In April, CMS finalized its Contract Year (CY) 2026 Medicare Advantage and Part D Final Rule (Final Rule). With CMS releasing the 2026 Medicare Advantage and Part D Proposed Rule in December under the Biden Administration, the Final Rule provides our first insight into how the new Administration may approach Medicare Advantage (MA) and Part D policies. As expected, the Trump administration’s Final Rule elected to not finalize a significant amount of the changes proposed by the Biden Administration. Some proposals were expressly not adopted, others are continuing to be considered, and still others were not mentioned at all.
CMS finalized changes relating to risk adjustment data, excluded supplemental benefits, and certain organizational determinations and administrative appeal processes, but most of the major provisions adopted by the Final Rule relate to implementing the Inflation Reduction Act of 2022 (IRA). CMS also adopted changes relating to dual eligibles that we will cover in a separate blog post.
In addition to the changes that were considered during the rulemaking process, CMS also noted that it is continuing to review Medicare regulations and policies as a result of Executive Order 14192 which is titled “Unleashing Prosperity Through Deregulation.” The areas currently under review primarily relate to measures concerning health equity, social determinants of health, and providing culturally and linguistically appropriate services.
Below we have summarized key provisions that were adopted in the Final Rule and those that the Trump administration expressly declined to adopt.
Risk Adjustment Data
The Final Rule adopted changes to the definition of Hierarchical Condition Categories (HCCs) and codified the requirement that PACE organizations and Cost plans must submit risk adjustment data. The changes to the definition of HCC were made to more closely track language used in the International Classification of Diseases (ICD) and to avoid CMS from having to amend the definition when the version of ICD is updated in the future. CMS’s decision to adopt a regulation requiring that PACE organizations and Cost plans submit risk adjustment data is interesting as both categories of entities are small and not growing. That CMS felt the need to adopt this begs the question, why now?
Excluded Supplemental Benefits
CMS has allowed Medicare Advantage Organizations (MAOs) relative flexibility when designing supplemental benefits offered to chronically ill members. But based on its review of certain supplemental benefit packages submitted by MAOs for review over the years, CMS concluded that it needed to adopt in regulation a non-exhaustive list of items and services that cannot be offered as supplemental benefits. That list includes:
- Solely cosmetic procedures (not already covered by Medicare)
- Alcohol, tobacco, and cannabis products
- Funeral planning and expenses
- Life insurance
- Hospital indemnity insurance,
- Broad membership-type programs (ex. Costco), and
- Non-healthy food
The category for non-healthy food was added through the Final Rule, but not included in the Proposed Rule. CMS elected to add it to clarify that CMS would not consider a benefit that covered non-healthy food to have a reasonably expectation of improving or maintaining the health or overall function of the member. CMS cited its 2019 guidance and confirmed that it continues to allow such benefits to cover food and produce that could assist chronically ill members in meeting nutritional needs.
Organizational Determinations and Administrative Appeal Processes
CMS adopted a few changes relating to organizational determinations and the appeals process:
- CMS added a provision to 42 CFR 422.566 that clarifies that an MAO’s decisions that take place pre-, during, or post-service, including those that relate to the level of service that the MAO will cover are considered “organization determinations.” CMS explained that it made this change because MAOs were not applying the required processes that attach to organizational determinations to certain decisions most often relating to hospital-based care.
- CMS finalized a change to Section 42 CFR 422.562 that clarifies that the MAO’s determination regarding a request for payment from a contract provider is not appealable when a member has no further liability to pay for services provided under their MA plan (e.g., when the MA plan’s determination will not impact the member’s cost share obligation). CMS reported that it made this change because MAOs had been claiming that other types of organizational determinations were not subject to appeal.
- CMS amended 42 CFR 422.616 to limit when MAOs are permitted to reopen favorable organization determinations on inpatient hospital admissions. Specifically, under the Final Rule, once an MAO approves an inpatient hospital admission based on the 2 mid-night rule, the MAOs may not seek to reopen that determination for “good cause” based on clinical information that the MAO receives after the determination.
- Lastly, CMS also amended 42 CFR 422.568 to require that MAOs provide notice of standard organization determinations to a member’s involved provider, not just the member.
IRA Related Provisions and Decisions
The Final Rule codifies and effectuates various provisions of the Inflation Reduction Act of 2022 (IRA) and related subregulatory guidance within the MAand Part D Programs. Below, we highlight the provisions of the Final Rule relevant to the IRA, as well as a number of key policy proposals that the Trump administration chose not to finalize.
The Final Rule implemented the following IRA requirements for MA prescription drug (MA-PD) plans and stand-alone Part D plans (PDP) beginning January 1, 2026 (except as otherwise noted below):
- Vaccine Cost-Sharing. CMS codified that Part D plans may not apply co-insurance, other cost sharing or deductibles to adult vaccines recommended by the Advisory Committee on Immunization Practices (ACIP) that are covered under Part D, as required by Section 11401 of the IRA.
- Insulin Cost-Sharing. CMS also codified, as required by Section 11406 of the IRA, that the 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.
- As previously reported in the Mintz IRA Update, the applicable copayment amount for 2023, 2024, and 2025 was $35.
- Beginning January 1, 2026, and each subsequent plan year, the applicable cost-sharing amount is the lesser of
- $35
- An amount equal to 25% of the maximum fair price (MFP) established for the covered insulin product under the Medicare Drug Negotiation Program (Negotiation Program); or
- An amount equal to 25% of the negotiated price of the covered insulin product under the applicable MA-PD plan or PDP.
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Medicare Prescription Payment Program. As a quick recap, the Medicare Prescription Payment Plan (MPPP) went into effect January 1, 2025, and requires each MA-PD and PDP sponsor to allow Part D beneficiaries to pay for their out-of-pocket prescription drug costs in monthly capped payments over the course of a given plan year instead of at the pharmacy point-of-sale. In the Final Rule, CMS implements these requirements as proposed with a few minor modifications, including:
- Automatic Renewal. CMS finalized its proposal to create an automatic renewal process that renews a Part D beneficiary’s participation in the MPPP for the next calendar year, unless the enrollee opts out. The Final Rule included a minor modification to change the timing requirement for plan sponsors to send the MPPP renewal notice to participants—the renewal notice must be sent after the end of the annual coordinated election period but prior to the beginning of the plan year to account for beneficiaries who may switch plans and are thus not eligible for automatic renewal.
- Voluntary Termination. CMS finalized its proposal to require plan sponsors to send a notice confirming a beneficiary’s voluntary termination within ten (10) calendar days of receipt of the beneficiary’s request. However, CMS modified its proposal to require plan sponsors to effectuate the termination within three (3) calendar days of receipt of the request, rather than 24 hours, to reduce the burden on plan sponsors.
- Grace Period and Notice of Nonpayment. CMS finalized its proposal to adjust the start date for the grace period to start the first day of the month following the date the initial notice of non-payment is sent to the beneficiary.
- Participant Billing Rights. CMS also finalized its proposal that in the event a plan sponsor bills an MPPP participant over the maximum monthly cap, sponsors should work with the participant to determine whether they should refund the difference back to the beneficiary or apply the overpayment to the remaining OOP costs owed by the beneficiary. CMS indicates that plan sponsors should follow their normal processes for adjustments and issuing refunds, and apply their existing coverage determination, grievance, and appeals procedures to any MPPP participant disputes.
- Payment to Pharmacies. CMS finalized its requirement that the MPPP does not affect the amount or timing of payment to pharmacies; plan sponsors cannot impose any fees or costs related to implementation of the MPPP to pharmacies and pharmacies cannot be held responsible for any unpaid balances or collecting unpaid balances from a Part D beneficiary on behalf of the sponsor.
Notably, CMS did not finalize its proposal requiring plan sponsors to ensure pharmacies are prepared to inform Part D beneficiaries of the actual OOP cost of a Part D drug processed under the MPPP at the point of sale since this information is already provided to pharmacies through claims processing methodology. In the Final Rule, CMS encourages pharmacies to provide OOP costs to beneficiaries upon request and will consider additional requirements in the future.
- Medicare Drug Negotiation Program. CMS also finalized a handful of proposals related to the IRA’s Negotiation Program:
- Negotiation Program’s Medicare Transaction Facilitator Data Module. CMS finalized its requirement that Part D sponsors’ pharmacy network participation agreements, including any contracts with first tier, downstream, and related entities, include a provision requiring such contracting pharmacy to be enrolled in the Negotiation Program’s Medicare Transaction Facilitator Data Module (MTF DM). Additionally, the network participation agreements must require the contracting pharmacies to certify the accuracy and completeness of their enrollment information in the MTF DM.
- Timely Submission for Prescription Drug Event (PDE) Record. In the Final Rule, CMS adopted PDE submission timeliness requirements, one for Selected Drugs and one for all other drugs.
- Selected Drugs: PDP sponsors must submit initial PDE records for Selected Drugs within 7 calendar days from the date the PDP sponsor receives the claim.
- All Other Drugs: PDP sponsors must submit initial PDE records for non-Selected Drugs within 30 calendar days from the date the PDP sponsor receives the claim, and adjust, delete or resolve rejected PDE records within 90 calendar days of identifying the issue or receiving the rejected record status from CMS.
Other Provisions That Were Expressly Not Finalized
Anti-Obesity Medications. The Trump administration declined to finalize the Biden administration’s proposal to reinterpret the Social Security Act’s statutory exclusion of drugs used for “weight loss” to permit Medicare Part D coverage and require Medicaid coverage of anti-obesity medications for individuals with obesity. However, the Trump administration noted that it may “consider future policy options” as Medicare and state Medicaid programs struggle to cover the rising cost of popular GLP-1 drugs. Stay tuned for our next issue of the Mintz IRA Update where we will provide in-depth of the ongoing issue.
Ensuring Access to Generics and Biosimilars. In the Final Rule, CMS declined to implement its proposal to add a step to its formulary review process to ensure compliance with requirements relating to prioritizing generics and biosimilars and will revisit formulary requirements in future rulemaking as necessary.
Health Equity Provisions. The Trump administration declined to finalize provisions concerning conducting annual health equity analyses of utilization management policies, and provisions relating to the intersection of ensuring equitable access to services and using AI.