the Agency better understand
supplemental benefit utilization trends in the Part C program.
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\120\ 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 use 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
[[Page 17550]]
supplemental benefits information and would create undue burden for MA
organizations. Further, recent evidence suggests that enrollees are
utilizing supplemental benefits when they need them. For the
aforementioned reasons, CMS proposed to rescind the Mid-Year Notice
requirement at Sec. Sec. 422.111(l) and 422.2267(e)(42).
CMS invited public comment on the proposed removal of this
regulatory requirement and received mixed comments. A discussion of the
comments received, along with CMS's responses, follows.
Comment: Some commenters expressed concern that MA enrollees could
be unaware of the full slate of supplemental benefits available to
them, and that enrollees would not be informed of their supplemental
benefits as a result of the removal of the Mid-Year Notice requirement.
Response: As discussed in the preamble, the Mid-Year Notice
duplicates existing communication requirements such as the EOC. MA
organizations are required to send an EOC annually to each individual
enrolled in their MA plans. The EOC includes detailed information about
the supplemental benefits covered by the plan such as benefit
descriptions, copays, coinsurance, and eligibility criteria when
applicable. Further, many MA organizations already communicate
availability of supplemental benefits through their care coordination
services, newsletters, and other enrollee education efforts.
Comment: Some commenters stated that enrollees do not always
understand that they must meet particular eligibility requirements to
receive certain supplemental benefits, and that a failure to rescind
the Mid-Year Notice requirement would result in confusion when
enrollees receive information about benefits for which they are not
eligible.
Response: CMS agrees that a new, targeted communication method that
presents an individualized menu of supplemental benefits options (i.e.
the enrollee's unused supplemental benefits) but may not exclude
benefits the enrollee is ineligible or not necessarily eligible for,
could be confusing and would likely result in frustration for enrollees
and increased costs for MA organizations. CMS believes that the EOC
already makes clear distinctions between types of supplemental benefits
and their corresponding eligibility criteria in a way that is easy to
understand.
Comment: Some commenters stated that enrollees choose plans based
on supplemental benefits, and MA plans receive rebates to fund those
supplemental benefits. Thus, CMS should promote enrollee utilization of
supplemental benefits to ensure government funds are responsibly spent.
Response: CMS is committed to ensuring that taxpayer money is spent
responsibly, transparently, and appropriately across all CMS programs.
Continuous oversight and thoughtful consideration for the use of
government funds, including in MA, are an ongoing Agency priority.
While, as these commenters stated, enrollees should be encouraged to
use their supplemental benefits, CMS does not believe that the
duplicative effort of sending a bulk of information to enrollees that
they have already received six months earlier will achieve this result.
Comment: Some commenters gave their support for removal of the Mid-
Year Notice requirement due to the logistical challenges and
administrative and operational costs associated with its implementation
and noted that the information sent would be largely duplicative of
information sent six months earlier in the EOC. A subset of those
commenters further noted that the complexity of these challenges would
put smaller MA organizations at a disadvantage.
Response: CMS appreciates the feedback and acknowledges the
challenges MA organizations, including small MA organizations, face
when new regulatory requirements emerge. CMS also acknowledges the
importance of maintaining an environment that gives smaller MA
organizations a fair chance to compete, with the ultimate goal being a
wide variety of plan choices for enrollees each year. As such, it is
important to ensure that every new requirement can offer enough benefit
to offset the burden it imposes.
Comment: A commenter stated that in some cases, the Mid-Year Notice
would require great effort but produce little value. As an example, the
commenter pointed out that some provider-led Institutional Special
Needs Plans (I-SNPs) already ensure enrollees maximize their available
supplemental benefits, and as a result, the enrollees of those SNPs are
unlikely to have improved access to care and health outcomes because
they received a Mid-Year Notice.
Response: CMS appreciates the thoughtful response by this commenter
and acknowledges the commenter's assessment that if a MA plan such as
an I-SNP is already designed to help enrollees maximize their use of
supplemental benefits, it is unlikely that any improvement in health
outcomes would result from the distribution of a Mid-Year Notice. This
example demonstrates that aside from being duplicative of existing
communication requirements, the requirement may also be overly broad
because of its application to all MA plan-types.
Comment: Some commenters noted the dearth of available data on
supplemental benefit usage and stated that CMS should obtain such data
and use it for future policy refinements with respect to supplemental
benefit communications. For example, a commenter pointed out the
hypothetical potential for a discharge team to use electronic tools,
suggestive of the interoperability infrastructure of which
implementation began during the first Trump administration, to connect
a patient with post-discharge support that could help reduce the
likelihood of rehospitalization.
Response: Use of interoperability tools by providers for the
purpose of connecting patients to supplemental benefits is intriguing,
but beyond the scope of this rule. CMS appreciates the thoughtful
nature of these comments and will take this input into consideration
for future rulemaking.
After careful consideration of the comments received, CMS will move
forward with the proposal, without modification, and rescind the Mid-
Year Notice of Supplemental Benefits.
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
[[Page 17551]]
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.
Additionally, on January 31, 2025, E.O. 14192, ``Unleashing Prosperity
through Deregulation'' was issued, 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. In
the Contract Year 2027 proposed rule (90 FR 54988), CMS proposed 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
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 received the following comments on this proposal, and our
responses follow:
Comment: A commenter agreed with the proposal, as they were
supportive of the aims of E.O. 14148 and the removal of sex-based
terminology.
Response: CMS thanks the commenter for their support for our
proposal.
Comment: Multiple commenters were opposed to the proposal and
shared concerns about the proposed change to Sec. 422.112(a)(8).
Concerns included that the change would impede plans' ability to
address social risk factors and other barriers that impact care
delivery and management, as well as that the generality of the language
would lead to inconsistent implementation which would potentially
worsen health disparities. Several commenters noted support for
enumerating groups that have experienced poor health care experiences
and that it was a specific, inclusive, and helpful guide for plans.
Response: CMS appreciates commenters sharing their concerns.
However, CMS disagrees with this position, as plans will still be
required to ensure all enrollees, without exception, are provided with
accommodations to access services, as they were required to do even
before the April 2023 updates to Sec. 422.112(a)(8). Further, this
action does not prohibit plans (including special needs plans) from
identifying health disparities, addressing barriers that impact care
delivery, and developing strategies for different sub-populations to
ensure high-quality care if they choose to do so. Plans can continue to
develop their own lists of sub-populations of focus, continue quality
improvement programs that work to improve health outcomes, and address
disparities observed among their enrollees.
Comment: A commenter urged that CMS ensure that the language
requiring culturally competent services for those with limited English
proficiency or reading skills is implemented robustly, with this
including requirements for qualified interpreter services, translated
written materials, and other accommodations.
Response: CMS appreciates the commenter sharing this suggestion.
CMS believes that plans can determine what strategies, such as
translation or interpreter services, work best to ensure culturally
competent care for their enrollees. Of note, plans are also held to the
Health and Human Services Office for Civil Rights (OCR) notice of
availability of language assistance services and auxiliary aids and
services requirements (currently at 45 CFR 92.11).
After consideration of the public comments CMS received, and for
the reasons outlined here and in the Contract Year 2027 proposed rule,
CMS is finalizing as proposed revisions to Sec. 422.112(a)(8).
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
Medicare Advantage (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.
Subsequently, CMS made and proposed additional changes to the UM
Committee requirements, which are detailed in the Contract Year 2027
proposed rule. This includes changes made in April 2024, when 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).
Specifically, at Sec. 422.137(c)(5) CMS finalized 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 finalized a requirement that the UM Committee must
conduct an annual health equity analysis on 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). 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 health equity analysis
requirement, as proposed and finalized, would provide a useful baseline
of data. CMS also signaled the intent to consider further changes to
these requirements in subsequent rulemaking based on comments received.
CMS implemented the additional UM Committee requirements in the
April 2024 final rule based on the previous administration's health
equity-related initiatives, which have since been revoked by E.O.
14148: ``Initial
[[Page 17552]]
Rescissions of Harmful Executive Orders and Actions.'' \121\
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\121\ https://www.federalregister.gov/documents/2025/01/28/2025-01901/initial-rescissions-of-harmful-executive-orders-and-actions.
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Moreover, as discussed in the Contract Year 2027 proposed rule, 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.\122\
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\122\ 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.
In the Contract Year 2027 proposed rule, CMS proposed to remove the
requirement at Sec. 422.137(c)(5) that the UM Committee include at
least one member with expertise in health equity. In addition, CMS
proposed 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 proposed 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.
CMS received the following comments on this section of the Contract
Year 2027 proposed rule, and provided responses as follows:
Comment: Many commenters expressed support for CMS' proposal to
rescind the requirements for MA organizations' UM Committees at Sec.
422.137(c)(5), (d)(6), and (d)(7). The commenters stated that the
analysis was duplicative, offered limited value, and could present a
misleading picture of health equity due to inconsistences in data
reporting. Commenters also indicated that simplifying and streamlining
the requirements would reduce administrative costs and burden on MA
organizations. A commenter stated prior authorization denial rates are
not necessarily attributable to an enrollee's SRF status. Another
commenter expressed concerns that statistics alone would not describe
the entirety of MA plans approach to supporting beneficiaries access to
care. Finally, a commenter expressed concerns that there would be data
inconsistencies in the absence of reporting guidance defining data
elements or a standard template.
Response: CMS appreciates the commenters' support and thanks them
for their comments.
Comment: Many commenters supported the requirement that MA
organizations release an annual health equity analysis of utilization
management policies. These commenters stated that the burden associated
with producing the analysis would be minimal and that the resulting
data would provide important transparency, information, and
accountability around the use of UM on different populations.
Numerous commenters further asserted that the analysis would
strengthen CMS oversight of the MA program by helping to prevent
inappropriate denials, barriers to care, harmful clinical delays, and
clinician burnout. They emphasized that the reporting would support
efforts to identify and address health disparities and improve access
to care for underserved populations.
Several commenters expressed concerns about removing health equity
reporting requirements when Medicare's population is increasingly
diverse and disparities in access to care are well documented.
Commenters also stated that MA organizations' prior authorization
practices lead to inappropriate denials, care delays, and
administrative burden. These commenters stated that the analysis would
provide a deeper understanding of the real-world impacts of prior
authorization and help ensure that MA organizations are meeting
coverage requirements. A commenter stated that removing the requirement
would allow a critical information gap to persist, while another
commenter expressed concerns that eliminating the requirement would
undermine prior authorization reform efforts.
Response: CMS considered commenters' views regarding transparency,
oversight, and the importance of analyzing UM policies in an
increasingly diverse Medicare population. As outlined in the Contract
Year 2027 proposed rule and this final rule, CMS continues to believe
that the burden associated with producing the annual health equity
analysis is not minimal and that the analysis would not meaningfully
strengthen oversight of UM practices in the MA program.
CMS' decision to rescind the requirements for MA organizations' UM
Committees at Sec. 422.137(c)(5), (d)(6), and (d)(7) reflects CMS'
assessment that the requirements would have limited effectiveness in
advancing health equity, while imposing additional administrative
burden associated with collecting and publishing the data. This
decision is also consistent 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 believes there are more efficient and effective ways to obtain
information on the impact of UM requirements on MA enrollees, including
through ongoing interoperability initiatives and other data collection
mechanisms. CMS remains committed to ensuring that MA organizations
comply with coverage and UM requirements and will continue to evaluate
options for collecting data that more accurately reflect the
experiences of all MA enrollees.
Comment: Several commenters urged CMS not to rescind the annual
requirement for MA organizations to release an annual health equity
analysis without first establishing an alternative data collection
mechanism. These commenters recommended that CMS
[[Page 17553]]
retain the health equity analysis requirement until service level
determination and appeal data are fully operational.\123\ Commenters
also recommended that CMS adopt a less burdensome alternative
methodology, collect baseline data through interoperability, or expand
data reporting to better understand how prior authorization policies
affect access to care across beneficiary populations.
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\123\ In a December 16, 2025, HPMS memorandum, CMS announced its
plans to conduct a voluntary pilot to collect service level data on
MA plan initial determinations and appeals in 2026, with the intent
to expand the data collection to all MA plans beginning in 2027.
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Multiple commenters proposed specific alternative methodologies for
monitoring MA organizations' UM policies and practices. Some commenters
encouraged CMS to extend reporting requirements to Part D plans to
improve understanding of how UM policies affect access to care and help
inform beneficiaries' and caregivers' coverage decisions. A commenter
further urged CMS to conduct a study examining whether utilization
management policies contribute to poorer health outcomes. Another
commenter encouraged CMS to require states to develop standardized
tools to measure the impact of UM policies on access to Medicaid
services for dually eligible individuals.
Response: CMS appreciates commenters' recommendations regarding
ways to retain and strengthen the annual health equity analysis. While
CMS acknowledges commenters' concerns about eliminating the reporting
requirements without an alternative approach, the Agency does not
believe that the annual health equity analysis, as finalized in prior
rulemaking, is the most effective or efficient mechanism for
establishing baseline data on the impacts of UM practices across MA
enrollee populations. CMS is therefore rescinding the requirements
while continuing to consider other approaches to obtaining more timely,
standardized, and actionable data.
CMS also considered commenters' suggested alternative methodologies
for monitoring MA organizations' UM policies and practices. CMS
believes the proposed alternative analysis methodologies would offer
limited practical utility and impose additional administrative burden
on MA organizations. CMS is committed to taking steps to reduce the
regulatory burdens imposed by the UM Committee requirements, consistent
with the focus on streamlining regulations and reducing administrative
burden. However, CMS may consider other approaches to monitoring UM
policies and practices in future rulemaking.
Comment: Several commenters urged CMS not to remove the requirement
that the UM Committee include at least one member with health equity
expertise. The commenters stated that the requirement supports MA
organizations' ability to monitor the impact of prior authorization on
specific patient groups, identify disparities, and address any
inequities in access to care.
Response: CMS carefully considered commenters' views regarding the
inclusion of a UM Committee member with health equity expertise and the
role such expertise may play in monitoring the effects of UM on
specific patient populations. In the MA program, access to care is
monitored through multiple oversight mechanisms, and MA organizations
are already required to maintain policies, procedures, and safeguards
to ensure timely access to covered items and services. Therefore, CMS
does not believe that a prescriptive UM Committee composition
requirement is necessary to monitor the impact of prior authorization
on specific patient groups, address inequities in access to care, or
ensure access to services for all MA enrollees.
After considering the public comments received, and for the reasons
discussed in the Contract Year 2027 proposed rule and in this response
to comments, the proposals to rescind the requirements for MA
organizations' UM Committees at Sec. 422.137(c)(5), (d)(6), and
(d)(7), are being finalized as proposed, consistent with the cited
E.O.s., and in response to interested parties' concerns about the
requirements' rationale, feasibility, and administrative burden. This
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 also requested comments on ways to reduce administrative
burdens associated with other UM Committee requirements for
consideration in future rulemaking. CMS appreciates the comments and
suggestions received and will take the feedback into consideration for
future policy development.
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.
Consistent with E.O.s 14148 and 14192, CMS proposed to eliminate
the regulatory requirement for QI programs under Sec. 422.152(a)(5)
for the reasons outlined in detail in the Contract Year 2027 proposed
rule issued in November 2025 (90 FR 54990).
CMS did not propose to modify the QI Program requirements under
Sec. 422.152(a)(1) through (4), which are required 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 final rule
aligns with the directives of E.O. 14192, to deregulate and reduce the
administrative burden on MA organizations while preserving quality.
MA organizations 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 ensures 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 finalized deregulation reflects CMS' continued
commitment to high-quality health care, while reducing
[[Page 17554]]
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 received the following comments on this section of the Contract
Year 2027 proposed rule, and responses follow:
Comment: Many commenters expressed concerns that removing
requirements in MA quality improvement programs for the inclusion of
activities to reduce disparities may exacerbate the prevalence of
chronic illness and noted the well-documented correlation between
health disparities and chronic illness. Commenters expressed concerns
that removing this requirement would widen the health care gaps
affecting marginalized and underrepresented populations. Some voiced
concerns that if this requirement is revoked, insurers would use
discriminatory practices to improve overall quality scores. They also
urged CMS to continue naming specific groups that have historically
experienced discrimination (such as people with disabilities, LGBTQI
individuals, racial and ethnic minorities, rural residents, and those
affected by persistent poverty) to provide necessary clarity,
accountability, and direction to MA plans to ensure equitable access to
care.
Response: CMS appreciates the commenters sharing their concerns.
The QI Program requirements under Sec. 422.152(a)(1) through (4) will
remain in effect, including the requirement to have a chronic care
improvement program (CCIP). Additionally, as discussed in the proposal,
MA plans may continue with their current quality improvement
initiatives and retain the ability to incorporate activities that
address health disparities within their QI programs. CMS remains
committed to sustained improvement in patient health outcomes.
Comment: Several commenters urged CMS to either keep the provision
at Sec. 422.152(a)(5) or come up with an alternative policy that would
ensure quality care and health equity for MA enrollees from underserved
communities.
Response: While CMS acknowledges the commenters' suggestion, the
remaining QI Program requirements are sufficient to address the
concerns regarding enrollee access to quality health care while
reducing burden for MA organizations.
Comment: A commenter indicated that in Massachusetts, the
requirement at Sec. 422.152(a)(5) has functioned as a backstop against
unfair or discriminatory prior authorization practices. They went on to
urge CMS to strengthen the link between civil rights compliance and
Star Ratings, using the ratings to reform utilization management to
support timely, fair access to care.
Response: CMS appreciates the suggestion for reforming utilization
management practices through the Star Ratings. However, this comment is
outside the scope of this regulation.
Comment: Some commenters wrote in support of rescinding the
provision at Sec. 422.152(a)(5), noting that it would reduce
administrative burden.
Response: CMS thanks the commenters for their support.
After consideration of the public comments received, and for the
reasons set forth in the Contract Year 2027 proposed rule and in the
above responses to comments, CMS is finalizing the removal of Sec.
422.152(a)(5) as proposed.
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 expired at the end of plan year 2025, we proposed
to remove Sec. 422.752(d) as articulated in the Contract Year 2027
proposed rule (90 FR 54990).
We received the following comments on this proposal and respond to
them below:
Comment: A few stakeholders commented on our proposal. A commenter
noted that retaining an expired enforcement authority in regulation is
unnecessary and potentially confusing and that removing this language
would improve regulatory clarity while preserving CMS oversight tools.
While not opposed to removing the expired enforcement authority,
another commenter recommended that CMS work with Congress to extend the
expiring statutory authority. This commenter explained that an
intermediate sanction can be less disruptive for enrollees than an
intermediate termination and reinstating the statutory authority would
allow CMS to engage in enrollment sanctions for non-compliant D-SNPs in
the future.
Response: We appreciate these comments in support of our proposal
to remove Sec. 422.752(d). We agree that the sanction authority was
useful for States and new D-SNPs since it created a mechanism to
suspend enrollment for D-SNPs when SMACs were delayed. While we
appreciate the interest in extending the enforcement authority in
statute, we have been able to work with all applicable States to
include, where appropriate, language in the SMACs that provides the
same result as the limited enrollment enforcement authority from CMS.
After considering the comments we received and for the reasons
outlined in the proposed rule and our responses to comments, we are
finalizing the proposed removal of Sec. 422.752(d) without
modification.
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
[[Page 17555]]
exempt 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 proposed to codify a waiver for the LI NET
program with respect to customer call center 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 proposed 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 changes to the regulatory text will
adversely impact the LI NET sponsor, individuals' access to
prescription drug benefits, the Medicare Trust Fund, or result in a
paperwork burden.
The following is a summary of the comments we received and our
responses.
Comment: A few commenters expressed support for the proposal to
waive requirements related to customer call center extended hours of
operation for the LI NET program. They agreed that the removal of this
requirement appropriately reflects the unique structure of the LI NET
program and avoids duplicative requirements.
Response: We thank the commenters for their support.
Comment: Some commenters expressed concern that shorter call center
hours may limit access to medications and prescription reimbursement
assistance, especially for those with work, caregiving, or
transportation constraints. Shorter hours may also inconvenience those
with less flexible schedules. A few of the same commenters stated the
importance of maintaining phone service for individuals without
smartphones or internet access.
Response: While we acknowledge the concerns raised by the
commenters, we do not believe enrollees' access to medications will be
affected. As discussed previously, 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. Consequently, LI NET
enrollees have access to a call center as long as the enrollee's
pharmacy is open. In addition, the number of calls made to the call
center after 7:00 p.m. ET has historically been low due to the short-
term nature of LI NET enrollment and the relatively open formulary
employed by the LI NET program, which indicates that the call center
hours of operation are sufficient to accommodate individuals with
limited schedules or lacking internet access.
Comment: A commenter noted that the proposed LI NET call center
hours waiver does not apply to every plan.
Response: We acknowledge this comment and agree that the waiver
only applies to LI NET. All other plans must follow the extended call
center hour requirements.
Comment: A commenter acknowledged the significance of telephonic
and digital enrollment models in increasing beneficiary access and
encouraged uniform safeguards and equivalent scrutiny to ensure
beneficiary protection as it pertains to call centers and digital
enrollment models.
Response: This comment is out of scope with respect to this
proposal to waive requirements related to customer call center extended
hours of operation for the LI NET program.
After consideration of the public comments we received, we are
finalizing this proposal without modification.
VIII. Request for Information on Future Directions in Medicare
Advantage (Risk Adjustment and Quality Bonus Payments)
A. Introduction
The MA program has grown considerably in the past two decades and
now covers over half of all Medicare beneficiaries.\124\ In light of
this growth, CMS was 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)
125 126 and other researchers.127 128 129 CMS was
particularly interested in changes that can enhance competition in the
MA
[[Page 17556]]
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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\124\ 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.
\125\ 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.
\126\ 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.
\127\ Kronick, R., & Chua, F. M. (2021). Industry-wide and
sponsor-specific estimates of Medicare Advantage coding intensity.
Available at SSRN 3959446.
\128\ 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.
\129\ Layton, T. J., & Ryan, A. M. (2015). Higher incentive
payments in Medicare advantage's pay[hyphen]for[hyphen]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 (for
example, 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,130 131 the Home Health Value-Based
Purchasing Model,\132\ and Prior Authorization of Repetitive, Scheduled
Non-Emergent Ambulance Transport (RSNAT),\133\ 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,\134\ which terminates effective December 31,
2025.\135\ 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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\130\ 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.
\131\ 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.
\132\ 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.
\133\ 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.
\134\ Centers for Medicare & Medicaid Services. https://www.cms.gov/priorities/innovation/innovation-models/vbid.
\135\ 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.\136\
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\136\ 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.\137\ 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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\137\ 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.\138\
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\138\ 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, therefore, requested feedback in the CY 2027 Proposed Rule 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 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 sought 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,
[[Page 17557]]
incentivize positive health outcomes, and minimize administrative
burden for plans and providers. In particular, CMS sought 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 was
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 solicited 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 were 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 also solicited 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 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?
C. Quality Bonus Payments in Medicare Advantage
In this RFI, we solicited 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 was 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 \139\ 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 was
[[Page 17558]]
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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\139\ 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 prior to being finalized as Star
Ratings measures used for payment. We, therefore, solicited 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 also solicited
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 solicited
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?
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?
Commenters broadly supported updating MA risk adjustment and the
Quality Bonus Payment/Star Ratings framework to better align payments
and incentives with beneficiary needs and meaningful outcomes. For risk
adjustment, many urged CMS to improve payment accuracy and reduce
incentives for coding intensity, including by strengthening the
underlying data and better accounting for persistent chronic conditions
while avoiding continued credit for conditions that are no longer
clinically active. Commenters emphasized transparency, testing, and
phased implementation to prevent unintended impacts on high-need
populations and program stability.
For QBP/Star Ratings, commenters recommended refining measure
selection, weighting, and program design to better reflect outcomes and
beneficiary experience, improve alignment with other CMS quality
programs, and reduce timing lags between measurement and payment. Some
raised concerns about overall spending and whether QBP should be budget
neutral, while others cautioned against abrupt changes that could
disrupt plan benefits and supplemental offerings.
We appreciate the feedback received on MA risk adjustment and the
Quality Bonus Payment/Star Ratings programs. We will consider these
comments as we evaluate future policy directions for the MA program.
D. Well-Being and Nutrition
CMS requested comments on well-being and nutrition policy changes
for the MA program, including tools and policies that improve overall
health, happiness, and life satisfaction through complementary and
integrative health approaches, as well as strategies to achieve optimal
nutrition and preventive care, with particular emphasis on improving
incentives to ensure MA organizations bear long-term risk for
beneficiary health and well-being.
CMS received numerous comments in response to this RFI. Comments
were overwhelmingly supportive of CMS's focus on nutrition and well-
being in MA. Commenters expressed strong support for recognition of
nutrition as foundational to preventive care, focus on well-being and
nutrition policy development, and efforts to integrate nutrition
interventions into Medicare Advantage programs. Comments reflected
strong support for integrating nutrition and holistic well-being into
Medicare policy, with emphasis on prevention, expanded coverage, and
addressing social determinants of health. Comments recommend expanding
access to nutrition-related services including medical nutrition
therapy (MNT) for malnutrition, obesity, cancer, heart disease, and
other conditions affecting nutritional status. Additional
recommendations included home-delivered medically tailored meals, oral
nutrition supplements for food-insecure populations, produce
prescriptions, virtual and in-home visits from multidisciplinary teams,
and education opportunities such as grocery store tours and cooking
classes.
CMS thanks the commenters for expressing their support and sharing
their recommendations for comprehensive health, nutrition, and
preventive care in the MA program.
IX. Technical Changes to Terminology in Risk Adjustment and in Payments
to Sponsors of Retiree Prescription Drug Plans
We proposed 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 proposed to 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 did not include a discussion of this provision in the COI
section of this rule.
We did score this provision in the Regulatory Impact Analysis
section because this technical change has no impact on program
operations.
Comment: A few commenters stated that the technical change will
create
[[Page 17559]]
barriers to care for gender-diverse beneficiaries. A commenter was
concerned that the terminology change will create confusion across
Medicare Advantage and Medicare Part D payer policies, leading to
variability in the interpretation and application of coverage
requirements by plans. This commenter also noted that the policy change
may lead to confusion in practices because it is not consistent with
coding and medical documentation.
Response: We recognize the concerns raised by the commenters.
However, these terms have no discernable operational difference in
meaning with regard to risk adjustment and applications for qualified
retiree prescription drug plans.
After consideration of the public comments we received, we are
finalizing the technical change as proposed.
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 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.
In the Contract Year 2027 proposed rule (90 FR 54894), we solicited
public comment on each of these issues for the following sections of
the rule that contained information collection requirements. Such
comments were received for the provisions proposed under ICR #2
(Strengthened Documentation Standards for Part D Plan Sponsors) and ICR
#4 (Appeals Process for Part D Program Integrity Prescription Drug
Event Record Review Audits). A summary of the comments and our
responses follow under the applicable ICR section of this final rule.
Separately, we received a comment on our use of BLS's National
Occupational Employment and Wage Estimates to calculate costs. A
summary of that comment and our response follow under section X.A.
(Wage Data) of this final rule.
While a number of requirements were finalized on April 15, 2025 (90
FR 15792) under CMS-4208-F (RIN 0938-AV40), the proposed information
collection requirement in section VI.B.9. of the Contract Year 2026
proposed rule CMS-4208-P (89 FR 99340) titled ``ICRs Regarding
Eligibility for Supplemental Benefits for the Chronically Ill (SSBCI)
(Sec. 422.102(f)(4)(iii)(C))'' was not finalized at that time. As
indicated throughout this preamble, this provision is being finalized
in this CMS-4208-F3 rule.
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
final rule, provides May 2024 wages. In this regard, table 6 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.
[GRAPHIC] [TIFF OMITTED] TR06AP26.036
In response to the commenter's recommendation to use BLS's Employer
Costs for Employee Compensation data, we use BLS's National
Occupational Employment and Wage Estimates, which provide more job-
specific details and categories of employees. In addition, the employer
costs shown in both datasets are fairly comparable. For example, the
BLS's ECEC dataset for September 2025 estimates the total hourly
compensation for management, professional, and related occupations at
$77.26/hour.\140\ By contrast, BLS's OEW dataset for May 2024 for
management occupations (occupational code 11-0000) reflects a mean
hourly wage of $68.15. To account for the cost of fringe benefits and
other indirect costs, we doubled the OEW mean hourly wage, yielding a
total hourly compensation estimate of $136.30. Our use of BLS's OEW
data yields a conservative estimate of labor costs while providing
greater specificity in distinguishing wage estimates across job titles
and occupational classifications. Accordingly, this rule relies on
BLS's OEW data as the basis for the occupational wage estimates used in
calculating the burden costs associated with the provisions in this
final rule. We will continue to evaluate estimation methods and policy
implementation timelines, as appropriate.
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\140\ U.S. Bureau of Labor Statistics, Employer Costs for
Employee Compensation, https://www.bls.gov/web/ecec.supp.toc.htm.
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After consideration of the public comments we received, we are
finalizing the proposed collection of information requirements using
BLS's mean hourly wages doubled for fringe benefits and other indirect
costs to estimate the adjusted mean hourly wages.
B. Information Collection Requirements (ICRs)
The following ICRs are listed in the order of appearance within the
preamble of this final rule.
[[Page 17560]]
1. ICRs Regarding Manufacturer Discount Program (Sec. 423.100 and
Sec. Sec. 423.2700 Through 423.2768)
As described in section II.C. of the Contract Year 2027 proposed
rule, we proposed to codify the policies established under the
Manufacturer Discount Program Final Guidance,\141\ with certain
refinements, as new subpart AA of part 423.
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\141\ Available at: https://www.cms.gov/files/document/revised-manufacturer-discount-programfinal-guidance122024.pdf.
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Codification of the Manufacturer Discount Program policies in this
final rule have no impact on the requirements or burden estimates that
are currently approved by OMB under control number 0938-1451 (CMS-
10846). The collection of information requirements/burden in the Final
Guidance are active and properly accounted for in CMS-10846 without the
need for change. In this regard, our finalized provisions are not
subject to the requirements of the PRA.
We received no comments regarding information collection
requirements for the Manufacturer Discount Program. We are finalizing
the regulatory policies for the Manufacturer Discount Program largely
as proposed, with limited modifications, which are described in greater
detail in section II.C. of this final rule.
2. ICRs Regarding Strengthened Documentation Standards for Part D Plan
Sponsors (Sec. 423.505)
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, 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 the Contract Year 2027 proposed rule, CMS proposed 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 proposed 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 CMS to evaluate if the PDE
record was covered and paid under the Medicare Part D benefit in
compliance with CMS policy or policies.
CMS proposed 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
proposed 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 proposed 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 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.
As indicated, comments were received. A summary of the comments and
our response follow.
Comment: A few commenters mentioned that the documentation standard
proposed may cause increased administrative burden for Part D plan
sponsors.
Response: We have included minor updates to the proposed language
and addressed comments for documentation standards, including
commenters' concerns surrounding burden for plan sponsors in this
rule's provision for ``Strengthened Documentation Standards for Part D
Plan Sponsors''. CMS provided clarification that plan sponsors (1) do
not need to maintain audio recordings and that transcripts or call
notes suffice, (2) only need to maintain communications that they have
with pharmacists, prescribers, enrollees or other stakeholders entities
and not communications between these entities, and (3) do not need to
perform additional outreach if information available clearly
illustrates how a decision for Part D coverage was made.
After consideration of the public comments we received, we are
finalizing the proposed provisions with minor modifications in the
original draft language to clarify plan sponsor expectations.
3. ICRs Regarding Removing Rules on Time and Manner of Beneficiary
Outreach (Sec. Sec. 422.2264(c) and 423.2264(c))
CMS is finalizing three deregulatory changes to Sec. Sec.
422.2264(c) and 423.2264(c) to remove rules on the time and manner of
beneficiary outreach. The changes are designed to improve the plan
decision making process by
[[Page 17561]]
creating a more convenient, beneficiary-friendly outreach experience
and to reduce burden on beneficiaries, plans, and agents/brokers. The
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 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), this rule removes 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 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), this rule removes 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 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), this rule removes 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).
d. Burden Summary
The following table summarizes our burden estimates.
[GRAPHIC] [TIFF OMITTED] TR06AP26.037
We did not receive any comments related to the aforementioned
collection of information requirements and burden estimates and are
finalizing them in this rule as proposed.
4. ICRs Regarding Appeals Process for Part D Program Integrity
Prescription Drug Event Record Review Audits (Part 423, Subpart Z)
The effort associated with our finalized requirements under part
423, subpart Z 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)).
We also believe that there would be no need for plan sponsors to
establish a new appeals process or revise an existing appeals process.
As indicated, comments were received. A summary of the comments and
our response follow.
Comment: A few commenters mentioned that the appeals process may
cause increased administrative burden for Part D plan sponsors.
Response: CMS has addressed comments for the appeals process,
including commenters' concerns surrounding burden for plan sponsors in
this rule's provision for ``Appeals Process for Part D Program
Integrity Prescription Drug Event Record Review Audits''.
After consideration of the public comments we received, we are
finalizing the proposed provisions without modification.
5. ICRs Regarding Eligibility for Supplemental Benefits for the
Chronically Ill (SSBCI) (Sec. 422.102(f)(4)(iii)(C))
The following changes will be submitted to OMB for approval under
control number 0938-0753 (CMS-R-267).
As outlined in the CY 2026 proposed rule, for each SSBCI, the plan
must post the written policies and objective criteria on which the
policies are based to a public-facing website. For web developers and
programmers to annually post the required information on the plan
website, we estimate it will take 2 hours at $130.68/hr (89 FR 99392).
We estimate that there are 697 plans including local and regional CCPs,
MSA, and PFFS. In aggregate, we estimate an annual burden of 1,394
hours (697 plans * 2 hr/plan) at a cost of $182,168 (1,394 hr *
$130.68) Medicare Cost plans are excluded from the count since they are
not permitted to offer SSBCI.
The following table summarizes our burden estimates.
[GRAPHIC] [TIFF OMITTED] TR06AP26.038
[[Page 17562]]
We did not receive any comments related to the aforementioned
collection of information requirements and burden estimates. We are
finalizing our estimates in this rule based on the proposed methodology
but with more current data for wages and MA contracts. Our original
estimates used wage data and a count of MA contracts that are no longer
accurate.
6. ICRs Regarding Passive Enrollment by CMS (Sec. 422.60)
The requirement and burden change for D-SNPs will be submitted to
OMB for approval under control number 0938-TBD (CMS-10953). At this
time, the OMB control number has yet to be determined. However, it will
be assigned by OMB upon their approval of this collection of
information request. The public can monitor the status of our request
at reginfo.gov under Information Collection Review.
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 will 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.
To address this issue, we are finalizing an amendment at 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 will
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 will minimize the number of enrollees whose provider
relationships are disrupted as a result of passive enrollment.
Based on July 2025 total D-SNP enrollment, we estimated 6,168,649
D-SNP enrollees per 949 D-SNPs or a CY 2025 average of 6,500 enrollees
per D-SNP (6,168,649 D-SNP enrollees/949 D-SNPs).\142\
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\142\ CMS, SNP Comprehensive Report, July 2025. Available 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-2025-07.
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We assumed 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 estimated that a sheet of paper weighs 0.16
ounces (10.0 lb/1,000 sheets x 16 oz/lb), and did not anticipate
additional postage for mailings in excess of 1 ounce.
We estimated 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 assumed a maximum of 2 double-
sided pages (generally, weighing less than 1 ounce) would 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 did not estimate any labor costs. Therefore, we estimated
a total mailing cost by sponsors of $114,686 (6,500 enrollees/D-SNP * 2
mailings * 11 D-SNPs * $0.802/mailing).
We did not receive comments on the information collection
requirements associated with our proposal and, therefore, are
finalizing the information collection requirements without
modification.
The following table summarizes our burden estimates.
[GRAPHIC] [TIFF OMITTED] TR06AP26.039
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 changes will be submitted to OMB for approval 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 final rule.
We are amending Sec. Sec. 422.107(d)(1) and 422.514(h) to allow D-
SNPs that serve full-benefit dually eligible individuals in a
coordination-only D-SNP or HIDE SNP to continue enrollment of full-
benefit dually eligible individuals in a D-SNP in the same service area
where
[[Page 17563]]
those individuals are enrolled in Medicaid FFS. As discussed in section
VI.C. of this final rule, we are revising specific 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. The provisions
that we are finalizing at Sec. Sec. 422.107(d)(1) and 422.514(h) will
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. Using BLS's May
2022 wage data, 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 (or a total of 8 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 finalizing in section VI.C. of this
rule to Sec. Sec. 422.107(d)(1) and 422.514(h) will allow D-SNPs that
serve full-benefit dually eligible individuals in a coordination-only
D-SNP or HIDE 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, will change
which D-SNPs will 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 finalized exception. To account for the reduction in affected MA
organizations under this finalized 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 estimate that amendments to Sec. Sec. 422.107(d)(1) and
422.514(h) will 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 in
finalizing the amendments to Sec. Sec. 422.107(d)(1) and 422.514(h).
The wage estimates reflect May 2024 BLS National Occupational
Employment and Wage Estimates, whereas our estimates in the April 2024
final rule used BLS National Occupational Employment and Wage Estimates
from May 2022.
Using BLS's May 2024 wage data, 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 estimated 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 estimated a burden reduction of minus 180 hours
(420 hr revised-600 hr active) and minus $15,673 ($51,355 revised-
$67,028 active).
The following table summarizes our burden estimates.
[GRAPHIC] [TIFF OMITTED] TR06AP26.040
We did not receive comments on the information collection
requirements associated with this proposal and are finalizing the
information collection requirements without modification.
8. ICRs Removing Account-Based Medical Plans From Entities Required To
Provide Creditable Coverage Disclosures
The following changes will be submitted to OMB for approval under
control number 0938-1013 (CMS-10198).
As described in section VII.A. (90 FR 54984) of the Contract Year
2027 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 finalized provision 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
[[Page 17564]]
section 1860D-22(a)(2) of the Act. As described in section VII.A. of
the Contract Year 2027 proposed rule (90 FR 54984), 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.
As stated in section VII.A. of the Contract Year 2027 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 from
feedback that CMS received 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 attempted 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.\143\
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\143\ 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.
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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 burden 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). We
used the higher of our two cost estimates (namely, $90,266) to score
our total burden estimates.
The following table summarizes our burden estimates.
[GRAPHIC] [TIFF OMITTED] TR06AP26.041
We received no comments on this proposal and therefore are
finalizing this provision without modification.
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))
Section 422.137(c)(5) requires a member of the UM Committee to have
expertise in health equity. CMS estimated 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 of 348 hours (697 contracts * 0.5 hr) and $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
estimated 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
estimated 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).
The following table summarizes our burden estimates.
[GRAPHIC] [TIFF OMITTED] TR06AP26.042
We did not receive any comments related to the aforementioned
collection of information requirements and burden estimates and are
finalizing them in this rule as proposed.
C. Summary of Information Collection Requirements and Associated Burden
BILLING CODE P
[[Page 17565]]
[GRAPHIC] [TIFF OMITTED] TR06AP26.043
[[Page 17566]]
BILLING CODE C
XI. Regulatory Impact Analysis
A. Statement of Need
This final rule addresses several critical needs in the Medicare
Advantage (Part C), Medicare Prescription Drug Benefit (Part D), and
Medicare cost plan programs that require regulatory action to ensure
program integrity, beneficiary protection, and statutory compliance.
The provisions finalized in this rule are intended to codify 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 codify 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
provided under statute. 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 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
modifications being finalized 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 final 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 final 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
final 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 final rule in order to arrive at the
total impact. Table 7 summarizes the estimated transfers and costs
associated with the various provisions in this final rule over a 10-
year period. Further details are provided later in this RIA.
[[Page 17567]]
[GRAPHIC] [TIFF OMITTED] TR06AP26.044
[[Page 17568]]
1. Effects of Part D Redesign: Redesigned Part D Benefit
In the Contract Year 2027 proposed rule, we proposed to codify
changes to the Part D benefit made by section 11201 of the IRA related
to the deductible, the initial coverage limit, the coverage gap, the
annual out-of-pocket (OOP) threshold, and alternative prescription drug
coverage options.
The CMS Office of the Actuary estimated the impacts of the drug
provisions of the IRA using the 2024 President's Budget as a baseline
early in calendar year 2023. These estimates were made prior to many
policy decisions to implement the law, and independently from other
components of CMS. Since the majority of these provisions have already
been implemented through program instruction,\144\ this estimate should
be taken only in its historical context, not as a reflection on the
experience since the provisions' effectuation. Additionally, these
estimates measure the overall impact of the IRA on Medicare, whereas
this regulation codifies only certain provisions of the law. We will
highlight certain components of this estimate where recent experience
has diverged from our initial assumptions.
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\144\ This includes the Medicare Drug Price Negotiation Program
Guidance with respect to initial price applicability years 2026,
2027, and 2028; the Part D Redesign Program Instructions for CY 2025
and 2026 (as discussed in section II.A. of this final rule); and the
Medicare Part D Manufacturer Discount Program Final Guidance for CYs
2025 and 2026 (as discussed in section II.C. of this final rule).
---------------------------------------------------------------------------
The IRA has a range of Medicare provisions, including restraining
price growth and negotiating drug prices for certain drugs payable
under Part B and covered under Part D, as well as redesigning the Part
D benefit structure to decrease beneficiary out-of-pocket costs. The
provisions of the IRA take effect over several years, resulting in very
different effects by year. Much of the Part D benefit redesign became
effective in 2025, for example, before the Negotiation Program
provisions can have any offsetting effects.
To model the Negotiation Program provisions of the IRA, we first
determined which drugs would be selected for negotiation in accordance
with sections 11001 and 11002 of the IRA. Using 2022 experience for
Part B and Part D claims, we ranked drugs by Part B and Part D
expenditures and then applied the eligibility criteria specified in the
IRA--verifying, in particular, that the ranked drugs had been on the
market long enough to qualify for negotiation. From this list, we
generated the potential list of drugs to be negotiated in each year for
Part B and Part D.
To estimate the impact of negotiation and to measure the
differences between the current prices and the ceiling price and other
pricing parameters laid out in the IRA, we used 2021 data from a
variety of sources, including PDE records, Medicaid Average
Manufacturer Price data, and Part B ASP data. We assumed, after
comparing the Medicare prices to the ceiling prices in each projection
year, that Medicare would be able to negotiate slightly below the
ceiling price in Part D. We then adjusted for generic and biosimilar
launches that, should they happen after the selection process, would
potentially limit the impact of the maximum fair price. Lastly, we
adjusted for changes in the percentage of spending that the selected
drugs would represent over time. The discounts relative to total 2021
Part D allowed cost, prior to manufacturer rebates and total Part B
allowed cost, are shown in Table 8.
[GRAPHIC] [TIFF OMITTED] TR06AP26.045
For Part D, the benefit is considerably enriched under the IRA
redesign, and the most impactful changes took effect in 2025. To
estimate these effects inclusive of the Negotiation Program impacts, we
incorporated the negotiated price at the drug level into a beneficiary-
and claim-level detailed model. Then, we recalculated the new benefit
on the negotiated prices to determine the combined result under the
defined standard benefit design by year. To protect beneficiaries from
large premium increases, the IRA limits the premium change in years
2024 through 2029 before ultimately readjusting the base beneficiary
premium percentage to a minimum of 20 percent in 2030 and later years.
The major benefit changes and beneficiary premium protections by year
are shown in Table 9.
[[Page 17569]]
[GRAPHIC] [TIFF OMITTED] TR06AP26.046
To complete the modeling of the Negotiation Program, prescription
drug inflation rebates, and benefit provisions, we applied the results
from the Part D claim-level detailed simulation to our total Part D
benefit model. This model also incorporated changes to the per capita
cost trends to reflect: (i) the impact of most existing brand-name
drugs moving to a CPI-level increase; (ii) the expected growth in new
drug costs; and (iii) the expected induced utilization due to the
enriched benefit. We assumed that drugs with a significant amount of
spending in Part D would temper their price increases rather than pay
the inflation rebates required by the IRA. Additionally, we reduced
manufacturer rebates to compensate for the lower negotiated prices and
lower price growth on existing drugs.
For drugs payable under Part B, we applied the negotiated price
discounts to the OM spending for separately payable Part B drugs. We
further adjusted these results to account for the impact to private
health plan expenditures to obtain a total impact. While there are also
inflation rebates required for certain drugs payable under Part B drugs
under the IRA, price increases on existing drugs payable under Part B
historically have been close to the CPI in aggregate, and therefore we
did not project an effect for this provision in the drugs payable under
Part B. We also incorporated other, less significant changes from the
IRA, such as the lower cost sharing for insulins furnished under
durable medical equipment and the temporary payment increase for
biosimilar products.
Our assumptions on the impacts of the IRA differed from those used
in other public estimates in a few critical ways. Most importantly, we
assumed that the inflation rebates required by the IRA would result in
manufacturers paying relatively small inflation rebate amounts for
drugs covered under Part D and nothing for drugs payable under Part B.
We assumed that manufacturers would prefer to have lower price trends
that would incentivize greater use than pay publicly reported fees for
price increases that exceed inflation. Under this assumption, the
effects of the inflation rebate provisions of the IRA are changed
because the difference in price is shared across the benefit rather
than accruing directly to the government. In other words, lower list
price trends will reduce prices paid at the pharmacy relative to the
baseline, which results in lower beneficiary cost sharing and lower
state clawback payments, thereby increasing the federal cost for the
Part D benefit. To compensate for the loss of price increases, we
expected manufacturers to reduce rebates offered to plan sponsors.
Additionally, we expected that the initial pool of drugs covered
under Part D selected for negotiation would have a large proportion of
heavily rebated drugs. In these cases, we expected that the price net
of rebate will be substantially lower than the other ceiling prices
described in the IRA. We further estimated that the effect of
negotiation in the early years would be similar to the impact of
shifting rebates to the point of sale. This shift reduces beneficiary
cost sharing as the price at the point of sale is lower, but increases
bid amounts and increases federal expenditures.
In summary, the total effects were to reduce government
expenditures for Part B, to increase expenditures for Part D through
2030, and to decrease Part D expenditures beginning in 2031. Part B
savings were primarily due to: (i) the substantial lowering of
payments, relative to current payment, as a result of negotiated
prices; and (ii) small impacts from other provisions. Part D ultimately
generated cost savings at the end of the budget window, but many of the
gains from negotiated prices and lower trends were initially spent on
increased benefits and the loss of manufacturer rebates. The impact on
benefits and premiums and the impact in total are shown in Table 10
using the 2024 President's Budget as a basis.
[[Page 17570]]
[GRAPHIC] [TIFF OMITTED] TR06AP26.047
Since we produced these estimates, both the Part B and Part D
programs have had large increases in drug expenditures. Part D trends
have accelerated dramatically, with the per capita gross drug cost
increasing more than 18 percent in 2025 over 2024, driven by higher
glucagon-like peptide-1 (GLP-1) and specialty drug usage. Meanwhile
Part B drug trends have also increased, although the primary driver was
skin substitutes that were not FDA-approved drugs. There are a variety
of other causes contributing to observed changes in expenditures for
both programs.
The Part D trends in per capita gross costs are shown in table 11.
Much of the IRA Part D benefit redesign took effect in 2025, including
limiting annual out of pocket expenditures to $2,000 per enrollee for
2025 (to be annually increased by the annual percentage increase, as
described in section 1860D-2(b)(6) of the Act). While this new feature
could have induced spending beyond the assumption we included in our
initial estimate, it is worth noting that the 2024 benefit structure
under the IRA also eliminated cost-sharing in the catastrophic phase of
the benefit, effectively implementing an out-of-pocket maximum without
a pronounced increase in costs. Additionally, some of the increase may
be attributable to manufacturers reducing spending on patient
assistance programs, which would cause more claims to run through the
Part D program. Expanded indications for cancer drugs also contributed
to the increase.
[[Page 17571]]
[GRAPHIC] [TIFF OMITTED] TR06AP26.048
The observed discounts from maximum fair prices for selected drugs
also differed from what we initially assumed. For initial price
applicability year 2026, the projected negotiated discount impact on
allowed costs--ingredient cost, dispensing fee, and sales tax--using
2025 experience data is 11.3 percent, while the projected impact for
initial price applicability year 2027 is 18.2 percent. Compared with
the original estimated effects shown in Table 8, the actual negotiated
discounts are more than two percent greater than the original modeling
results. These differences reflect the deviation in price levels,
updated information about generic and biosimilar launches, and the
percentage of expense the negotiated drugs represent for each year.
Part B negotiated prices for initial price applicability year 2028 are
not currently available, so we do not quantify the change from our
original assumptions. We also had assumed that maximum fair prices for
initial price applicability years 2026 and 2027 would also apply to
Part B utilization. Final policies for those years contained the
maximum fair prices to the Part D benefit. This change from our
assumption did not meaningfully affect overall estimates, due to
multiple factors including limited observed utilization of most IPAY
2026 and IPAY 2027 drugs in Part B and the timing of certain generic or
biosimilar entrants.
Part D drug inflation rebates were higher than originally assumed.
Converting the published inflation rebates owed from the applicable
period to a calendar year basis, 2023 inflation rebates were over $500
million dollars. This is higher than the $400 million dollar estimate
shown in Table 10. This implies that drug prices increased slightly
faster than originally assumed, generating higher inflation rebates. As
a percentage of gross drug costs, the original estimate represents 0.01
percent, while the actual amount was 0.02 percent.
For Part B, our original estimates assumed that the drug inflation
rebates would be negligible. Actual Part B drug inflation rebates due
for calendar years 2023 and 2024 were $14 million and $121 million,
respectively. These amounts represent approximately 0.01 percent and
0.04 percent of the incurred charges for OM in 2023 and 2024. Since
drug inflation rebates are not incurred on MA utilization, this is the
most appropriate comparison.
Other, more nuanced elements of the IRA changes also differed from
our original expectations. For example, the Manufacturer Discount
Program is likely larger than we initially assumed, but the PDE
reporting is not yet complete for the discount's first year. Similarly,
the impacts of the IRA on Part D DIR are unknown, as Part D plan
sponsors have not yet submitted the 2025 DIR reports. These elements
may have larger effects on overall Part D expense than the other
assumption deviations described previously.
The costs and transfers attributable to the Part D redesign are
attributable to the IRA and are not a result of this rule.
We received no comments on the impacts of the Part D redesign
proposals. We are finalizing those provisions without modification, as
discussed in section II.A. of this final 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 the Contract Year 2027 proposed rule, we proposed 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 will
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.
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. This provision
does not impose new requirements on Part D sponsors or change existing
operational processes.
This provision codifies a conforming change made in response to the
redesigned Part D benefit; thus, the impact analysis of the redesigned
Part D benefit discussed in section XI.C.1. of this final rule does not
relate to this provision. 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.
[[Page 17572]]
b. Specialty-Tier Maximum Allowable Cost Sharing (Sec.
423.104(d)(2)(iv)(D))
In the Contract Year 2027 proposed rule, we proposed to codify the
methodology for determining the specialty-tier coinsurance/deductible
ranges that was established in the Final CY 2025 Part D Redesign
Program Instructions. This provision will 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 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.
Because this provision codifies a conforming change made in
response to the redesigned Part D benefit, the impact analysis of the
redesigned Part D benefit discussed in section XI.C.1. of this final
rule does not relate to this provision. In the Contract Year 2022 final
rule (86 FR 6078), we codified the specialty-tier maximum allowable
cost-sharing methodology and concluded that the specialty-tier
provisions, including those permitting 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 finalizing our update to this methodology to align with
the redesigned Part D benefit will 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.
We received no comments on the impacts of this proposal and are
finalizing this provision without modification.
3. Effects of the Medicare Coverage Gap Discount Program (Sec. Sec.
423.100, and 423.2300 through 423.2345 (Subpart W))
In the Contract Year 2027 proposed rule, we proposed to codify the
sunset of the Coverage Gap Discount Program, which was enacted under
the Affordable Care Act and began on January 1, 2011. The Part D
benefit redesign under section 11201 of the IRA, which eliminated the
coverage gap phase of the Part D benefit, included sunsetting the
Coverage Gap Discount Program on 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 benefit
redesign, including sunsetting the Coverage Gap Discount Program, are
attributable to the IRA, as described in greater detail in section C.1
of this Detailed Economic Analysis, and are not a result of this rule.
We received no comments on the impacts of the proposals related to
the Coverage Gap Discount Program, which we are finalizing without
modification.
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))
In the Contract Year 2027 proposed rule, we proposed to codify
policies implementing the Manufacturer Discount Program, established
under section 11201 of the IRA as part of the 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 proposed 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, as described in greater detail in section C.1. of this
Detailed Economic Analysis, and are not a result of this rule.
We received no comments on the impacts of the Manufacturer Discount
Program proposals. We are finalizing the policies largely as proposed,
with limited modifications, which are described in greater detail in
section II.C. of this final rule.
5. Effects of Third-Party Marketing Organization (TPMO) Oversight:
Revising the Record Retention Requirements for Marketing and Sales Call
Recordings
This provision proposed 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, which 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 to 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). As finalized, CMS
is reducing the overall retention time from 10 to 6 years. Years 1
through 3 must be audio recordings, and years 4 through 6 can be either
audio recordings or transcripts. This will take effect on October 1,
2026, to coincide with the beginning of the 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 estimate
the cost savings, CMS reviewed different types of storage costs. The
first type is cloud storage where an entity pays per 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 or marketed (or both) 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 with access to call recording technology at a reduced cost
or otherwise factor it into agent/broker contractual arrangements.
Finally, CMS noted 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 made it more difficult to
establish the savings associated with this provision.
In this final rule, CMS is finalizing a requirement that agent and
broker marketing and sales audio call recordings to be stored for years
1 through 3 and permits either audio call recordings or transcripts for
years 4 through 6. To estimate the cost savings associated with
revising the call recording retention requirement, CMS had to estimate
both the cost to record and retain audio recordings as well as the cost
to transcribe calls and retain the transcriptions. In estimating costs,
CMS assumes MA plans and Part D sponsors will retain documentation
through the use of transcripts for years 4 through 6.
[[Page 17573]]
CMS used the same methodology as in the Contract Year 2027 proposed
rule for estimating the costs of call recordings. CMS first estimated
the number of licensed and appointed agents to sell Medicare products,
including MA plans and PDPs, to be 100,000.\145\ CMS acknowledged 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 acknowledged
that the typical cost to agents combines both the recording and the
storage costs into one fee. With these challenges acknowledged, for the
Contract Year 2027 proposed rule, CMS used 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.146 147 148 149
Further, CMS estimated that approximately 60 percent of the cost is
attributed to the recording costs while the other 40 percent is
attributed to the cost of storage ($14 is storage [35*0.4]). The
Contract Year 2027 proposed rule for a 6-year audio recording retention
period estimated 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 estimated that this provision would save an
estimated $6.72 million per year ($67.2 [savings per agent per year] *
100,000 [agents]), or $67.2 million over a 10-year period.
---------------------------------------------------------------------------
\145\ https://www.sparkadvisors.com/resource/where-agents-become-pawns-the-dark-side-of-fmo-contracting-and-what-it-means-for-agents.
\146\ https://www.claap.io/blog/chorus-pricing.
\147\ https://www.nextiva.com/x20/lpGVDT11_i?utm_source=getvoip&utm_medium=affiliate&utm_campaign=lpgvdt&utm_term=nextiva%20plans.
\148\ https://www.zoom.us/pricing/zoom-phone.
\149\ CMS recognizes that some of the tools do not include
unlimited, 10-year storage. Storage may be an additional cost.
---------------------------------------------------------------------------
To estimate the cost to capture and retain calls via a transcript,
CMS reviewed the cost and processes associated with converting calls
into transcripts. Converting recorded calls into transcripts range from
$0.10 to $0.30 per minute for AI generated transcripts while human
generated transcripts beginning at $1.25 per minute.\150\ These costs
were based on transcriptions being completed after the call, using the
original call recording.
---------------------------------------------------------------------------
\150\ https://rev.outgrow.us/rev-pricing-calculator; https://www.scribbl.co/post/cost-for-transcription-services; https://www.gmrtranscription.com/prices#GenTranscription; https://
www.dittotranscripts.com/blog/how-much-do-human-transcription-
services-cost/
#:~:text=How%20Much%20Does%20Human%20Transcription,and%20thus%20incur
%20higher%20fees.
---------------------------------------------------------------------------
While reviewing the costs to transcribe calls, CMS identified other
methods of recording and transcribing calls. In the current
marketplace, applications are available to simultaneously record and
transcribe calls. These applications vary in pricing, with the
estimated cost ranging from $109 per year to $300 per year, depending
on whether the agent/broker is using a ``standard'' or ``pro
version''.\151\ Using these updated costs, CMS is revising our final
cost estimate for the final regulation.
---------------------------------------------------------------------------
\151\ https://www.withallo.com/blog/best-call-transcription-software-apps.
---------------------------------------------------------------------------
Using the originally proposed number of agents at 100,000 and an
average of the updated cost of $204.5 [109+300)/2], CMS estimates that
the final regulation will save $20.5 million per year ($204.5*100,000)
or $205 million over the course of 10 years. Based on the previous
noted limitations, CMS specifically requested comments on these
estimates and welcomed additional data that may help the Agency to
further quantify the savings associated with this provision. We
requested comments on our assumptions of savings, taking into account
the continued requirement for the recording of a beneficiary's
enrollment into a plan.
We did not receive comments on the impact of this provision in the
Contract Year 2027 proposed rule. Based on CMS's updated information
the provision is being finalized with the modifications identified
previously.
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 proposed 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 finalized in
this rule, we have estimated the impact of the measure removals on the
Medicare Trust Fund in this rule. We also proposed 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 finalized changes on MA
contracts using the 2025 Star Ratings data. We calculated the net
impacts summarized in Table 7 due to these finalized Star Ratings
updates by quantifying the difference in the MA organization's final
Star Rating with the finalized changes and without the finalized
changes. We assume Medicare Trust Fund impacts due to the Star Ratings
changes associated with these finalized revisions to the measure set
and methodology. Not moving forward with the implementation of the HEI
and continuing to include the historical reward factor will be
effective for the 2027 Star Ratings and will 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 will be effective also for the 2028 Star Ratings and
will impact the 2029 plan payments and 2029 QBPs. The removal of the
remaining measures (with the exception of the Diabetes Care--Eye Exam
measure which will remain in the Star Ratings, as discussed in section
V.B. of this final rule) will be effective for the 2029 Star Ratings
and will impact the 2030 plan payments and 2030 QBPs.
All impacts are considered transfers, but we requested 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 final rule impact analysis. 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
[[Page 17574]]
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 final rule. We estimated the cumulative impact of the
finalized changes to the Star Ratings calculations since there are
interactions between the changes. We updated the estimated impacts from
the Contract Year 2027 proposed rule because, as discussed in section
V.B. of this final rule, we are retaining the Diabetes Care--Eye Exam
measure in the Star Ratings. The impacts are shown in Table 12. For the
Star Ratings updates, the net impact is estimated to be between $5.02
billion in 2028 and $1.89 billion in 2036, resulting in a 10-year net
impact estimate of $18.56 billion, which equates to 0.21 percent of the
Medicare payments to private health plans for the years 2027 through
2036.
[GRAPHIC] [TIFF OMITTED] TR06AP26.049
Comment: A couple of commenters requested that CMS update the
modeling using data from the 2026 Part C and D Star Ratings, with a
commenter noting that this would take into account the three new
measures added to the 2026 Star Ratings. These commenters also
requested that CMS clarify the measures and weights used in the
modeling.
Response: The impact analysis included in the Contract Year 2027
proposed rule was based on modeling that used data from the 2025 Star
Ratings but accounted for measure and measure weight changes that
occurred in the 2026 Star Ratings. Based on this, CMS does not believe
it is necessary to update the modeling using data from the 2026 Star
Ratings. The modeling included the three measures added to the 2026
Star Ratings (Improving or Maintaining Physical Health, Improving or
Maintaining Menth Health, and Kidney Health Evaluation for Patients
with Diabetes) and the weight changes for the patient experience,
complaints, and access measures from 4 to 2. In other words, the
modeling used the measure set and measure weights from the 2026 Star
Ratings. Measure changes for years beyond the 2026 Star Ratings were
not included.
Comment: A commenter estimated the impact of the proposed changes
and came to substantially different estimates than CMS shared in the
Contract Year 2027 proposed rule. This commenter estimated the net
impact would be savings of billions of dollars to the Medicare Trust
Fund rather than the cost estimated by CMS.
Response: We appreciate this commenter's analysis of the impact of
the proposed changes; however, this commenter would not have all
necessary data available to estimate the impact of the proposed
changes. For example, while contracts have data on their own
performance on the reward factor and simulated HEI reward, the
commenter would not have data on the HEI or the reward factor for the
full set of contracts included in the Star Ratings as CMS has not made
those data publicly available.
After consideration of the public comments we received, we are
finalizing all of the Star Ratings provisions except the proposal to
remove the Diabetes Care--Eye Exam measure (Part C).
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
[[Page 17575]]
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 final rule, we are finalizing a third exception at Sec.
422.514(h)(3) to allow D-SNPs that serve full-benefit dually eligible
individuals in a coordination-only D-SNP or HIDE 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 changes will 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 to begin disenrolling those members in 2030 as currently required
under Sec. 422.514(h).
We expect that establishing a third exception at Sec.
422.514(h)(3) will 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) will be
reduced. We note that we are also finalizing 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 this
exception to have an impact on savings estimates in the April 2024
final rule. The methodologies and baseline data used in the estimates
presented in Table 10 are consistent with those used in the April 2024
final rule estimates, except the Tables 10 and 11 estimates exclude
certain coordination-only D-SNPs and HIDE SNPs that would be exempt
under this final rule.
For our third exception at Sec. 422.514(h)(3), as shown in Table
13, 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] TR06AP26.050
Table 14 shows the estimated Part D costs of the 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.
[[Page 17576]]
[GRAPHIC] [TIFF OMITTED] TR06AP26.051
We did not receive comments on the regulatory impact analysis
associated with this proposal and, therefore, are finalizing the
regulatory impact analysis without modification. We respond to public
comments received on other aspects of our proposal in section IV.C. of
this final rule. We are finalizing the amendments to Sec. Sec.
422.107(d)(1) and 422.514(h) largely as proposed, with some
modifications, which are described in detail in section IV.C. of this
final rule.
8. Effects of Rescinding the Mid-Year Supplemental Benefits Notice
This provision rescinds the requirement established in the April
2024 final rule (89 FR 30448) that required MA organizations to provide
annual mid-year notices to enrollees regarding unused supplemental
benefits. The requirement was to take effect on January 1, 2026, and
required 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 were 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 will prevent the burden that
would have been imposed on MA organizations. Based on updated BLS wage
data, this will 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 will 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 $68,747 (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 will 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 estimated this
provision will 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 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 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.
CMS received no comments regarding the impacts of this proposal and
is finalizing this provision without modification.
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
[[Page 17577]]
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 final rule codify existing
policy where we have evidence, as discussed in the appropriate preamble
sections, that the codification of 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 finalized 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.
We did not receive comments on this proposal and are finalizing
this provision without modification.
E. Regulatory Review Costs
If regulations impose administrative costs on reviewers, such as
the time needed to read and interpret this final rule, then we should
estimate the cost associated with regulatory review. We received
approximately 42,632 comments specific to the provisions in this final
rule, 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
final 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 final rule. For
each entity that reviews the rule, the estimated cost is therefore
$1,324.40 (10 hours x $132.44). Therefore, we estimate that the maximum
total cost of reviewing the final rule is $56.4 million ($1,324.40 x
42,632 reviewers). However, we expect 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 $5.6 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 15, 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.
[GRAPHIC] [TIFF OMITTED] TR06AP26.052
[[Page 17578]]
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 final 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,\152\ 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 1,071 businesses using this NAICS
code, we believe 799 (or 74.6 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, 99.7
percent (424,395 out of 425,715) are considered small.\153\
---------------------------------------------------------------------------
\152\ Medicare Advantage/Part D Contract and Enrollment Data,
https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-advantagepart-d-contract-and-enrollment-data.
\153\ US Census Bureau, 2022 SUSB Annual Data Tables by
Establishment Industry, https://www.census.gov/data/tables/2022/econ/susb/2022-susb-annual.html; and US Census Bureau, 2022
Nonemployer Statistics Datasets, https://www.census.gov/programs-surveys/nonemployer-statistics/data/datasets.html?text-list-d6a8ce0de1%3Atab=2022#text-list-d6a8ce0de1.
---------------------------------------------------------------------------
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.\154\ To explain our position, we will first note certain
operational aspects of the Medicare program.
---------------------------------------------------------------------------
\154\ U.S. Department of Health and Human Services, Guidance on
Proper Consideration of Small Entities in Rulemaking, https://aspe.hhs.gov/sites/default/files/documents/dd6288d1b8db19ee8a1f37b3ce775003/guidance-proper-consideration-hhs-2003-rulemaking.pdf.
---------------------------------------------------------------------------
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 Original 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
Original 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 to provide
supplemental benefits or lower beneficiary cost sharing or both, 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 firms. 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, 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 7, the proposals described in this rule are
expected to result in cost savings amounting to approximately $23.4
million in 2027 and $23.5 million in subsequent years. Most affected
entities are expected to
[[Page 17579]]
have cost savings as a result of this rule. For example, we anticipate
that the 697 MA organizations will experience a net cost savings. 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 $756,929 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, $2,902 for 2027, and $2,878 per year starting in
2028.
Many of the other entities affected by the provisions of this final
rule are similarly expected to see cost savings, though others will see
negligible cost increases. The following table outlines costs savings,
the estimated number of entities affected, and aggregate costs and cost
savings over the next 10 years:
[GRAPHIC] [TIFF OMITTED] TR06AP26.053
We reiterate our belief that this final 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. These cost savings are
described in Table 7. Even among the D-SNPs that are expected to incur
new net costs through the passive enrollment provision, D-SNPs must
agree to receive enrollees through the passive enrollment process.
Especially small D-SNPs that cannot incur the additional costs would
opt not to participate in passive enrollment. 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.
Comment: A commenter expressed concerns about the assumptions used
in the Regulatory Impact Analysis. The commenter noted that the new
out-of-pocket maximum and sunsetting of the Medicare Coverage Gap
Discount Program may disproportionately burden smaller plans with
limited revenue to absorb increased drug costs. The commenter added
that the proposed changes will impact plans differently based on size,
type, and populations served, noting that certain Star Ratings changes
may harm SNPs and small plans serving vulnerable populations in long-
term care facilities. The commenter recommended that CMS conduct a
granular analysis of how each change affects small and specialty plans,
and to tailor regulations to avoid harming plans serving beneficiaries
requiring institutional or institutional-equivalent care.
Response: We appreciate the commenter's concerns regarding the
potential impact of this rule on small MA organizations and SNPs.
However, we consider aspects of the commenter's statement to concern
statutory changes and are out of scope, and on the whole we believe
that the rule will not have a significant economic impact on most small
entities. We reiterate that the vast majority of affected entities,
including small plans, are expected to experience net cost savings as a
result of this rule. Our analysis of cost estimates and time burdens
are specific to each respondent type (i.e., MA organization, D-SNP,
Part D sponsor, group health plan, etc.) to ensure that estimated
impacts reflect the burden experienced by each type of entity. Many
provisions also do not have an impact on small entities as they do not
produce costs or cost savings; therefore, we do not include those
provisions in this analysis. In addition, MA organizations are expected
to include compliance costs in their bids, ensuring small plans have
necessary resources, and can address cost changes through adjusting
administrative costs, modifying benefit structures, and adjusting
profit margins. CMS remains committed to ensuring all Medicare
enrollees, including those served by SNPs and small plans, have access
to high-quality, affordable coverage, and we will continue to monitor
the impact of these provisions.
We are certifying that 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 final
rule constitutes our RFA analysis.
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.
[[Page 17580]]
In 2026, that threshold is approximately $193 million. This final rule
is not anticipated to have an unfunded effect on State, local, or
Tribal governments, in the aggregate, or on the private sector of $193
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 final 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 final 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 final rule is expected to be an E.O.
14192 deregulatory action. We estimate that this rule generates $19.2
million in annualized cost savings at a 7 percent discount rate,
discounted relative to year 2024, over a perpetual time horizon.
K. Conclusion
This final rule will result in net annualized cost savings ranging
between $21.2 and $20.7 million for calendar years 2026 to 2036, at the
3 percent and 7 percent discount rates, respectively. These savings are
primarily attributable to the provision revising aspects of TPMO
oversight. This final rule will also result in net annualized monetized
transfers ranging between $1.63 billion and $1.54 billion for calendar
years 2026 to 2036, at the 3 percent and 7 percent 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 amends 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 (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, 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 paragraph (b)(5)(i) of this
section, 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.
* * * * *
(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.
* * * * *
(g) Elections requiring prior CMS approval--(1) CMS approval. SEPs
specified in paragraph (g)(2) of this section 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.
[[Page 17581]]
(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
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. Revising paragraph (f)(1)(i)(A);
0
b. Adding paragraph (f)(1)(i)(C);
0
c. Revising paragraphs (f)(1)(iii)(G) and (f)(4)(iii); and
0
d. Adding paragraph (g).
The revisions and additions read as follows:
Sec. 422.102 Supplemental benefits.
* * * * *
(f) * * *
(1) * * *
(i) * * *
(A) A chronically ill enrollee is an individual enrolled in the MA
plan who meets all of the following:
(1) Has one or more comorbid and medically complex chronic
conditions that is life threatening or significantly limits the overall
health or function of the enrollee.
(2) Has a high risk of hospitalization or other adverse health
outcomes.
(3) Requires intensive care coordination.
* * * * *
(C) An enrollee who has one or more comorbidities and medically
complex chronic conditions alone is not sufficient to demonstrate that
an enrollee meets all 3 criteria set forth in paragraph (f)(1)(i)(A) of
this section. MA plans must, through health risk assessments, review of
claims data, or other similar means, demonstrate that enrollees meet
all 3 criteria set forth in paragraph (f)(1)(i)(A) of this section.
* * * * *
(iii) * * *
(G) Cannabis products that are illegal under applicable State or
Federal law.
* * * * *
(4) * * *
(iii) Have objective criteria for SSBCI. Specifically:
(A) Have and apply written policies based on objective criteria for
determining a chronically ill enrollee's eligibility to receive a
particular SSBCI;
(B) Document the written policies specified in paragraph
(f)(4)(iii)(A) of this section and the objective criteria on which the
written policies are based; and
(C) For each SSBCI, list all the written policies and objective
criteria on which the policies are based, as noted in paragraphs
(f)(4)(i) and (f)(4)(iii)(A) of this section, on their public-facing
website.
* * * * *
(g) Administration of supplemental benefits--(1) General rule. MA
organizations must have processes for delivering supplemental benefits
to enrollees that ensure compliance with Sec. 422.100(c)(2) and
paragraphs (a) through (f) of this section and appropriate access to
all covered items and services, in accordance with Sec. 422.112(a).
(2) Provision of benefits through debit card. MA organizations that
administer reductions in cost sharing or provide coverage of 100
percent of the cost of a mandatory supplemental benefit through use of
a debit card must do all of the following:
(i) Provide debit cards that are electronically linked to plan
covered items and services through a real-time identification mechanism
to verify eligibility of plan covered benefits at the point of sale.
(ii) Provide instructions for debit card use and customer service
support to enrollees.
(iii) Have an alternative process that allows for reimbursement of
eligible expenses for plan covered benefits in circumstances where the
debit card is unusable at the point of sale, including but not limited
to debit card malfunction or when a beneficiary is entitled to obtain
covered benefits out-of-network.
(iv) Ensure debit cards are limited to the specific plan year.
0
7. Section 422.107 is amended by adding paragraph (d)(1)(i) and
reserved 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), where the State Medicaid
agency does not mandate enrollment in Medicaid managed care for all
full-benefit dually eligible individuals, and either the State Medicaid
agency contract allows a dual eligible special needs plan established
through this paragraph (d)(1) to enroll full-benefit dually eligible
individuals or the plan is a highly integrated dual eligible special
needs plan, the State Medicaid agency 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]
* * * * *
0
8. Section 422.111 is amended by--
0
a. Revising paragraph (b)(6); and
0
b. Removing paragraph (l).
The revision reads as follows:
Sec. 422.111 Disclosure requirements.
* * * * *
(b) * * *
(6) Supplemental benefits. Any mandatory supplemental benefits
(including reductions in cost sharing) or optional supplemental
benefits, the premium for optional supplemental benefits, and the
applicable conditions and limitations associated with receipt or use of
supplemental benefits. This includes both of the following:
(i) Disclosure of eligible over-the-counter items.
(ii) If providing supplemental benefits through a debit card,
specifying which benefits may be accessed using the debit card.
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.
* * * * *
[[Page 17582]]
Sec. 422.137 [Amended]
0
10. Section 422.137 is amended by removing paragraphs (c)(5) and (d)(6)
and (7).
Sec. 422.152 [Amended]
0
11. Section 422.152 is amended by removing paragraph (a)(5).
0
12. Section 422.162 is amended by revising paragraphs (b)(3)(iv)(A)(2)
and (b)(3)(iv)(B)(2) to read as follows:
Sec. 422.162 Medicare Advantage Quality Rating System.
* * * * *
(b) * * *
(3) * * *
(iv) * * *
(A) * * *
(2) For contract consolidations approved on or after January 1,
2022, if a measure score for a consumed or surviving contract is
missing due to a data integrity issue as described in Sec.
422.164(g)(1)(i) and (ii), CMS assigns a score of zero for the missing
measure score in the calculation of the enrollment-weighted measure
score. If a measure score for a consumed or surviving contract is
missing due to not having enough data to meet the measure technical
specification or the reliability is less than 0.6 for a CAHPS measure,
CMS treats this measure score as missing in the calculation of the
enrollment-weighted measure score.
(B) * * *
(2) For contract consolidations approved on or after January 1,
2022, for all measures except HEDIS, CAHPS, and HOS, if a measure score
for a consumed or surviving contract is missing due to a data integrity
issue as described in Sec. 422.164(g)(1)(i) and (ii), CMS assigns a
score of zero for the missing measure score in the calculation of the
enrollment-weighted measure score. For all measures except HEDIS,
CAHPS, HOS, and call center measures, if a measure score for a consumed
or surviving contract is missing due to not having enough data to meet
the measure technical specification, CMS treats this measure score as
missing in the calculation of the enrollment-weighted measure score.
* * * * *
0
13. 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
14. 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).
The revision reads 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
15. Section 422.308 is amended in paragraph (c)(1) by removing the word
``gender'' and adding in its place the word ``sex''.
0
16. 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
17. 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 paragraph
(a)(4)(xvii) of this section.
(c) * * *
(2) * * *
(iv) The contract is being terminated based on paragraph
(a)(4)(xvii) of this section.
* * * * *
0
18. Section 422.514 is amended by adding paragraphs (h)(3)(iii) and
(iv) to read as follows:
Sec. 422.514 Enrollment requirements.
* * * * *
(h) * * *
(3) * * *
(iii) If an MA organization subject to paragraph (h)(1) of this
section holds a State Medicaid agency contract with a State that does
not mandate enrollment in Medicaid managed care for all full-benefit
dually eligible individuals and the State Medicaid agency contract
allows, 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 dually eligible individuals who
are enrolled in Medicaid fee-for-service. These D-SNPs may not enroll
full-benefit dually eligible individuals who are 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.
(iv) 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
19. Section 422.752 is amended by removing and reserving paragraph (d).
0
20. Section 422.2261 is amended by adding paragraph (a)(3) to read as
follows:
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
[[Page 17583]]
to Sec. 422.107(e) must submit all materials for the contract in HPMS
under the MA organization's contract number.
(ii) MA organizations may not submit materials for the contract
under the organization's Multi-Contract Entity number and third-party
marketing organizations may not submit materials under the Multi-Plan
number as described in Sec. 422.2262(d)(2)(i).
* * * * *
Sec. 422.2262 [Amended]
0
21. Section 422.2262 is amended by removing paragraphs (a)(1)(i) and
(ii) and redesignating paragraphs (a)(1)(iii) through (xix) as
paragraphs (a)(1)(i) through (xvii), respectively.
0
22. 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
23. Section 422.2267 is amended by--
0
a. Revising paragraphs (e)(5)(ii)(B)(1);
0
c. Removing and reserving paragraph (e)(31);
0
d. Revising paragraph (e)(41) introductory text and paragraph
(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.
* * * * *
(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
24. 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) All marketing and sales calls, including the audio portion of
calls conducted via web-based technology, must be recorded and retained
in their entirety for a minimum period of 6 years. For the first 3
years of the retention period, records must be maintained in audio
format. For years 4, 5, and 6, records may be maintained in either
audio format or as complete and accurate transcript recordings.
PART 423--VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT
0
25. 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
26. 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
27. 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.
* * * * *
Specialty means the National Plan Provider Enumeration System
(NPPES) taxonomy of a prescriber.
* * * * *
0
28. 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 paragraph (k)(2) of this section
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
[[Page 17584]]
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
29. 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 paragraph (g)(2) of this section
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
30. Section 423.38 is amended by revising paragraphs (c)(2), (c)(8)
introductory text, (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
31. 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 or of any selected drug subsidy under section 1860D-14D 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 Sec. 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
32. 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;
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--
[[Page 17585]]
(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--
(i) Covered Part D drugs that are not paid for under the Part D
plan as a result of application of any annual deductible or other cost-
sharing rules for covered Part D drugs prior to the Part D enrollee
satisfying the out-of-pocket threshold under Sec. 423.104(d)(5)(iii),
including any price differential for which the Part D enrollee is
responsible under Sec. 423.124(b); or
(ii) 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 in 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; and
(2) That are paid for--
(i) By the Part D enrollee or on behalf of the Part D enrollee by
another person, and the Part D enrollee (or person paying on behalf of
the Part D enrollee) is not reimbursed through insurance or otherwise,
a group health plan, or other third party payment arrangement, or the
person paying on behalf of the Part D enrollee is not paying under
insurance or otherwise, a group health plan, or third party payment
arrangement;
(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
(iii) Under Sec. 423.782.
(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
[[Page 17586]]
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.
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
33. Section 423.104 is amended by--
0
a. Revising paragraphs (d)(1) introductory text, (d)(2) heading,
(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), and (d)(5)(iv);
0
h. Revising paragraphs (e)(5) introductory text, (e)(5)(i), and
(f)(1)(ii)(B)(3); and
0
i. 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) Limit on specialty-tier cost threshold adjustment. (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.
Equation 1 to Paragraph (d)(2)(iv)(D)(3)(ii)
[GRAPHIC] [TIFF OMITTED] TR06AP26.054
(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 (d)(3) 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) * * *
[[Page 17587]]
(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 (d)(5)(i)(A) for the previous year
increased by the annual percentage 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
(d)(5)(iii) 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 (d)(5)(iii) 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 paragraph (d)(5)(iv)(C) of this section) and a
multiplicative update (as defined in paragraph (d)(5)(iv)(D) of this
section).
(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 2 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
34. 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
35. Section 423.182 is amended by revising paragraphs (b)(3)(ii)(A)(2)
and (b)(3)(ii)(B)(2) to read as follows:
Sec. 423.182 Part D Prescription Drug Plan Quality Rating System.
* * * * *
(b) * * *
(3) * * *
(ii) * * *
(A) * * *
(2) For contract consolidations approved on or after January 1,
2022, if a measure score for a consumed or surviving contract is
missing due to a data integrity issue as described in Sec.
423.184(g)(1)(i), CMS assigns a score of zero for the missing measure
score in the calculation of the enrollment-weighted measure score. If a
measure
[[Page 17588]]
score for a consumed or surviving contract is missing due to not having
enough data to meet the measure technical specification or the
reliability is less than 0.6 for a CAHPS measure, CMS treats this
measure score as missing in the calculation of the enrollment-weighted
measure score.
(B) * * *
(2) For contract consolidations approved on or after January 1,
2022, for all measures except CAHPS, if a measure score for a consumed
or surviving contract is missing due to a data integrity issue as
described in Sec. 423.184(g)(1)(i), CMS assigns a score of zero for
the missing measure score in the calculation of the enrollment-weighted
measure score. For all measures except CAHPS and call center measures,
if a measure score for a consumed or surviving contract is missing due
to not having enough data to meet the measure technical specification,
CMS treats this measure score as missing in the calculation of the
enrollment-weighted measure score.
* * * * *
0
36. 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
37. 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).
The revision reads 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 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
38. 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
39. 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 (b) 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)
of this section.
* * * * *
0
40. 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)'' in alphabetical order.
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) paid by manufacturers under the
Manufacturer Discount Program (as defined at Sec. 423.100). 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-
[[Page 17589]]
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
41. 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 Sec. 423.329(e)(2)(i), and final reconciliation to
actual allowable reinsurance costs as provided in Sec. 423.343(e).
0
42. Section 423.325 is amended by revising paragraph (a)(3) to read as
follows:
Sec. 423.325 PDE submission timeliness requirements.
(a) * * *
(3) A PDE record for a paid claim transaction associated with a PDE
record that was previously rejected by CMS 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 that was rejected is otherwise
found to have been submitted in error.
* * * * *
0
43. 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) * * *
(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) and negotiated and approved
under Sec. 423.272 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
44. 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
45. 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.
[[Page 17590]]
(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 remainder 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
46. 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 reconciled selected drug subsidy
payment described at Sec. 423.343(e)--
* * * * *
0
47. 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. 423.336, Sec. 423.343,
Sec. 423.2320(b), or Sec. 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
48. Section 423.464 is amended by revising paragraph (f)(2)(i)(C) to
read as follows:
Sec. 423.464 Coordination of benefits with other providers of
prescription drug coverage.
* * * * *
(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
49. 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
50. 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 revisions and 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 for the Coverage Gap Discount Program
and the requirements in subpart AA of part for the Manufacturer
Discount Program.
* * * * *
(d) * * *
(1) * * *
(vi) Enable CMS to review original format documentation or
information utilized from all written, electronic, and verbal
communications between the plan sponsor and 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 sufficient
documentation to support Part D coverage will result in an improper
Part D audit determination and will be
[[Page 17591]]
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 plan sponsor and 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) of this section.
This includes:
(A) Date and time the request for a coverage determination or
point-of-sale claim adjudication was received and, when available, the
identity of the individual or entity who submitted the request.
(B) Name and title, as applicable if additional outreach is made,
of the individual the Part D plan contacted to obtain the information
needed to complete 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 for a coverage determination or point-of-sale claim
adjudication when used to determine Part D coverage for 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
51. Section 423.782 is amended by--
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
e. Adding paragraph (d).
The revisions and 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:
(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
52. Section 423.882 is amended by revising the definition of
``Allowable retiree costs'' and ``Gross covered retiree pan-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) paid by manufacturers
under the Manufacturer Discount Program (as defined by Sec. 423.100).
* * * * *
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).
* * * * *
Sec. 423.884 [Amended]
0
53. 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) introductory text, (d)(1)(i) and (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
54. Section 423.1000 is amended by revising paragraph (a)(3) to read as
follows:
Sec. 423.1000 Basis and scope.
(a) * * *
[[Page 17592]]
(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
55. Section 423.1002 is amended by revising the definition of
``Affected party'' to read 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
56. 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 may not submit materials for the contract
under the organization's Multi-Contract Entity number and third-party
marketing organizations may not submit materials under the Multi-Plan
number as described in Sec. 423.2262(d)(2)(i).
* * * * *
Sec. 423.2262 [Amended]
0
57. Section 423.2262 is amended by removing paragraphs (a)(1)(i) and
(ii) and redesignating paragraphs (a)(1)(iii) through (xviii) as
paragraphs (a)(1)(i) through (xvi), respectively.
0
58. 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
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
59. 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.
* * * * *
(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
60. 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) All marketing and sales calls, including the audio portion of
calls conducted via web-based technology, must be recorded and retained
in their entirety for a minimum period of 6 years. For the first 3
years of the retention period, records must be maintained in audio
format. For years 4, 5, and 6, records may be maintained in either
audio format or as complete and accurate transcript recordings.
0
61. Revise and republish Sec. 423.2300 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.
[[Page 17593]]
(4) Provision of applicable discounts on applicable drugs for
applicable beneficiaries.
(5) Manufacturer audit and dispute resolution processes.
(6) Resolution of beneficiary disputes involving coverage gap
discounts.
(7) 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
62. Section 423.2305 is amended by--
0
a. Revising and republishing the introductory text and the definition
of ``Applicable discount'';
0
c. 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''; and ``National Drug Code'';
0
d. Revising and republishing the definition of ``Negotiated price'';
and
0
e. Removing the definition of ``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--
(1) The Part D sponsor (or other intermediary contracting
organization) and the network dispensing pharmacy or other network
dispensing provider have negotiated as the lowest possible
reimbursement such network entity will receive, in total, for a
particular drug;
(i) Includes all price concessions (as defined in Sec. 423.100)
from network pharmacies or other network providers; and
(ii) Excludes additional contingent amounts, such as incentive
fees, if these amounts increase prices;
(2) Is reduced by those discounts, direct or indirect subsidies,
rebates, non-pharmacy price concessions, and direct or indirect
remuneration that the Part D sponsor has elected to pass through to
Part D enrollees at the point-of-sale; and
(3) Excludes any dispensing fee or vaccine administration fee for
the applicable drug.
(4) In connection with applicable drugs dispensed by an out-of-
network provider in accordance with the applicable beneficiary's Part D
plan out-of-network policies, the negotiated price means the plan
allowance as set forth in Sec. 423.124, less any dispensing fee or
vaccine administration fee.
Sec. 423.2310 [Amended]
0
63. 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
64. 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:
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
65. 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
66. 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
67. 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
68. 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
69. Section 423.2345 is amended by--
0
a. Revising the section heading;
0
b. In paragraph (a)(1)--
0
i. Removing the phrase ``Discount Program Agreement'' and adding in its
place the phrase ``Coverage Gap Discount Program Agreement''; and
0
ii. Removing the phrase ``Discount Program'' and adding in its place
the phrase ``Coverage Gap Discount Program'';
0
c. In paragraphs (a)(3)(i), (b)(1), (d), and (e), 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), all Coverage Gap Discount Program
Agreements under this subpart are terminated as of January 1, 2025.
0
70. 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
71. Section 423.2536 is amended by adding paragraph (m) to read as
follows:
Sec. 423.2536 Waiver of Part D program requirements.
* * * * *
[[Page 17594]]
(m) Provision of specific information. Section 423.128(d)(1)(i)(A).
0
71. 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
72. 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
73. 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
74. 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
75. 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''; and
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
76. Add subpart AA to read as follows:
Subpart AA--Medicare Part D Manufacturer Discount Program
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.
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--
[[Page 17595]]
(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 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
[[Page 17596]]
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--
(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)(3)(i)(A) of
this section that map to NDCs associated with single source drugs or
biological products;
(C) Identify all mapped HCPCS codes identified in paragraph
(a)(3)(i)(B) of this section 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 (a)(3)(i)(C) of this section to each manufacturer, consistent
with the
[[Page 17597]]
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 (a)(3)(i)(D) of this section 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) Part D total expenditures for a specific drug for 2021 and
small manufacturer phase-in eligibility. 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.
(2) [Reserved]
(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 must include supporting
documentation.
(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--
[[Page 17598]]
(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 attempt to recover such unpaid amounts and any civil money penalties
imposed by CMS under this part.
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 do all of the
following:
(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.
[[Page 17599]]
(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 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)
of this section 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) of this section 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) of this section.
(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 under this paragraph (c)(1)(v)(A)(2) 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.
[[Page 17600]]
(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) of this section 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 (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--(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 (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
[[Page 17601]]
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) Transfer of labeler codes. 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 calendar
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 at a location specified by the TPA and,
with the exception of work papers, audit data cannot be removed from
such specified location.
(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
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
[[Page 17602]]
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 subpart T of this part, the civil money penalty is due,
as applicable, once the administrative process 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 subpart T of this part, 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 this part.
Robert F. Kennedy, Jr.,
Secretary, Department of Health and Human Services.
[FR Doc. 2026-06600 Filed 4-2-26; 4:15 pm]
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