On April 4, 2025, the Centers for Medicare & Medicaid Services (“CMS”) released the contract year (“CY”) 2026 final rule for the Medicare Advantage (“MA”) program, Medicare Prescription Drug Benefit Program (“Part D”), Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly (the “Final Rule”). While CMS finalized several proposals of its Proposed Rule, it did not finalize many of its key proposals, including on anti-obesity medication (“AOM”) coverage, enhanced guardrails for artificial intelligence (“AI”), and various health equity related initiatives in MA and Part D.
Summarized below are some of the key provisions of the Final Rule.
MA and Part D Proposals Not Finalized
Perhaps most notable from the CY 2026 Final Rule are those proposals that CMS did not finalize. These include the following:
- Part D Coverage of Anti-Obesity Medications (AOMs) and Application to the Medicaid Program—CMS declined to finalize a proposal to “reinterpret” the statutory definition of a covered Part D drug at section 1860D–2(e)(2) of the Social Security Act (SSA), which excludes coverage for certain drugs and uses, including those that may be excluded by Medicaid under SSA § 1927(d)(2) as ‘‘agents when used for . . . weight loss.’’ The proposal would have applied to both Medicare and Medicaid to allow coverage for AOMs when used for the treatment of obesity, with a hefty, estimated price tag of $25 billion in Medicare spending and $15 billion in Medicaid spending over the course of a decade. As the proposal was not finalized, the current policy remains in place—the Medicare and Medicaid programs will only cover AOMs when used to treat another medically accepted condition (e.g., type 2 diabetes or cardiovascular risk).
- Enhancing Health Equity Analyses: Annual Health Equity Analysis of Utilization Management Policies and Procedures — CMS did not finalize its proposal to require Medicare Advantage organizations to conduct annual health equity analyses of utilization management policies. CMS stated that this proposal remains under review for potential future rulemaking in line with Executive Order 14192’s directive to ensure consistency and avoid unnecessary burden.
- Guardrails for Artificial Intelligence (AI) / Ensuring Equitable Access to Medicare Advantage Services — CMS opted not to finalize proposals related to the use of AI and algorithmic decision-making in MA, including proposals requiring plans to utilize AI in a manner that preserves equitable access, to adhere to existing Medicare regulations prohibiting discrimination, and requiring disclosure of use of AI tools. In declining to finalize these proposals, CMS acknowledged strong stakeholder interest and stated that the agency would “consider the extent to which it may be appropriate to engage in future rulemaking in this area.”
- Behavioral Health Parity — Although CMS acknowledged significant stakeholder concern regarding access to behavioral health care in MA plans, it did not finalize proposals to establish stricter parity protections or expand network adequacy standards in the Final Rule. The proposed behavioral health parity provisions would have applied new requirements to ensure equitable access to mental health and substance use disorder services in Medicare Advantage plans. CMS acknowledged ongoing concerns, especially in dual-eligible special needs plans, but stated that the proposed changes are still under review. Future rulemaking may revisit these policies in coordination with broader parity and access initiatives.
- Prior Authorization — While CMS finalized prior authorization requirements applicable to inpatient admissions (discussed below), CMS did not finalize proposals to establish guardrails on the use of AI in prior authorization processes.
- Agent and Broker Oversight — Despite recent scrutiny of agent and broker practices, CMS did not finalize key proposed marketing reforms. Among other things, these included broadening the definition of “marketing” to enhance agency oversight of materials submitted to CMS as well as promoting informed choice by requiring agents and brokers to provide more comprehensive information to potential enrollees, such as low-income assistance options and implications of switching to traditional Medicare.
- Promoting Transparency for Pharmacies — CMS did not finalize or address a proposal to require Part D sponsors (or their FDRs) to allow pharmacies the right to terminate their network contracts without cause following the same notice period that Part D sponsors have for terminating contracts without cause. Had this proposal been finalized, it would have likely faced legal challenges for violating the Part D statute’s noninterference requirement.
- Formulary Placement of Generics and Biosimilars — CMS did not finalize a proposal to include an additional step in the formulary review process to check that Part D sponsors provide broad access to generics, biosimilars, and other lower cost drugs. However, CMS noted that “may consider codifying additional requirements regarding formularies in future rulemaking if necessary.”
- Administration of Supplemental Benefits through Debit Cards — CMS did not finalize its proposal to impose new requirements on the use debit cards to administer plan-covered benefits, including new guardrails to ensure that beneficiaries are fully aware of covered supplemental benefits and how to access those benefits.
- Community-Based Services and In-Home Service Contractors — CMS did not finalize or directly address proposals related to improving transparency and beneficiary protections through expanded provider directory requirements. These proposals included codifying definitions for community-based organizations and in-home supplemental benefit providers, and requiring their inclusion in provider directories.
- Part D Medication Therapy Management (“MTM”) Program — CMS deferred for subsequent rulemaking a proposal to expand the regulatory list of core chronic diseases used to identify Part D enrollees who have multiple chronic diseases for purposes of determining eligibility for Medication Therapy Management (“MTM”) enrollment to include other causes of dementia in addition to Alzheimer’s.
Moreover, CMS indicated that various currently effective regulations and policies are currently under review by the Trump Administration “to ensure consistency with the Executive Order 14192, Unleashing Prosperity Through Deregulation.” According to CMS, policies currently under review include the following:
- Health Equity Index Reward for the Parts C and D Star Ratings
- Annual health equity analysis of utilization management policies and procedures
- Requirements for MA plans to provide culturally and linguistically appropriate services
- Quality improvement and health risk assessments (“HRAs”) focused on equity and social determinants of health (“SDOH”)
FINALIZED MA AND PART D PROPOSALS
Covered Insulin Products and Vaccines
CMS finalized a proposal to codify a relatively modest expansion of the definition of a “covered insulin product” to include Part D coverage for drug products that are a combination of more than one type of insulin or both insulin and non-insulin drugs, which is consistent with existing CMS guidance. CMS also finalized proposals to eliminate cost sharing for both covered insulin products and for adult vaccines recommended by the Advisory Committee on Immunization Practices (ACIP) covered under Part D.
Medicare Prescription Payment Plan
CMS finalized regulatory requirements for the Medicare Prescription Payment Plan for 2026 and subsequent years, codifying provisions previously established in two-part guidance for 2025. The program, created under section 11202 of the Inflation Reduction Act, requires all Medicare Part D and MA-PD plan sponsors to offer enrollees the option to pay capped monthly installments on their out-of-pocket Part D drug costs, rather than paying the full amount at the point of sale. The goal is to ease financial pressure—especially for beneficiaries who incur high drug costs early in the year.
Most provisions from prior guidance were finalized without modification, including operational processes, election procedures, and outreach requirements. CMS also finalized several new provisions:
- Automatic Renewal: Beginning in 2026, enrollees who participate in the program will be automatically re-enrolled the following year unless they opt out. A separate renewal notice must be sent after the end of the annual election period and include the plan’s upcoming terms and conditions.
- Voluntary Termination: CMS adjusted its original proposal and will now require plan sponsors to process opt-out requests within 3 calendar days, rather than the initially proposed 24-hour timeframe, to reduce administrative burden.
- Standardized Communications: New requirements were finalized for model and standardized materials, including the “likely to benefit” notice, voluntary and involuntary termination notices, and renewal notices. Part D sponsor websites must also display information about the program.
- Waiver for LI NET: CMS confirmed that the Medicare Prescription Payment Plan requirements will not apply to the Limited Income Newly Eligible Transition (LI NET) program, consistent with prior guidance.
- Election Processing and Real-Time Requirements: While CMS finalized the 24-hour processing requirement for election requests received during the plan year, it did not finalize a proposed real-time processing requirement for phone or web-based requests, citing stakeholder concerns about operational feasibility. CMS may revisit this in future rulemaking.
CMS stated that its approach was intended to limit disruption, reduce burden on plans, and give stakeholders time to gain experience with the program. The agency will continue to evaluate program implementation and consider refinements in future years.
Timely Submission Requirements for Prescription Drug Event (PDE) Records
CMS has finalized new regulatory requirements under § 423.325 to codify timely submission of Prescription Drug Event (PDE) records by Medicare Part D sponsors. These records are essential for payment accuracy and program integrity, especially for programs like the Coverage Gap Discount Program, the Manufacturer Discount Program, and the Medicare Drug Price Negotiation Program.
Previously guided by subregulatory policy, CMS now formalizes specific submission timelines:
- General PDEs: Within 30 days of claim receipt.
- Adjustments/deletions: Within 90 days of issue discovery.
- Rejected PDEs: Resubmitted within 90 days of rejection notice.
- Selected drugs (Negotiation Program): Initial PDEs due within 7 days to support timely Manufacturer Fair Price refunds.
Despite concerns about the 7-day timeline, CMS finalized it without changes, citing that most PDEs are already submitted within this window. The 90-day deadlines for adjustments and rejections remain unchanged. These timelines are now enforceable, and noncompliance may trigger CMS actions.
Medicare Transaction Facilitator Requirements for Network Pharmacy Agreements
CMS finalized the proposal requiring that Part D sponsors’ network participation agreements with contracting pharmacies, including any FDR contracts, require network pharmacies to be enrolled in the Medicare Drug Price Negotiation Program’s (‘‘Negotiation Program’’) Medicare Transaction Facilitator Data Module (‘‘MTF DM’’) and that such pharmacies certify the accuracy and completeness of their enrollment information in the MTF DM. According to CMS, the MTF DM will contain several key functionalities that are necessary and appropriate for administration of the Negotiation Program and the Part D program. Through each of these functionalities, the dispensing pharmacy’s enrollment in the MTF DM would help ensure continued access to selected drugs that are covered under Part D for beneficiaries and pharmacies and help maintain the accuracy of Part D claims information and payment. These functionalities are:
- The MTF DM will provide pharmacies enrolled in the MTF DM with remittances or ERAs to reconcile Maximum Fair Price (“MFP”) refund payments when a Primary Manufacturer of a drug selected by CMS for price negotiation chooses to pass payment to the pharmacy through the MTF PM rather than prospectively ensuring that the price paid by the pharmacy entity when acquiring the drug is no greater than the MFP.
- There will be streamlined access for pharmacies that are enrolled in the MTF DM to submit complaints and disputes within the MTF DM to help identify issues with timely MFP refund payment, supporting pharmacies to continue efficient operations and prevent undue financial hardship, while maintaining accuracy of Part D claims information and payment.
- The MTF DM will serve as a central repository for information about pharmacies enrolled in the MTF DM that self-report that they anticipate material cashflow concerns due to the reliance on retrospective MFP refunds within the 14-day prompt MFP payment window.
- CMS intends that pharmacies will be able to view the status of MFP refunds from Primary Manufacturers through the MTF DM.
- The MTF DM will collect and share financial information belonging to pharmacies enrolled in the MTF DM with Primary Manufacturers that pay MFP refunds to pharmacies outside the MTF PM.
CMS published new guidance on its webpage on Tuesday, April 8th to provide pharmacies and other dispensing entities with resources for engaging with the new MTF system. Enrollment in the MTF is expected to begin in June 2025.
Clarifying MA Organization Determinations to Enhance Enrollee Protections in Inpatient Settings
In the Final Rule, CMS clarifies and expands the definition of “organization determinations” under § 422.566 to explicitly include decisions made while a beneficiary is receiving care, particularly inpatient services. The key reforms include the following:
- Whether a decision is made before, during, or after a service is provided, it must be treated as a formal organization determination. This change is intended to prevent MA plans from not affording appeal rights by reclassifying care decisions as claims reviews.
- MA organizations may not retroactively deny or downgrade previously authorized inpatient admissions, even based on clinical data collected after admission. The only exceptions are fraud or qualifying good cause.
- The Final Rule also clarifies that a beneficiary’s financial liability does not attach until an MA plan has made a formal claim determination, aligning liability with appeal rights.
These finalized requirements are intended to eliminate surprise denials, ensure transparency for providers and beneficiaries, and create a consistent standard across MA plans for inpatient decision-making. The Final Rule also introduces certain limited protections for beneficiaries and providers navigating MA plans’ prior authorization (“PA”) processes, including several provisions that restrict a plan’s ability to retroactively deny care after initial approval. Beginning in 2026:
- Approved services, including inpatient admissions, cannot be retroactively denied unless there is evidence of fraud or a valid reason under CMS’s “good cause” standard as defined in 42 CFR § 405.986.
- All coverage decisions made during or after an inpatient stay must be treated as formal determinations, granting enrollees full appeal rights.
- Plans must notify both providers and enrollees of all coverage decisions, and beneficiaries cannot be held financially responsible until a claims payment determination is made.
Non-Allowable Special Supplemental Benefits for the Chronically Ill (SSBCI)
In the Final Rule, CMS adopts new regulatory restrictions for SSBCI. With some modifications from the Proposed Rule, CMS finalized a non-exhaustive list of non-allowable SSBCI benefits, codified at 42 C.F.R. § 422.102(f)(1)(iii).
Under existing regulations, SSBCI are not required to be primarily health related but must have a reasonable expectation of improving or maintaining the health or overall function of the enrollee, as established by the MA plan based on a bibliography of relevant acceptable evidence. In the Final Rule, CMS adopts a non-exhaustive list of non-primarily health related items or services that do not meet the standard of having a reasonable expectation of improving or maintaining the health or overall function of the enrollee. As finalized at 42 C.F.R. § 422.102(f)(1)(iii), examples of items or services that may not be offered as SSBCI include all of the following:
- Procedures that are solely cosmetic in nature and do not extend upon Traditional Medicare coverage (for example, cosmetic surgery, such as facelifts, or cosmetic treatments for facial lines, atrophy of collagen and fat, and bone loss due to aging)
- Hospital indemnity insurance
- Funeral planning and expenses
- Life insurance
- Alcohol
- Tobacco
- Cannabis products
- Broad membership programs inclusive of multiple unrelated services and discounts
- Non-healthy food
Modifications from the Proposed Rule include the addition of “non-healthy food” to the non-allowable SSBCI list. According to CMS, the addition of non-healthy food addresses comments requesting clarification on how plans may provide “Food is Medicine” (an initiative of HHS’ Office of Disease Prevention and Health Promotion) within the parameters of supplemental benefit requirements. In addition, CMS did not finalize proposals to expressly incorporate as non-allowable SSBCI “cash and monetary rebates” (which are prohibited by SSA § 1851(h)(4)(A)) or “gambling items (e.g., online casino games, lottery tickets), firearms and ammunition.”
Improving Experiences for Dually Eligible Enrollees
CMS finalized its proposed requirements for certain dual-eligible Special Needs Plans (“D-SNPs”) to further streamline and integrate care delivery for dual eligible beneficiaries. Specifically, finalized proposals include:
- Requiring integrated member ID cards for both Medicare and Medicaid plans. The proposal is limited to Applicable Integrated Plans (“AIPs”);
- Requiring AIPs to conduct a single, integrated Health Risk Assessment (“HRA”) for both Medicare and Medicaid, replacing the separate HRAs currently utilized for each. However, CMS delayed the implementation date of this provision to January 1, 2027.
- Codifying timeframes for all SNPs to conduct HRAs and develop Individualized Care Plans (“ICPs”), emphasizing active participation by enrollees or their representatives in the ICP development process. Specifically, CMS proposes to require that SNPs conduct the initial HRA within 90 days of the effective date of enrollment.
- Establish new requirements for all SNPs related to outreach to enrollees regarding completion of the HRA. Specifically, SNPs make at least three non-automated phone call attempts, unless the enrollee agrees or declines to participate in the HRA before three attempts are made, on different days at different times. If the enrollee has not responded, the SNP must send a follow-up letter. The SNP must document attempts to contact the enrollee, and if applicable, the enrollee’s choice not to participate.
Require that SNPs update ICPs as warranted when there are changes in an enrollee’s health status or they have a healthcare transition.
Risk Adjustment Data
CMS finalized as proposed various technical changes to the definitions related to risk adjustment data, including a technical change to the definition of Hierarchical Condition Categories (HCCs) at § 422.2 to remove the reference to a specific version of the ICD to keep the HCC definition current as newer versions of the ICD become available and are adopted by CMS, as well as substituting the terms “disease codes” with “diagnosis codes” and “disease groupings” with “diagnosis groupings” to be consistent with ICD terminology. CMS also finalized its proposal to codify existing practice of requiring mandatory submission of risk adjustment data by PACE organizations and Section 1876 Cost plans, consistent with the risk adjustment data requirements applicable to MA plans.
Medical Loss Ratio (MLR) Reporting
In the Proposed Rule, CMS proposed a number of regulatory changes intended to improve the meaningfulness and comparability of the MLR across plan contracts, as well as align the MA and Part D MLR regulations with the regulations in the commercial and Medicaid MLR programs. However, in the Final Rule, CMS adopted only one MLR-related proposal — to exclude Medicare Prescription Payment Plan unsettled balances from the MLR numerator.
MLR related proposals that were not finalized include the following:
- Requiring provider incentive and bonus arrangements are tied to clinical or quality improvement standards in order to be included in the MA MLR numerator;
- Requiring administrative costs to be excluded from quality-improving activities in the MA and Part D MLR numerators; and
- Codifying the current practice by which MA and Part D MLR reports include a description of how expenses are allocated across lines of business.