99340 Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 417, 422, 423, and 460 

[CMS–4208–P] 

RIN 0938–AV40 

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 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), Department 

of Health and Human Services (HHS). 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

revise the Medicare Advantage (Part C), 

Medicare Prescription Drug Benefit (Part 

D), Medicaid, Medicare cost plan, and 

Programs of All-Inclusive Care for the 

Elderly (PACE) regulations to 

implement changes related to Star 

Ratings, marketing and 

communications, agent/broker 

compensation, health equity, drug 

coverage, dual eligible special needs 

plans (D–SNPs), utilization 

management, network adequacy, and 

other programmatic areas, including the 

Medicare Drug Price Negotiation 

Program. This proposed rule also 

includes proposals to codify existing 

subregulatory guidance in the Part C 

and Part D programs. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. Eastern Time on January 27, 

2025. 

ADDRESSES: In commenting, please refer 

to file code CMS–4208–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. Comments, including 

mass comment submissions, must be 

submitted in one of the following three 

ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–4208–P, P.O. Box 8013, Baltimore, 

MD 21244–8013. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–4208–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Matthania Volmy, (667) 290–8662— 

General Questions. 

Naseem Tarmohamed, (410) 786– 

0814—Part C and Cost Plan Issues. 

Matthania Volmy, (667) 290–8662— 

Part D Issues. 

Kristy Nishimoto, (206) 615–2367— 

Beneficiary Enrollment and Appeal 

Issues. 

Alissa Stoneking, (410) 786–1120— 

Parts C and D Payment Issues. 

Hunter Coohill, (720) 853–2804— 

Enforcement Issues. 

Lauren Brandow, (410) 786–9765— 

PACE Issues. 

Sara Klotz, (410) 786–1984—D–SNP 

Issues. 

PartCandDStarRatings@

cms.hhs.gov—Parts C and D Star Ratings 

Issues. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following 

website as soon as possible after they 

have been received: http://

www.regulations.gov. Follow the search 

instructions on that website to view 

public comments. CMS will not post on 

Regulations.gov public comments that 

make threats to individuals or 

institutions or suggest that the 

commenter will take actions to harm an 

individual. CMS continues to encourage 

individuals not to submit duplicative 

comments. We will post acceptable 

comments from multiple unique 

commenters even if the content is 

identical or nearly identical to other 

comments. 

Plain Language Summary: In 

accordance with 5 U.S.C. 553(b)(4), a 

plain language summary of this 

proposed rule may be found at https:// 

www.regulations.gov/. 

I. Executive Summary 

A. Purpose 

The primary purpose of this proposed 

rule is to amend the regulations for the 

Medicare Advantage (Part C) program, 

Medicare Prescription Drug Benefit (Part 

D) program, Medicaid program, 

Medicare cost plan program, and 

Programs of All-Inclusive Care for the 

Elderly (PACE). This proposed rule 

includes a number of new policies that 

would improve these programs for 

contract year 2026 as well as codify 

existing Part C and Part D subregulatory 

guidance. 

We note that, as with previous rules, 

the new marketing and communications 

policies in this rule are proposed to be 

applicable for all contract year 2026 

marketing and communications, 

beginning October 1, 2025. However, to 

operationalize the proposed Format 

Provider Directories for Medicare Plan 

Finder provision at § 422.111(m), we 

anticipate that 2025 plan year directory 

data will need to be made available 

online for testing purposes in the 

summer of 2025, and 2026 plan year 

data would need to be available online 

on October 1, 2026. Therefore, we 

propose an applicability date of July 1, 

2025, for this provision. 

B. Summary of the Key Provisions 

1. Vaccine Cost Sharing Changes 

This proposal would implement 

section 11401 of the Inflation Reduction 

Act of 2022 (IRA), which amends 

section 1860D–2 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 cost-sharing for, an adult 

vaccine recommended by the Advisory 

Committee on Immunization Practices 

(ACIP) covered under Part D. 

2. Insulin Cost Sharing Changes 

This proposal would implement 

section 11406 of the IRA, which amends 

section 1860D–2 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 statutorily defined 

‘‘applicable copayment amount’’ for all 

enrollees. The applicable copayment 

amount for 2023, 2024, and 2025 is $35. 

For 2026 and each subsequent year, in 

accordance with the statute, we are 

proposing that, with respect to a 

covered insulin product covered under 

a prescription drug plan (PDP) or a 

Medicare Advantage prescription drug 


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(MA–PD) plan prior to an enrollee 

reaching the annual out-of-pocket 

threshold, the ‘‘covered insulin product 

applicable cost-sharing amount’’ is the 

lesser of— 

• $35; 

• An amount equal to 25 percent of 

the maximum fair price established for 

the covered insulin product in 

accordance with Part E of subchapter XI; 

or 

• An amount equal to 25 percent of 

the negotiated price, as defined in 

§ 423.100, of the covered insulin 

product under the PDP or MA–PD plan. 

3. Medicare Prescription Payment Plan 

We propose regulatory changes to 

codify agency guidance implementing 

section 11202 of the IRA, which 

establishes the Medicare Prescription 

Payment Plan and requires each PDP 

sponsor offering a prescription drug 

plan and each MA organization offering 

an MA–PD plan to provide to any 

enrollee of such plan, including an 

enrollee who is subsidy eligible, the 

option to elect with respect to a plan 

year to pay cost-sharing under the plan 

in monthly amounts that are capped. 

Specifically, we propose to add new 

§ 423.137, add several new Part D 

required materials and content at 

§ 423.2267, add Medicare Prescription 

Payment Plan information to the list of 

required content for Part D sponsor 

websites at § 423.2265, and add the 

Medicare Prescription Payment Plan to 

the list of Part D requirements waived 

for the Limited Income Newly Eligible 

Transition (LI NET) program at 

§ 423.2536. 

4. Part D Coverage of Anti-Obesity 

Medications (§ 423.100) and 

Application to the Medicaid Program 

The statutory definition of a covered 

Part D drug at section 1860D–2(e)(2) of 

the Social Security Act (the Act) 

excludes certain drugs and uses— 

specifically, those that may be excluded 

by Medicaid under section 1927(d)(2) of 

the Act. This includes, at section 

1927(d)(2)(A) of the Act, ‘‘agents when 

used for anorexia, weight loss, or weight 

gain.’’ Historically, drugs used for 

weight loss have been excluded from 

the definition of covered Part D drug, 

regardless of their use for treatment of 

individuals with obesity, and have been 

an optional drug benefit for Medicaid 

programs. Increases in the prevalence of 

obesity in the United States and changes 

in the prevailing medical consensus 

towards recognizing obesity as a disease 

since the beginning of the Part D 

program in 2006 have compelled CMS 

to re-evaluate Part D coverage of antiobesity medications (AOMs) for 

Medicare Part D enrollees with obesity 

where the drug’s prescribed use is not 

for a medically accepted indication 

(MAI) that is currently covered under 

Part D. We are proposing to reinterpret 

the statutory exclusion of agents when 

used for weight loss to allow Part D 

coverage of AOMs when used to treat 

obesity by reducing excess body weight 

or maintaining weight reduction longterm for individuals with obesity who 

do not have another condition for which 

the prescribed use is an MAI that is 

covered under the current Part D policy. 

The proposed reinterpretation would 

also apply to the Medicaid program. 

Thus, AOMs could not be excluded 

from Medicaid coverage under this 

interpretation when used for weight loss 

or chronic weight management for the 

treatment of obesity. Coverage of AOMs 

and drugs that contain the same active 

ingredient as AOMs that meet the 

definition of a covered outpatient drug 

are already subject to section 1927 

requirements when used for an 

indication, other than weight loss, that 

is an MAI, and Medicaid must cover 

those products when they are medically 

necessary. Under our proposed 

reinterpretation, AOMs approved for 

weight loss and chronic weight 

management that are used for weight 

loss in individuals who do not have 

obesity or another condition that is an 

MAI for the AOM would remain 

excluded from the definition of covered 

Part D drug and would remain optional 

benefit for Medicaid programs. 

5. Promoting Informed Choice—Format 

Provider Directories for Medicare Plan 

Finder 

We are proposing to require MA 

provider directory data, as required 

under § 422.111(b)(3)(i) be submitted for 

use to populate Medicare Plan Finder 

(MPF). In addition, we are proposing to 

require MA organizations to attest that 

this information is accurate and 

consistent with data submitted to 

comply with CMS’s MA network 

adequacy requirements at 

§ 422.116(a)(1)(i) when it is submitted to 

CMS for the purpose of incorporating 

into MPF. The proposed regulatory 

changes would further promote 

informed beneficiary choice and 

transparency found in online resources, 

empowering people with Medicare to 

make informed choices about their 

coverage. In addition, the proposal will 

help ensure that provider directory 

information, including the provider’s 

cultural and linguistic capabilities, 

which are currently required for MA 

provider directories, and are especially 

important to underserved communities, 

will be more readily available when 

considering an MA plan. 

6. Promoting Informed Choice—Expand 

Agent and Broker Requirements 

Regarding Medicare Savings Programs, 

Extra Help, and Medigap 

To ensure beneficiaries are well 

informed about and have an accurate 

picture of their MA and Part D 

enrollment options, we are also 

proposing to add the following topics to 

the existing list of requirements that 

agents and brokers must discuss with 

their customers: the availability of lowincome supports including the Part D 

Low-Income Subsidy (also known as 

‘‘Extra Help’’) and Medicare Savings 

Programs; for beneficiaries enrolling 

into MA when first eligible for Medicare 

or dropping a Medigap plan to enroll in 

an MA plan for the first time, general 

information on Medigap Federal 

guaranteed issue (GI) rights, the 

practical implications of switching from 

Medicare Advantage to Traditional 

Medicare, and, when applicable, 

provide information on state laws 

regarding Medigap GI rights for those 

states where the agent or broker is 

licensed and appointed to sell; and 

requiring that agents pause to address 

remaining questions the beneficiary may 

have related to enrollment in a plan 

prior to moving forward with an 

enrollment. As Medicare enrollees 

consider their coverage options, it is 

essential that agents and brokers 

provide adequate information to ensure 

beneficiaries can make fully informed 

choices, both to support enrollees and 

promote a functioning, competitive 

marketplace. 

7. Promoting Informed Choice— 

Enhancing Review of Marketing and 

Communications 

We are proposing to broaden the 

marketing definition in §§ 422.2260 and 

423.2260, in order to expand CMS 

oversight of Medicare Advantage and 

Part D communications materials and 

activities and strengthen beneficiary 

protections against misleading and 

confusing advertising tactics. Currently, 

communications materials and activities 

only fall within the regulatory definition 

of marketing if they meet certain content 

and intent standards. To satisfy the 

content portion of the current regulatory 

definition of marketing, 

communications materials and activities 

must include or address content 

regarding: (1) the plan’s benefits, 

benefits structure, premiums or cost 

sharing; (2) measuring or ranking 

standards (for example, Star Ratings or 

plan comparisons); or (3), for MA plans 

only, rewards and incentives as defined 


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99342 Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 

1 CMS’s behavioral health strategy is available at: 

https://www.cms.gov/cms-behavioral-healthstrategy. 

2 Busch AB, Huskamp HA, Raja P, Rose S, 

Mehrotra A. Disruptions in Care for Medicare 

Beneficiaries with Severe Mental Illness During the 

COVID–19 Pandemic. JAMA Netw Open. 2022 Jan 

4;5(1):e2145677. doi: 10.1001/ 

jamanetworkopen.2021.45677. PMID: 35089352; 

PMCID: PMC8800078. Retrieved from: https://

www.ncbi.nlm.nih.gov/pmc/articles/PMC8800078/. 

under § 422.134(a). In order to broaden 

the definition of marketing, CMS is 

proposing to eliminate this content 

standard and rely solely on an intent 

standard to determine whether 

communications material and activities 

are considered marketing. Broadening 

the definition of marketing would 

expand the scope of materials that must 

be prospectively submitted to CMS for 

review, which would allow CMS to 

better ensure that MA organizations, 

Part D sponsors, and their downstream 

entities are not providing misleading, 

inaccurate, or confusing information to 

current or potential enrollees, or 

engaging in activities that could 

misrepresent the MA organization or 

Part D sponsor, in accordance with 

§§ 422.2262 and 423.2262. We are also 

proposing conforming edits to the 

definition of ‘‘Advertisement (Ad)’’ in 

§§ 422.2260 and 423.2260 to align with 

the proposed updates to the definition 

of marketing. 

8. Promoting Transparency for 

Pharmacies and Protecting Beneficiaries 

From Disruptions 

We are proposing to require Part D 

sponsors (or first tier, downstream, or 

related entities (FDRs), such as 

pharmacy benefit managers (PBMs), on 

the sponsors’ behalf) to notify network 

pharmacies which plans the pharmacies 

will be in-network for in a given plan 

year by October 1 of the year prior to 

that plan year and to require sponsors 

to provide pharmacies a list of these 

plans to network pharmacies on request 

after October 1. We are also proposing 

to require contracts with pharmacies for 

participation in Part D networks that 

allow the Part D sponsor or FDR to 

terminate the contract without cause to 

also allow pharmacies to terminate the 

contracts without cause after providing 

the same notice that the contract 

requires the sponsor or FDR to provide 

the pharmacy. We believe these policies 

will address concerns raised by 

pharmacies about their ability to 

provide accurate information to 

beneficiaries and will help protect 

beneficiaries from disruptions in care 

that occur when network pharmacies 

stop providing services before formally 

terminating their contracts. 

9. Administration of Supplemental 

Benefits Coverage Through Debit Cards 

This provision would codify existing 

requirements and new protections for 

supplemental benefits that are 

administered using debit cards by MA 

organizations. Specifically, we are 

proposing to: (1) describe when, how, 

and in what manner debit cards can be 

used by an MA organization and 

enrollee; (2) introduce additional 

disclosure requirements to increase 

transparency, including additional 

disclosure rules around supplemental 

benefits and plan debit cards (3) further 

protect access to plan-covered services 

for MA enrollees by requiring MA 

organizations to allow an enrollee to 

receive covered benefits through an 

alternative process if there is an issue 

with a plan debit card, (4) ensure debit 

cards are electronically linked to plan 

covered items and services through a 

real-time identification mechanism, and 

5) clarify what types of over the counter 

(OTC) products are acceptable. Finally, 

we are proposing to prohibit 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 item or service. 

10. Improving Access—Enhancing Rules 

on Internal Coverage Criteria 

In the final rule titled ‘‘Medicare 

Program; Contract Year 2024 Policy and 

Technical Changes to the Medicare 

Advantage Program, Medicare 

Prescription Drug Benefit Program, and 

Medicare Cost Plan Program, Medicare 

Cost Plan Program, and Programs of AllInclusive Care for the Elderly,’’ which 

appeared in the April 12, 2023, Federal 

Register (88 FR 22120) (hereinafter 

referred to as the ‘‘April 2023 final 

rule’’), we codified regulations that 

clarified the obligations and 

responsibilities for MA organizations in 

covering basic benefits and established 

guardrails for MA organizations to 

develop and use coverage criteria in a 

way that aligns with Traditional 

Medicare. These rules were applicable 

to coverage for MA organizations 

beginning January 1, 2024. Through 

CMS account manager engagement with 

MA organizations, incoming inquiries 

from industry stakeholders, and our 

ongoing 2024 program audits, we have 

learned a great deal about common 

misunderstandings related to these new 

rules. In order to further clarify these 

rules, we are proposing to build upon 

and enhance the regulations from the 

April 2023 final rule, specifically those 

related to the use of internal coverage 

criteria, by defining the meaning of 

‘‘internal coverage criteria,’’ establishing 

policy guardrails to ensure access to 

benefits, and adding more specific rules 

about publicly posting internal coverage 

criteria content on MA organization 

websites. 

11. Ensuring Equitable Access to 

Behavioral Health Benefits Through 

Section 1876 Cost Plan and MA Cost 

Sharing Limits (§§ 417.454 and 422.100) 

Addressing the nation’s behavioral 

health crisis and ensuring equitable 

access to behavioral health services are 

key priorities for CMS.1 Beneficiaries 

with severe mental illness experienced 

substantial disruptions in care during 

the COVID–19 pandemic and these 

disruptions were greater among 

disadvantaged populations (including 

historically underserved racial and 

ethnic groups and low-income 

populations).2 As a result, CMS is 

pursuing policies to address barriers 

individuals may face in accessing 

mental health and substance use 

disorder care. This includes using the 

authority under sections 

1852(a)(1)(B)(iv), 1856(b)(1), 1857(e)(1), 

1876(c)(2)(A), and 1876(i)(3)(D) of the 

Act to add to the list of Part A and Part 

B benefits (items and services) for which 

Medicare Advantage (MA) and Section 

1876 Cost Plans’ (Cost Plans) in-network 

cost sharing may not exceed the costsharing levels in Traditional Medicare. 

We propose to require MA and Cost 

Plans’ in-network cost sharing for 

categories of mental health and 

substance use disorder services 

(collectively called ‘‘behavioral health 

services’’) be no greater than that in 

Traditional Medicare beginning January 

1, 2026. 

We are proposing behavioral health 

cost-sharing standards for MA and Cost 

Plans that strike a balance between: (1) 

improving the affordability of these 

services for enrollees in a timely 

manner; and (2) minimizing disruption 

to enrollees’ access to care and coverage 

options. We also propose several 

changes to the cost-sharing regulations 

for MA and Cost Plans at §§ 417.454 and 

422.100. Additionally, we solicit 

comment on: (1) whether CMS should 

apply these proposed changes to the 

behavioral health cost-sharing standards 

beginning in contract year 2026 or 2027; 

(2) whether there should be a transition 

period from the existing contract year 

2025 behavioral health cost-sharing 

standards in current regulations for 

select service categories (such as, the 

standards at § 422.100(f)(6)(i), (iii), or 


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3https://www.federalregister.gov/documents/ 

2023/11/01/2023-24283/safe-secure-andtrustworthy-development-and-use-of-artificialintelligence. 

(iv) for MA plans), to the proposed costsharing standard; and (3) how long any 

transition should be. We also solicit 

comment regarding this behavioral 

health cost-sharing proposal’s potential 

impact on how MA plans would satisfy 

existing requirements that cost sharing 

be actuarially equivalent to Traditional 

Medicare cost sharing at § 422.100(j)(1) 

and (2). 

12. Improving Experiences for Dually 

Eligible Enrollees 

Dually eligible individuals face 

fragmentation in many parts of the 

health care system, including their 

experiences as enrollees of Medicare 

and Medicaid managed care plans. One 

way in which we seek to address such 

fragmentation is though policies that 

integrate care for dually eligible 

individuals. ‘‘Integrated care’’ refers to 

delivery system and financing 

approaches that (1) maximize personcentered coordination of Medicare and 

Medicaid services; (2) mitigate costshifting incentives between the two 

programs; and (3) create a seamless 

experience for dually eligible 

individuals. We are proposing to 

establish new Federal requirements for 

D–SNPs that are applicable integrated 

plans to: (1) have integrated member 

identification (ID) cards that serve as the 

ID cards for both the Medicare and 

Medicaid plans in which an enrollee is 

enrolled; and (2) conduct an integrated 

health risk assessment (HRA) for 

Medicare and Medicaid, rather than 

separate HRAs for each program. We are 

also proposing to codify timeframes for 

special needs plans to conduct HRAs 

and individualized care plans (ICPs) 

and prioritize the involvement of the 

enrollee or the enrollee’s representative, 

as applicable, in the development of the 

ICPs. 

13. Medical Loss Ratio (MLR) 

To improve medical loss ratio (MLR) 

reporting and oversight and to better 

align MA and Part D MLR requirements 

with commercial MLR and Medicaid 

MLR requirements, we are proposing to 

make certain changes to the regulations 

that govern MLR requirements for MA 

and Part D. Specifically, we are 

proposing to establish clinical and 

quality improvement standards for 

provider incentives and bonus 

arrangements included in the MA MLR 

numerator in order to help align such 

bonus payments with care outcomes 

and avoid excess premium transfer to 

providers. We also propose to prohibit 

administrative costs from being 

included in quality improvement 

activities in both the MA and Part D 

MLR numerator. Additionally, we 

propose to adopt additional 

requirements for the allocation of 

expenses in the MLR. We also propose 

to establish new audit and appeals 

processes for MLR compliance. In 

addition, we propose to amend the 

Medicare MLR regulations authorizing 

the release of Part C and Part D MLR 

data. We propose to codify the rules we 

established in the CY 2025 Part D 

Redesign Program Instructions for the 

treatment for MLR purposes of Medicare 

Prescription Payment Plan unsettled 

balances for 2026 and subsequent years. 

We also propose to explicitly provide 

that the Medicare MLR reporting 

include detailed information regarding 

provider payment arrangements. In 

addition to the proposed changes, we 

are issuing a request for information on 

potential policies that CMS could adopt 

regarding how the MA and Part D MLRs 

are calculated in order to enable 

policymakers to address concerns 

surrounding vertical integration in MA 

and Part D. 

14. Medicare Transaction Facilitator 

Requirements for Network Pharmacy 

Agreements 

We propose to amend § 423.505 by 

adding paragraph (q) to require that Part 

D sponsors’ network contracts with 

pharmacies require such pharmacies to 

be enrolled in the Medicare Drug Price 

Negotiation Program’s (‘‘Negotiation 

Program’’) Medicare Transaction 

Facilitator Data Module (‘‘MTF DM’’). 

We believe the requirement among Part 

D sponsors’ network pharmacies to be 

enrolled in the MTF DM that would be 

added to Part D sponsors’ network 

contracts with pharmacies, if finalized, 

would facilitate continued beneficiary 

access to selected drugs that are covered 

Part D drugs, promote access to 

negotiated maximum fair prices under 

the Negotiation Program for both 

beneficiaries and dispensing entities, 

and help ensure accurate Part D claims 

information and payment. 

15. Enhancing Health Equity Analyses: 

Annual Health Equity Analysis of 

Utilization Management Policies and 

Procedures 

We propose at § 422.137(d)(6)(iii)(A) 

through (H) to revise the required 

metrics for the annual health equity 

analysis of the use of prior authorization 

to require the metrics be reported by 

each item or service, rather than 

aggregated for all items and services. 

In the April 2024 final rule, CMS 

added health equity related 

requirements to § 422.137, including a 

requirement at § 422.137(d)(6) that the 

Utilization Management committee 

must conduct an annual health equity 

analysis of the use of prior 

authorization. The analysis must 

examine the impact of prior 

authorization at the plan level, on 

enrollees with one or more of the 

specified social risk factors (SRF). The 

analysis must use the outlined metrics, 

aggregated for all items and services, 

calculated for enrollees with the 

specified SRFS, and for enrollees 

without the specified SRFs, from the 

prior contract year, to conduct the 

analysis. 

During the public comment period, 

CMS received a significant number of 

comments on the requirement that the 

metrics for the health equity analysis be 

aggregated for all items and services (89 

FR 30569). Commenters recommended 

that CMS require a further level of 

granularity to ensure that potential 

disparities could be identified. 

Specifically, commenters suggested that 

CMS require disaggregation by item and 

service to ensure that CMS can identify 

specific services that may be 

disproportionately denied. We are 

proposing to revise the required metrics 

for the annual health equity analysis of 

the use of prior authorization to require 

the metrics be reported by each item or 

service, rather than aggregated for all 

items and services. 

16. Ensuring Equitable Access to 

Medicare Advantage Services— 

Guardrails for Artificial Intelligence (AI) 

On October 30, 2023, the Biden-Harris 

Administration released an Executive 

Order, ‘‘Executive Order on the Safe, 

Secure, and Trustworthy Development 

and Use of Artificial Intelligence,’’ 

directing agencies to ensure that 

artificial intelligence tools do not 

impede the advancement of equity and 

civil rights, and that the use of AI 

within health care organizations does 

not deny equal opportunity and justice 

for the American people.3 Given the 

growing use of AI within the healthcare 

sector, such as, but not limited to, AIbased patient care decision support 

tools, vision transformer-based AI 

methods for lung cancer imaging 

applications, and AI and machine 

learning based decision support systems 

in mental health care settings, we 

believe it is necessary to ensure that the 

use of AI does not result in inequitable 

treatment, bias, or both, within the 

healthcare system, and instead is used 

to promote equitable access to care and 

culturally competent care for all 

enrollees. As such, we propose to revise 


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§ 422.112(a)(8) to ensure services are 

provided equitably irrespective of 

delivery method or origin, whether from 

human or automated systems. We also 

clarify that in the event that an MA plan 

uses AI or automated systems, it must 

comply with section 1852(b) of the Act 

and § 422.110(a) and other applicable 

regulations and requirements and 

provide equitable access to services and 

not discriminate on the basis of any 

factor that is related to the enrollee’s 

health status. 

17. Promoting Community-Based 

Services and Enhancing Transparency 

of In-Home Service Contractors 

CMS has become aware that some 

entities that provide covered benefits 

may not be included in an MA 

organization’s provider directory. These 

concerns relate to safety and a lack of 

transparency regarding supplemental 

benefit service providers and their 

access to an enrollee’s home, as well as 

ensuring individuals know which 

providers are deeply rooted within the 

communities they serve. This is 

particularly of concern when the 

enrollee may not have information 

about who may have access to their 

home, personally identifiable 

information (PII), or protected health 

information (PHI). As such, to 

strengthen beneficiary protections and 

transparency, we propose to: (1) codify 

definitions of community-based 

organizations (CBOs), in-home or athome supplemental benefit providers 

and direct furnishing entities; (2) 

require plans to identify, within the 

provider directory, which providers and 

direct furnishing entities meet the 

proposed definition of a CBO; (3) 

require plans to identify in-home or athome supplemental benefit providers 

and direct furnishing entities, including 

those that provide a hybrid of services 

(both in-home or at-home, and in-office 

services), either through a subset list 

within the provider directory or through 

a separate list comprising in-home or athome supplemental benefit providers 

and direct furnishing entities; and (4) 

clarify existing policy by stating that all 

direct furnishing entities must be 

included within the provider directory. 

C. Conclusion 

Finally, we are clarifying and 

emphasizing our intent that if any 

provision of this rule, once finalized, is 

held to be invalid or unenforceable by 

its terms, or as applied to any person or 

circumstance, or stayed pending further 

agency action, it shall be severable from 

this rule and not affect the remainder 

thereof or the application of the 

provision to other persons not similarly 

situated or to other, dissimilar 

circumstances. Through this rule, we 

propose provisions that are intended to 

and will operate independently of each 

other, even if each serves the same 

general purpose or policy goal. Where a 

provision is necessarily dependent on 

another, the context generally makes 

that clear (such as by a cross-reference 

to apply the same standards or 

requirements). 

D. Summary of Costs and Benefits 

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4https://www.cms.gov/files/document/irainsulin

vaccinesmemo09262022.pdf. 

5https://www.cms.gov/files/document/final-cy2024-part-d-bidding-instructions.pdf. 

6https://www.cms.gov/files/document/aciprecommended-vaccines-july-2023.pdf. 

BILLING CODE 4120–01–C 

II. Implementation of IRA Provisions 

for the Medicare Prescription Drug 

Benefit Program 

A. Coverage of Adult Vaccines 

Recommended by the Advisory 

Committee on Immunization Practices 

Under Medicare Part D (§§ 423.100 and 

423.120) 

1. Background 

Section 11401 of the Inflation 

Reduction Act (IRA) amended section 

1860D–2 of the Act by adding new 

paragraph (8) to subsection (b) and new 

paragraph (5) to subsection (c) and 

making other conforming amendments 

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 cost-sharing 

for, an adult vaccine recommended by 

the Advisory Committee on 

Immunization Practices (ACIP) covered 

under Part D. 

Section 11401(e) of the IRA directed 

the Secretary to implement section 

11401 of the IRA for 2023, 2024, and 

2025 by program instruction or other 

forms of program guidance. In 

accordance with the law, CMS issued 

memoranda via the Health Plan 

Management System (HPMS) that 

outlined requirements for Part D 

sponsors regarding the implementation 

of section 11401. 

On September 26, 2022, CMS released 

an HPMS memorandum titled ‘‘Contract 

Year 2023 Program Guidance Related to 

Inflation Reduction Act Changes to Part 

D Coverage of Vaccines and Insulin.’’ 4

In this memorandum, we provided 

guidance that for any new ACIPrecommended adult vaccine that 

becomes available during a plan year, 

Part D sponsors must apply the $0 costsharing requirements in section 1860D– 

2(b)(8) of the Act to applicable claims 

with dates of service after ACIP’s issued 

recommendation. 

On April 4, 2023, CMS issued an 

HPMS memorandum titled ‘‘Final 

Contract Year (CY) 2024 Part D Bidding 

Instructions’’ in which we explained 

that, in order for a vaccine to be 

considered ACIP-recommended for 

adult use, it must be both adopted by 

the Director of the Centers for Disease 

Control and Prevention (CDC) and 

published in the CDC’s Morbidity and 

Mortality Weekly Report (MMWR).5

On July 24, 2023, CMS issued a 

revision to the April 4, 2023 

memorandum in which we clarified that 

the effective date of the $0 cost-sharing 

requirement for an ACIP-recommended 

adult vaccine must be aligned with the 

date on which the CDC Director adopts 

the respective ACIP vaccine 

recommendation, as posted on the 

CDC’s website at https://www.cdc.gov/ 

vaccines/acip/recommendations.html, 

not the date on which the 

recommendation is published in the 

MMWR.6

In this rule, we propose to codify the 

requirements related to $0 cost-sharing 

for adult vaccines recommended by 

ACIP under Part D for 2026 and each 

subsequent plan year. 


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7https://www.cdc.gov/vaccines/schedules/hcp/ 

imz/adult.html. 

8https://www.cdc.gov/vaccines/acip/acip-scdmfaqs.html. 

9https://www.cdc.gov/vaccines/hcp/acip-recs/ 

index.html. 

10 Section 423.124(b) currently states that a Part 

D sponsor that provides its Part D enrollees with 

coverage other than defined standard coverage may 

require its Part D enrollees accessing covered Part 

D drugs at out-of-network pharmacies to assume 

financial responsibility for any differential between 

the out-of-network pharmacy’s (or provider’s) usual 

and customary price and the Part D sponsor’s plan 

allowance. Section 50.4.3 of Chapter 14 of the 

Medicare Prescription Drug Benefit Manual (https:// 

www.cms.gov/medicare/prescription-drugcoverage/prescriptiondrugcovcontra/downloads/ 

chapter-14-coordination-of-benefits-v09-17- 

2018.pdf) provides detailed guidance on how Part 

D sponsors must process DMR requests that are 

submitted by enrollees who paid cash at an out-ofnetwork (or an in-network) pharmacy (or provider) 

and where the pharmacy (or provider) did not 

submit the claim to the Part D plan. 

2. Definition of ACIP-Recommended 

Adult Vaccine 

Section 1860D–2(b)(8)(B) of the Act 

specifies that for purposes of section 

1860D–2(b)(8) of the Act, the term 

‘‘adult vaccine recommended by the 

Advisory Committee on Immunization 

Practices’’ means a covered Part D drug 

that is a vaccine licensed by the U.S. 

Food and Drug Administration (FDA) 

under section 351 of the Public Health 

Service Act (PHSA) for use by adult 

populations and administered in 

accordance with recommendations of 

the CDC’s ACIP as adopted by the CDC 

Director. We propose to refer to these 

vaccines as ‘‘ACIP-recommended adult 

vaccines’’ and to codify this definition 

at § 423.100. CMS is not proposing to 

specify a particular age for a vaccine to 

be considered ‘‘adult’’ for the purposes 

of determining if a Part D vaccine is 

subject to $0 cost sharing under section 

11401 of the IRA. We defer to how the 

CDC and ACIP categorize such a 

recommendation. Part D sponsors must 

use the information provided by the 

CDC and ACIP to determine if the 

vaccine is recommended for, and being 

administered to, an adult. 

Consistent with the September 26, 

2022 HPMS memorandum, we propose 

to define an ‘‘ACIP-recommended adult 

vaccine’’ as a vaccine licensed by the 

FDA for use in adults and administered 

in accordance with ACIP 

recommendations. In some cases, the 

vaccine may be included on the ACIP 

‘‘Adult Immunization Schedule’’ 7 and, 

in other cases, the vaccine may be 

recommended under a separate ACIP 

recommendation that is not part of the 

Adult Immunization Schedule. In 

alignment with the September 26, 2022 

HPMS memorandum, we interpret the 

term ‘‘recommendation’’ to refer to a 

recommendation under any one of 

ACIP’s categories of recommendations, 

including routine, catch-up, risk-based, 

and shared clinical decision-making 

immunization recommendations. As 

described by ACIP, the different 

categories of recommendations can be 

distinguished based on the default 

decision to vaccinate. Routine, catch-up, 

and risk-based immunization 

recommendations include a default 

decision to vaccinate an individual 

based on their age or other indication, 

unless contraindicated. For shared 

clinical decision-making 

recommendations, the decision of 

whether or not to vaccinate is 

determined based on the ‘‘best available 

evidence of who may benefit from 

vaccination; the individual’s 

characteristics, values, and preferences; 

the health care provider’s clinical 

discretion; and the characteristics of the 

vaccine being considered.’’ 8

Some vaccines that are not on the 

ACIP Adult Immunization Schedule for 

routine immunization are included on 

the ACIP Vaccine Recommendations 

and Guidelines web page.9 This web 

page describes ACIP recommendations 

for vaccines that are used in limited 

populations and under limited 

circumstances. For example, ACIP 

recommends certain vaccinations for 

travelers prior to travelling to certain 

countries. Therefore, consistent with the 

September 26, 2022 HPMS 

memorandum, as long as the vaccine is 

an FDA-licensed vaccine for use by 

adults that is recommended by ACIP for 

use by adults, such vaccine would meet 

our proposed definition of an ACIPrecommended adult vaccine, when 

provided in accordance with ACIP 

recommendations. 

As described in the September 26, 

2022 HPMS memorandum, a Part D 

vaccine would not meet our proposed 

definition of an ACIP-recommended 

adult vaccine and, therefore, would not 

be subject to the requirements 

implemented in this proposed rule, if 

the vaccine is: (1) not licensed by the 

FDA under section 351 of the PHSA for 

use by adults; (2) not recommended by 

ACIP for use by adults; (3) administered 

to an individual who is not an adult, 

even if such use in the non-adult is 

supported by ACIP recommendations 

(for example, recommendations in the 

ACIP child and adolescent 

immunization schedule); or (4) not 

administered in accordance with ACIP 

recommendations. 

In summary, we propose to add at 

§ 423.100 a definition of ‘‘ACIPrecommended adult vaccine’’ that 

means a covered Part D drug, as defined 

at § 423.100, that is a vaccine licensed 

by the FDA under section 351 of the 

Public Health Service Act for use by 

adult populations and administered in 

accordance with recommendations of 

ACIP of the CDC as adopted by the CDC 

Director. 

3. No Deductible or Cost-Sharing for 

ACIP-Recommended Adult Vaccines 

Section 1860D–2(b)(8)(A) of the Act 

specifies that the deductible shall not 

apply and there shall be no coinsurance 

or other cost-sharing with respect to 

ACIP-recommended adult vaccines. 

Generally, Part D vaccines that have 

ACIP-recommended uses in the adult 

population and are administered to an 

adult must be provided with no enrollee 

cost-sharing. As described in the 

September 26, 2022 HPMS 

memorandum, this means that enrollees 

must not be subject to cost sharing on 

the ingredient cost of the vaccine 

submitted on the prescription drug 

event (PDE) record, or any associated 

sales tax, dispensing fee, or vaccine 

administration fee, regardless of the 

vaccine’s formulary tier placement or 

the benefit phase that the enrollee is in. 

We are also proposing at 

§ 423.120(g)(3) that enrollees who 

submit direct member reimbursement 

(DMR) requests for ACIP-recommended 

adult vaccines accessed at either out-ofnetwork pharmacies or providers (in 

accordance with § 423.124(a) and (c)), or 

at in-network pharmacies or providers, 

that a Part D sponsor determines are 

coverable under their benefit must not 

be subject to cost sharing. While Part D 

sponsors generally may charge the 

enrollee for the difference between the 

cash price and plan allowance for DMRs 

for covered Part D drugs accessed from 

both out-of-network and in-network 

pharmacies, neither § 423.124(b) nor 

Chapter 14 of the Prescription Drug 

Benefit Manual directly addresses 

covered Part D drugs that have 

statutorily limited cost sharing.10

Because there can be no cost sharing for 

ACIP-recommended adult vaccines 

accessed at either out-of-network 

pharmacies or providers (in accordance 

with § 423.124(a) and (c)), or at innetwork pharmacies or providers, that a 

Part D sponsor determines are coverable 

under their benefit, the Part D sponsor 

must reimburse the enrollee for the full 

cash price paid to the pharmacy or 

provider for an ACIP-recommended 

adult vaccine. 

The total gross covered drug cost 

(TGCDC) is usually reported differently 

on PDEs depending on whether the drug 

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downloads/part-d-benefits-manual-chapter-6.pdf 

network pharmacy or provider. 

Specifically, Part D sponsors report the 

cash price that the enrollee paid to the 

pharmacy or provider as the TGCDC for 

out-of-network DMRs but only report 

the negotiated price as the TGCDC for 

in-network DMRs. However, we are 

clarifying here that with respect to 

ACIP-recommended adult vaccines, as 

an exception to the Chapter 14 

guidance, the sponsor should report the 

cash price paid to the pharmacy or 

provider as the TGCDC on the PDE for 

both out-of-network and in-network 

DMRs. Regardless, there is no true outof-pocket (TrOOP) cost accumulation for 

these claims because the beneficiary has 

no cost sharing for ACIP-recommended 

adult vaccines under the basic Part D 

benefit. 

Under our proposed policy at 

§ 423.120(g), and as described in the 

September 26, 2022 HPMS 

memorandum, new Part D vaccines that 

become available during the plan year 

and meet the definition of an ACIPrecommended adult vaccine are subject 

to the cost-sharing requirements of 

section 1860D–2(b)(8)(A) of the Act. 

Consistent with the definition of a 

covered Part D drug at § 423.100, the 

statutory cost-sharing requirements 

apply regardless of whether a Part D 

sponsor adds the vaccine to the 

formulary midyear, or the enrollee 

obtains the vaccine via a formulary 

exception. In addition, we propose at 

§ 423.120(g)(2) that if ACIP issues a new 

or revised recommendation for a 

vaccine, related to its use in adults 

during the plan year, Part D sponsors 

must apply the cost-sharing 

requirements of this proposed rule, as 

applicable, to any ACIP-recommended 

adult vaccine claims with dates of 

service after the proposed ‘‘Effective 

date of the ACIP recommendation’’ 

discussed later in this proposed rule. 

Consistent with the April 4, 2023, 

HPMS memorandum, Part D sponsors 

may place ACIP-recommended adult 

vaccines on any tier, including a 

vaccine tier, and apply utilization 

management strategies (for example, 

prior authorization), insofar as such tier 

placement or utilization management 

strategy is consistent with the 

requirements of CMS’s formulary review 

and approval process under 

§ 423.120(b). 

As described in section 30.2.7 of 

Chapter 6 of the Medicare Prescription 

Drug Benefit Manual, Part D sponsors 

may only use utilization management 

strategies to assess the necessity of 

vaccines that are less commonly 

administered in the Medicare 

population, facilitate the use of vaccines 

in line with ACIP recommendations, 

and evaluate potential reimbursement of 

vaccines that could be covered under 

Part B.11 For example, utilization 

management strategies may be used to 

ensure an enrollee meets the age or 

clinical requirements recommended by 

ACIP for a particular vaccine, such as 

the respiratory syncytial virus (RSV) 

vaccine which is currently 

recommended by ACIP for adults aged 

75 years of age and older and adults 

aged 60–74 who are at increased risk for 

severe RSV disease. However, regardless 

of an ACIP-recommended adult 

vaccine’s tier placement or applicable 

utilization management strategies, the 

statutory zero cost-sharing limits 

required under this proposed rule 

would still apply. 

In summary, we propose to codify at 

§ 423.120(g)(1) the requirement that Part 

D sponsors must not apply the 

deductible or charge cost sharing on 

ACIP-recommended adult vaccines. We 

also propose to codify at § 423.120(g)(2) 

that once a new or revised 

recommendation is posted on the CDC 

website, Part D sponsors must provide 

coverage consistent with § 423.120(g)(1) 

for dates of service on or after the 

‘‘Effective date of the ACIP 

recommendation’’ as discussed later in 

this proposed rule. Finally, we propose 

to codify at § 423.120(g)(3) that these 

cost-sharing requirements apply for 

ACIP-recommended adult vaccines 

obtained from either in-network or outof-network pharmacies or providers (in 

accordance with § 423.124(a) and (c)). 

4. Effective Date of ACIP 

Recommendations 

In the July 24, 2023, HPMS 

memorandum, we stated that Part D 

sponsors must provide $0 cost sharing 

for an ACIP-recommended adult vaccine 

as of the date the CDC Director adopts 

the ACIP’s recommendation, and it is 

posted on the CDC’s website. 

Accordingly, we propose to add at 

§ 423.100 a definition of ‘‘Effective date 

of the ACIP recommendation’’ that 

means the date specified on the CDC 

website noting the date the CDC 

Director adopted the ACIP 

recommendation. 

In the July 24, 2023 HPMS 

memorandum, we also stated that in the 

event that the CDC Director’s adoption 

of an ACIP recommendation for an adult 

vaccine is posted on the CDC’s website 

but an adoption date is not specified, 

the effective date of the ACIP 

recommendation is the day after the last 

day of the ACIP meeting at which the 

recommendation was approved. 

However, we are not including this 

requirement in our proposed definition 

of ‘‘Effective date of the ACIP 

recommendation’’ at § 423.100 as it is 

highly unlikely that an ACIP 

recommendation will be posted without 

the date on which it was adopted by the 

CDC Director. In the event that a 

recommendation is posted without an 

effective date, CMS will consult with 

the CDC to obtain the date the 

recommendation was adopted by the 

CDC Director and provide guidance. 

The ACIP holds three regular 

meetings annually, generally in 

February, June, and October, in addition 

to emergency sessions, for the purpose 

of reviewing scientific data and voting 

on vaccine recommendations. We note 

that the proposed ‘‘Effective date of the 

ACIP recommendation’’ and the date on 

which it is published on the CDC’s 

website may not always be the same 

date (if, for example, the website posting 

occurs after the date specified as the 

date the CDC Director adopted the 

recommendation). Nevertheless, the 

proposed ‘‘Effective date of the ACIP 

recommendation’’ determines when the 

cost-sharing requirements apply. 

Consequently, if an enrollee paid cost 

sharing for an ACIP-recommended adult 

vaccine after the ‘‘Effective date of the 

ACIP recommendation’’ (for example, 

the enrollee received the vaccine after 

the ‘‘Effective date of the ACIP 

recommendation,’’ but prior to the 

recommendation being posted on the 

CDC website), once the recommendation 

has been posted to the CDC website, the 

Part D sponsor will need to reimburse 

the enrollee for any cost sharing they 

paid for the vaccine. 

In instances where ACIP expands a 

previous recommendation, narrows a 

previous recommendation, or removes a 

previous recommendation, the 

‘‘Effective date of the ACIP 

recommendation’’ is the date the CDC 

Director adopted the changed 

recommendation once the 

recommendation is posted on the CDC’s 

website. We note that a change to an 

ACIP recommendation alone does not 

affect a vaccine’s status as a Part D drug. 

Specifically, a Part D drug is defined at 

§ 423.100, in relevant part, as including 

a vaccine, if used for a medically 

accepted indication, as defined in 

section 1860D–2(e)(4) of the Act. Since 

an ACIP recommendation does not 

affect what is considered a medically 

accepted indication, as defined under 

section 1860D–2(e)(4) of the Act, for a 

particular vaccine, an ACIP 

recommendation alone does not affect a 

vaccine’s status as a Part D drug. 

However, if the FDA labeling changes to 


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13 https://www.cms.gov/files/document/final-cy2024-part-d-bidding-instructions.pdf. 

14 https://www.cms.gov/files/document/final-cy2025-part-d-redesign-program-instructions.pdf. 

align with a narrowed ACIP 

recommendation, this may change what 

is considered a medically accepted 

indication and may change what 

indications are coverable under Part D 

for a particular vaccine. In other words, 

if an ACIP recommendation is narrowed 

or removed, the vaccine may still be 

coverable under Part D, but an enrollee 

may be subject to cost-sharing for the 

vaccine if it is not administered in 

accordance with the revised ACIP 

recommendation. 

When an ACIP recommendation for a 

particular vaccine is narrowed (for 

example, additional restrictions are 

added or the vaccine is recommended 

for a more limited patient population), 

Part D sponsors may implement prior 

authorization (PA) to determine whether 

the vaccine is being administered in 

accordance with ACIP 

recommendations and whether the 

enrollee should be subject to costsharing. For example, if an ACIP 

recommendation is amended to raise the 

age for which a vaccine is recommended 

to be administered, Part D sponsors may 

implement PA to ensure a beneficiary 

meets this new age requirement. 

However, Part D sponsors are not 

required to implement PA for vaccines 

to determine if a vaccine is being used 

for an ACIP-recommended use and is 

therefore subject to $0 cost-sharing. 

When an ACIP recommendation is 

narrowed and a Part D sponsor does not 

currently have a PA in place for that 

vaccine, the plan must submit a 

negative formulary change request to 

add a PA requirement for that vaccine 

that aligns with the newly narrowed 

recommendation, consistent with 

§ 423.120(e)(1). As specified in 

§ 423.120(e)(3)(i), negative change 

requests for maintenance changes are 

considered to be approved after 30 days 

unless the Part D sponsor is notified 

otherwise. Once the request is 

approved, Part D sponsors may 

implement the PA requirement and, if 

the plan determines that the vaccine is 

not being used for an ACIP— 

recommended use, may charge the 

enrollee the applicable cost-sharing. 

Part D sponsors are permitted, but not 

required, to make retroactive 

determinations for claims that were 

processed with $0 cost-sharing after the 

‘‘Effective date of the ACIP 

recommendation’’ and before the date 

on which the PA requirement went into 

effect. 

If ACIP withdraws a recommendation 

for a previously recommended vaccine 

such that the vaccine no longer meets 

the definition of an ACIP-recommended 

adult vaccine, Part D sponsors are not 

required to submit a negative change 

request and may immediately apply cost 

sharing for the vaccine for dates of 

service after the ‘‘Effective date of the 

ACIP recommendation.’’ 

Because the cost-sharing limits for 

vaccines outlined in this proposal have 

been in place since 2023 through 

program instruction authority and we 

have annually reviewed cost sharing in 

plan benefit package submissions, we 

believe the impacts of our proposed 

codification of these requirements 

should have minimal impact on Part D 

sponsors and beneficiaries. 

B. Appropriate Cost-Sharing for Covered 

Insulin Products Under Medicare Part D 

(§§ 423.100 and 423.120) 

1. Background 

Section 11406 of the Inflation 

Reduction Act (IRA) amended section 

1860D–2 of the the Act by adding new 

paragraph (9) to subsection (b) and new 

paragraph (6) to subsection (c) and 

making other conforming amendments 

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 1- 

month supply of each covered insulin 

product must not exceed the statutorily 

defined ‘‘applicable copayment 

amount’’ for all enrollees. For 2023, 

2024, and 2025, the applicable 

copayment amount is $35. For 2026 and 

each subsequent year, the applicable 

copayment amount is the lesser of: (1) 

$35, (2) an amount equal to 25 percent 

of the maximum fair price (MFP) 

established for the covered insulin 

product in accordance with part E of 

subchapter XI of the Act, or (3) an 

amount equal to 25 percent of the 

negotiated price of the covered insulin 

product under the PDP or MA–PD plan. 

Section 11406(d) of the IRA directed 

the Secretary to implement section 

11406 of the IRA for 2023, 2024, and 

2025 by program instruction or other 

forms of program guidance. In 

accordance with the law, CMS issued 

several memoranda related to costsharing for covered insulin products via 

the Health Plan Management System 

(HPMS) that outlined expectations for 

Part D sponsors regarding the 

implementation of section 11406. On 

September 26, 2022, CMS released an 

HPMS memorandum titled ‘‘Contract 

Year 2023 Program Guidance Related to 

Inflation Reduction Act Changes to Part 

D Coverage of Vaccines and Insulin,’’ in 

which we provided program 

instructions for the implementation of 

the requirements in section 11406.12 On 

April 4, 2023, we released additional 

guidance in the ‘‘Final Contract Year 

(CY) 2024 Part D Bidding Instructions’’ 

in which we provided instructions for 

Part D sponsors as they prepared to 

submit bids for CY 2024.13 Lastly, on 

April 1, 2024, we released ‘‘Final CY 

2025 Part D Redesign Program 

Instructions.’’ 14

In this rule, we propose to codify the 

requirements related to appropriate 

cost-sharing for covered insulin 

products under Part D for 2026 and each 

subsequent plan year. 

2. Definition of Covered Insulin Product 

Section 1860D–2(b)(9)(C) of the Act 

defines a covered insulin product as ‘‘an 

insulin product that is a covered Part D 

drug covered under a PDP or MA–PD 

plan and that is approved under section 

505 of the Federal Food, Drug, and 

Cosmetic Act (FFDCA) or licensed 

under section 351 of the Public Health 

Service Act (PHSA) and marketed 

pursuant to such approval or licensure, 

including any covered insulin product 

that has been deemed to be licensed 

under section 351 of the PHSA pursuant 

to section 7002(e)(4) of the Biologics 

Price Competition and Innovation Act of 

2009 and marketed pursuant to such 

section.’’ 

We are proposing to codify the 

statutory definition of ‘‘covered insulin 

product’’ at § 423.100 and, in alignment 

with the guidance in CMS’s September 

26, 2022 HPMS memorandum, we 

clarify that a covered insulin product 

includes drug products that are a 

combination of more than one type of 

insulin. We are also proposing, 

consistent with the September 26, 2022 

HPMS memorandum, that the definition 

of a covered insulin product include 

drug products that are a combination of 

both insulin and a non-insulin drug or 

biological product. Our proposed 

definition of covered insulin product 

would not, however, include medical 

supplies associated with the injection of 

an insulin product, unless such medical 

supplies are a device constituent part of 

a combination product (as defined in 21 

CFR 3.2(e)) containing insulin and such 

combination product is licensed under 

section 351 of the PHSA. 

While our proposed definition of 

‘‘covered insulin product’’ includes 

drug products that are a combination of 

more than one type of insulin or both 

insulin and non-insulin drug or 

biological products, the definition 

would be limited to those drug products 


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that are FDA-licensed products. 

Consequently, because a compounded 

drug product, as described in 

§ 423.120(d), is not FDA-licensed, it 

would not meet the definition of 

‘‘covered insulin product’’. As such, a 

compounded drug product would not be 

subject to the requirements for a 

‘‘covered insulin product’’ under our 

proposed definition at § 423.100. 

Section 1860D–2(b)(9)(C) of the Act 

specifies that a ‘‘covered insulin 

product’’ is an insulin product that is a 

covered Part D drug covered under a 

PDP or MA–PD plan. Section 423.100 

defines a covered Part D drug to be a 

Part D drug that is included on a Part 

D sponsor’s formulary, treated as being 

included in a Part D plan’s formulary as 

a result of a coverage determination or 

appeal, and obtained at a network 

pharmacy or an out-of-network 

pharmacy in accordance with 

§ 423.124(a) and (c). Accordingly, we 

specify in our proposed definition at 

§ 423.100 that a ‘‘covered insulin 

product’’ is a covered Part D drug as 

defined in § 423.100. 

Additionally, we propose at § 423.100 

that a ‘‘covered insulin product’’ is 

licensed under section 351 of the Public 

Health Service Act and marketed 

pursuant to such licensure. We clarify 

that this proposed definition, in 

accordance with the statute, includes 

any covered insulin product that had an 

approved marketing application that 

was deemed to be a license for the 

insulin product (that is, an approved 

biologics license application) under 

section 351 of the PHSA pursuant to 

section 7002(e)(4) of the Biologics Price 

Competition and Innovation Act of 2009 

and marketed pursuant to such license. 

We also note that outside of these 

situations where the insulin had an 

approved marketing application under 

section 505 of the Federal Food, Drug, 

and Cosmetic Act, that was deemed to 

be a license for the insulin product (that 

is, an approved biologics license 

application) under section 351 of the 

Public Health Service Act pursuant to 

section 7002(e)(4) of the Biologics Price 

Competition and Innovation Act of 

2009, there is no need to reference 

section 505 of the Federal Food, Drug, 

and Cosmetic Act since a biological 

product can no longer be approved 

under section 505 and must be licensed 

in a biologics license application under 

section 351 of the Public Health Service 

Act. As such, a reference to section 505 

is not included in our proposed 

definition of a ‘‘covered insulin 

product’’. 

3. Definition of Applicable Cost-Sharing 

Amount for Covered Insulin Products 

Section 1860D–2(b)(9)(D) of the Act 

defines ‘‘applicable copayment amount’’ 

with respect to a covered insulin 

product under a PDP or an MA–PD plan 

dispensed during plan year 2026, and 

each subsequent plan year, as the lesser 

of— 

• $35; 

• An amount equal to 25 percent of 

the maximum fair price established for 

the covered insulin product in 

accordance with Part E of subchapter XI, 

or; 

• An amount equal to 25 percent of 

the negotiated price of the covered 

insulin product under the PDP or MA– 

PD plan. 

We interpret the section 1860D– 

2(b)(9)(D) reference to ‘‘applicable 

copayment amount’’ as an amount that 

could be either a fixed copayment or a 

coinsurance percentage. Therefore, we 

propose to define this ‘‘applicable 

copayment amount’’ as an ‘‘applicable 

cost-sharing amount’’ at § 423.100. In 

addition, to ensure that the reference to 

‘‘applicable cost-sharing amount’’ is 

specific to the cost-sharing for covered 

insulin products described under 

proposed § 423.120(h), and discussed 

later in this proposed rule, we propose 

to define the term ‘‘covered insulin 

product applicable cost-sharing 

amount.’’ 

Specifically, we propose to add at 

§ 423.100 a definition of ‘‘covered 

insulin product applicable cost-sharing 

amount’’ that means, with respect to a 

covered insulin product covered under 

a PDP or an MA–PD plan prior to an 

enrollee reaching the annual out-ofpocket threshold during plan year 2026 

and each subsequent plan year, the 

lesser of— 

• $35; 

• An amount equal to 25 percent of 

the maximum fair price established for 

the covered insulin product in 

accordance with Part E of subchapter XI, 

or; 

• An amount equal to 25 percent of 

the negotiated price, as defined in 

§ 423.100, of the covered insulin 

product under the PDP or MA–PD plan. 

For example, the August 15, 2024 

publication ‘‘Medicare Drug Price 

Negotiation Program: Negotiated Prices 

for Initial Price Applicability Year 

2026’’ establishes the maximum fair 

price for the covered insulin product 

Fiasp; Fiasp FlexTouch; Fiasp PenFill; 

NovoLog; NovoLog FlexPen; NovoLog 

PenFill as $119 for a 30-day supply in 

CY 2026.15 An amount equal to 25 

percent of the maximum fair price for 

this product is $29.75, which is lower 

than the cost-sharing amount of $35. 

Therefore, the covered insulin product 

applicable cost-sharing amount for 

Fiasp; Fiasp FlexTouch; Fiasp PenFill; 

NovoLog; NovoLog FlexPen; NovoLog 

PenFill would be the lesser of: (1) 

$29.75; or (2) an amount equal to 25 

percent of the negotiated price, as 

defined in § 423.100, of the covered 

insulin product under the PDP or MA– 

PD plan. 

4. Cost Sharing for Covered Insulin 

Products 

Section 1860D–2(b)(9)(A) of the Act 

specifies that for plan year 2023 and 

subsequent plan years, the deductible, 

as described in section 1860D–2(b)(1) of 

the Act, shall not apply with respect to 

any covered insulin product. Section 

1860D–2(b)(9)(B)(ii) of the Act further 

specifies that for 2025 and subsequent 

plan years, the coverage provides 

benefits for any covered insulin 

product, prior to an individual reaching 

the out-of-pocket threshold, with costsharing for a month’s supply that does 

not exceed the applicable copayment 

amount. We are proposing to codify 

these requirements at § 423.120(h)(1) 

and (2). 

In alignment with the guidance in our 

September 26, 2022 HPMS 

memorandum, we propose to interpret 

the section 1860D–2(b)(9) cost-sharing 

requirements to apply separately to each 

prescription fill that is dispensed. For a 

prescription fill dispensed in an amount 

up to a 1-month supply, $35 (or a lower 

amount specified by the sponsor) is 

considered a copayment for purposes of 

determining the ‘‘covered insulin 

product applicable cost-sharing 

amount.’’ Under our proposal, and 

consistent with our current policy in the 

September 26, 2022 HPMS 

memorandum, Part D sponsors would 

not be required to prorate the $35 

copayment if less than a 1-month 

supply is dispensed. We believe this 

proposed policy is supported by section 

1860D–2(b)(9)(D) of the Act, which does 

not explicitly require prorating the 

applicable copayment amount for less 

than a 1-month supply. It also aligns 

with current regulations because insulin 

is not a solid oral dosage form subject 

to daily cost-sharing requirements at 

§ 423.153(b)(4). Under our proposal, if 

the ‘‘covered insulin product applicable 

cost-sharing amount’’ is a coinsurance, 

the coinsurance percentage would be 


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16 Section 423.124(b) currently states that a Part 

D sponsor that provides its Part D enrollees with 

coverage other than defined standard coverage may 

require its Part D enrollees accessing covered Part 

D drugs at out-of-network pharmacies to assume 

financial responsibility for any differential between 

the out-of-network pharmacy’s (or provider’s) usual 

and customary price and the Part D sponsor’s plan 

allowance. Section 50.4.3 of Chapter 14 of the 

Medicare Prescription Drug Benefit Manual (https:// 

www.cms.gov/medicare/prescription-drugcoverage/prescriptiondrugcovcontra/downloads/ 

chapter-14-coordination-of-benefits-v09-17- 

2018.pdf) provides detailed guidance on how Part 

D sponsors must process DMR requests that are 

submitted by enrollees who paid cash at an out-ofnetwork (or an in-network) pharmacy (or provider) 

and where the pharmacy (or provider) did not 

submit claim to Part D plan. 

applied to the negotiated price 

regardless of the days’ supply 

dispensed. 

With respect to extended-day supplies 

(that is, greater than a 1-month supply) 

of covered insulin products, we are 

proposing that cost sharing must not 

exceed the cumulative ‘‘covered insulin 

product applicable cost-sharing 

amount’’ that would apply if the same 

days’ supply was dispensed in the 

fewest number of 1-month supply 

increments necessary. For example, if a 

covered insulin product is dispensed for 

greater than a 1-month supply, but less 

than a two-month supply, the lesser of 

$70 or 25 percent of MFP or negotiated 

price, whichever applies, would remain 

the maximum cost-sharing amount. 

Similarly, the lesser of $105 or 25 

percent of the MFP or negotiated price, 

whichever applies, would apply for a 

covered insulin product that is 

dispensed for greater than a two-month 

supply up to a three-month supply. If 

the ‘‘covered insulin product applicable 

cost-sharing amount’’ is a coinsurance, 

the coinsurance percentage would be 

applied to the negotiated price 

regardless of the days’ supply 

dispensed. 

While Part D sponsors must not 

charge cost-sharing that exceeds the 

‘‘covered insulin product applicable 

cost-sharing amount,’’ Part D sponsors 

may charge cost-sharing that is equal to 

or less than the ‘‘covered insulin 

product applicable cost-sharing 

amount.’’ This means that Part D 

sponsors have the flexibility to specify 

cost-sharing that is equal to or lower 

than the lesser of: a $35 copayment, or 

25 percent coinsurance based on the 

MFP (if established for such product 

under the Medicare Drug Price 

Negotiation Program for that year), or 25 

percent coinsurance based on the 

negotiated price. Part D sponsors could 

meet this cost-sharing requirement by 

establishing a copayment amount that is 

equal to or lower than $35 for a 1-month 

supply, establishing a coinsurance 

percentage that is equal to or lower than 

25 percent of the product’s MFP or 

negotiated price, or establishing both a 

copayment amount equal to or lower 

than $35 and a coinsurance percentage 

equal to or lower than 25 percent of the 

product’s MFP or negotiated price. 

In the September 26, 2022 HPMS 

memorandum, we provided guidance on 

managing out-of-network claims. We are 

now proposing that enrollees who 

submit direct member reimbursement 

(DMR) requests for covered insulin 

products accessed at either out-ofnetwork pharmacies or providers (in 

accordance with § 423.124(a) and (c)), or 

at in-network pharmacies or providers, 

must not pay more than the ‘‘covered 

insulin product applicable cost-sharing 

amount.’’ While Part D sponsors 

generally may charge the enrollee for 

the difference between the cash price 

and plan allowance for DMRs for 

covered Part D drugs accessed from both 

out-of-network and in-network 

pharmacies, neither § 423.124(b) nor 

Chapter 14 of the Prescription Drug 

Benefit Manual directly addresses 

covered Part D drugs that have 

statutorily limited cost sharing.16

Therefore, for covered insulin products 

accessed at either out-of-network 

pharmacies or providers (in accordance 

with § 423.124(a) and (c)), or at innetwork pharmacies or providers, we 

propose at § 423.120(h)(4) that the Part 

D sponsor must reimburse the enrollee 

for the full cash price paid to the 

pharmacy or provider for a covered 

insulin product minus the ‘‘covered 

insulin product applicable cost-sharing 

amount.’’ 

The total gross covered drug cost 

(TGCDC) usually is reported differently 

on prescription drug events (PDEs) 

depending on whether the drug was 

accessed at an out-of-network or innetwork pharmacy or provider. 

Specifically, Part D sponsors report the 

cash price that the enrollee paid to the 

pharmacy or provider as the TGCDC for 

out-of-network DMRs but only report 

the negotiated price as the TGCDC for 

in-network DMRs. However, we are 

clarifying here that with respect to 

covered insulin products, as an 

exception to the Chapter 14 guidance, 

the sponsor should report the cash price 

paid to the pharmacy or provider as the 

TGCDC on the PDE for both out-ofnetwork and in-network DMRs. 

Additionally, true out-of-pocket 

(TrOOP) cost accumulation for covered 

insulin products would be limited to the 

beneficiary’s cost-sharing amount, 

which cannot exceed the ‘‘covered 

insulin product applicable cost-sharing 

amount.’’ 

As described in the April 4, 2023 

HPMS memorandum, Part D sponsors 

may place covered insulin products on 

any tier, and apply utilization 

management strategies (for example, 

prior authorization and step therapy), 

insofar as such tier placement or 

utilization management strategy is 

consistent with the requirements of 

CMS’s formulary review and approval 

process under § 423.120(b). However, 

regardless of a covered insulin product’s 

tier placement or applicable utilization 

management strategy, the statutory costsharing limits under this proposed rule 

still apply. 

We propose to codify at 

§ 423.120(h)(1) and (2) that with respect 

to coverage of a covered insulin 

product, as we propose to define such 

term at § 423.100, prior to an enrollee 

reaching the annual out-of-pocket 

threshold, a Part D sponsor must not 

apply a deductible and must ensure any 

enrollee cost-sharing for each 

prescription fill up to a 1-month supply 

does not exceed the ‘‘covered insulin 

product applicable cost-sharing 

amount’’ as defined at § 423.100. We 

also propose to codify at § 423.120(h)(3) 

that Part D sponsors must ensure that 

any enrollee cost sharing for each 

prescription fill greater than a 1-month 

supply does not exceed the cumulative 

‘‘covered insulin product applicable 

cost-sharing amount,’’ that would apply 

if the same days’ supply was dispensed 

in the fewest number of 1-month supply 

increments necessary. Finally, we 

propose to codify at § 423.120(h)(4) that 

these cost-sharing requirements apply 

for covered insulin products obtained 

from either in-network and out-ofnetwork pharmacies and providers. 

C. Medicare Prescription Payment Plan 

(§§ 423.137, 423.2265, 423.2267, and 

423.2536) 

1. Background 

The Inflation Reduction Act of 2022 

(IRA) (Pub. L. 117–169) made several 

additions and amendments to the Social 

Security Act (the Act) that affect the 

structure of the defined standard Part D 

drug benefit. Section 11202 of the IRA 

(Maximum Monthly Cap on CostSharing Payments under Prescription 

Drug Plans and MA–PD Plans) added a 

new section 1860D–2(b)(2)(E) to the Act 

requiring all Medicare prescription drug 

plans to offer their Part D enrollees the 

option to pay out-of-pocket (OOP) Part 

D drug costs through monthly payments 

over the course of the plan year instead 

of at the pharmacy point of sale (POS) 

beginning January 1, 2025. 

CMS undertook consumer focus group 

testing to select a name for the program 


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17 See: Medicare Prescription Payment Plan: Final 

Part One Guidance on Select Topics, 

Implementation of Section 1860D–2 of the Social 

Security Act for 2025, and Response to Relevant 

Comments; Medicare Prescription Payment Plan: 

Final Part Two Guidance on Select Topics, 

Implementation of Section 1860D–2 of the Social 

Security Act for 2025, and Response to Relevant 

Comments. 

established at section 1860D–2(b)(2)(E) 

of the Act that would resonate with 

Medicare Part D enrollees. After 

multiple rounds of consumer testing 

fieldwork and evaluation of the results, 

CMS announced the official name of the 

program as the ‘‘Medicare Prescription 

Payment Plan.’’ We refer to the program 

herein using this name. 

Section 11202(c) of the IRA directs 

the Secretary to implement the 

Medicare Prescription Payment Plan for 

2025 by program instruction or other 

forms of program guidance. In 

accordance with the law, CMS released 

guidance establishing critical 

operational, technical, and 

communication requirements for the 

Medicare Prescription Payment Plan for 

2025. To provide Part D sponsors with 

sufficient time to implement the 

program, CMS released the guidance in 

two parts: the first addressed critical 

operational and technical requirements 

and the second addressed 

communications-related requirements.17

In order to solicit the feedback of 

interested parties, CMS initially 

published both parts as draft guidance 

and voluntarily solicited comment. 

After consideration of the comments, we 

then released final versions of each part. 

CMS released the draft part one 

guidance in August 2023, which 

covered topics such as how incurred 

OOP pharmacy costs should be recalculated into monthly billed amounts 

(‘‘program calculations’’); participant 

billing requirements; pharmacy 

payment obligations and claims 

processing; requirements related to Part 

D enrollee outreach; requirements 

related to Part D enrollee election; 

procedures for termination of election; 

reinstatement and preclusion; 

participant disputes; and data 

submission requirements. CMS also 

provided examples of the program 

calculations to help Part D sponsors 

program their claims and billing 

systems correctly for 2025. After 

consideration of comments received on 

the draft part one guidance, CMS 

released the final part one guidance 

(hereinafter referred to as ‘‘final part one 

guidance’’) in February 2024. 

CMS released the draft part two 

guidance in February 2024, which 

covered topics such as outreach, 

education, and communications 

requirements for Part D sponsors; CMS 

Part D enrollee education and outreach; 

pharmacy processes; and Part D sponsor 

operational requirements. After 

consideration of comments received on 

the draft part two guidance, CMS 

released the final part two guidance 

(hereinafter referred to as ‘‘final part two 

guidance’’) in July 2024. 

In addition to the final part one and 

final part two guidance, CMS released a 

technical memorandum in July 2023 

providing examples to demonstrate the 

calculations of the maximum monthly 

cap on cost sharing payments under the 

program in different scenarios, a second 

technical memorandum in April 2024 

providing additional examples of 

calculations that reflect IRA-related 

changes to the incurred costs that count 

toward true out-of-pocket costs 

(TrOOP), and a set of frequently asked 

questions in October 2024 providing 

clarifications on the final part one and 

final part two guidance. 

CMS also developed model and 

standardized materials to be used by 

Part D sponsors in meeting the statutory 

requirement for Part D sponsors to 

communicate with enrollees about the 

program. The materials developed by 

CMS include a model election request 

form, a model notice of election 

approval, a standardized likely to 

benefit notice, a model notice of 

voluntary termination, a model notice of 

failure to pay, and a model notice of 

involuntary termination. Where 

possible, CMS based development of the 

Medicare Prescription Payment Plan 

model materials on Part D plan 

enrollment and disenrollment notices to 

promote consistency across the Part D 

program. CMS issued the model 

materials through the Office of 

Management and Budget’s Information 

Collection Request (ICR) process and 

released final model materials in July 

2024 after consideration of public 

comments received on the ICR package. 

CMS does not have authority to 

implement the Medicare Prescription 

Payment Plan through program 

instruction authority beyond 2025. As 

such, we are pursuing rulemaking to 

codify the requirements of the program 

for 2026 and subsequent years. 

With only a few exceptions, we are 

proposing to codify, without 

modification, the requirements 

established in the final part one and 

final part two guidance at § 423.137 for 

2026 and subsequent years. Because we 

are codifying existing guidance, these 

provisions are not expected to impact 

the baseline. 

Instances where we are making 

modifications to the requirements 

previously finalized for 2025 include— 

• Proposing to modify the 

requirements for how Part D sponsors 

handle adjustments for Part D claims 

under the Medicare Prescription 

Payment Plan; and 

• Proposing to modify the timing 

requirements for the grace period and 

initial notice of failure to pay. 

We are also proposing new 

requirements for three additional topics: 

• Requirements related to year-overyear participation for existing 

participants in the Medicare 

Prescription Payment Plan and addition 

of a renewal notice to the required 

notices related to election into the 

program; 

• Requirements for the effective date 

of voluntary terminations from the 

program; 

• Requirements for Part D plans to 

provide pharmacies with easily 

accessible information on a Part D 

enrollee’s costs incurred under the 

program. 

We are also proposing to modify 

§ 423.2267(e), which lists CMS-required 

materials and content for Part D 

sponsors, to include model and 

standardized materials for the Medicare 

Prescription Payment Plan, and to 

modify the list of required content for 

Part D sponsor websites at § 423.2265 to 

include Medicare Prescription Payment 

Plan information. Finally, we are 

proposing to modify § 423.2536 to waive 

requirements related to the Medicare 

Prescription Payment Plan for the 

Limited Income Newly Eligible 

Transition (LI NET) program. 

2. Provisions of the Proposed Regulation 

(a) Basis, Scope, and General Rule 

Section 1860D–2(b)(2)(E)(i) of the Act 

requires that each PDP sponsor offering 

a prescription drug plan and each MA 

organization offering an MA–PD plan 

must provide to any enrollee of such 

plan, including an enrollee who is a 

subsidy eligible individual (as defined 

in paragraph (3) of section 1860D–14(a) 

of the Act), the option to elect, with 

respect to a plan year, to pay cost 

sharing under the plan in monthly 

amounts that are capped in accordance 

with section 1860D–2(b)(2)(E) of the 

Act. 

In the final part one guidance, CMS 

stated that, for calendar year 2025, the 

provision applies to all Part D sponsors, 

including both stand-alone PDPs and 

MA–PDs, as well as Employer Group 

Waiver Plans (EGWPs), cost plans, and 

demonstration plans. 

In the final part two guidance, CMS 

stated that while the Medicare 

Prescription Payment Plan is applicable 

to all Part D plans, it has no practical 


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18 Specifically, during any portion of the noncalendar plan year that starts in 2025 and continues 

into 2026, we intend to not expect plans operating 

on a non-calendar year basis to comply with the 

proposed modifications to the requirements for how 

Part D sponsors handle adjustments for Part D 

claims under the Medicare Prescription Payment 

Plan and the timing requirements for the grace 

period and initial notice of failure to pay. During 

any portion of the non-calendar plan year that starts 

in 2025 and continues into 2026, we also intend to 

not expect plans operating on a non-calendar year 

basis to comply with proposed new requirements 

related to year-over-year participation for existing 

participants in the Medicare Prescription Payment 

Plan and addition of a renewal notice to the 

required notices related to election into the 

program; for the effective date of voluntary 

terminations from the program; and for Part D plans 

to provide pharmacies with easily accessible 

information on a Part D enrollee’s costs incurred 

under the program. 

application for PACE participants or 

enrollees in plans that exclusively 

charge $0 cost sharing for Part D 

covered drugs. As such, CMS does not 

expect Part D plans that exclusively 

charge $0 cost sharing for covered Part 

D drugs to all plan enrollees to offer 

enrollees the option to pay their OOP 

costs through monthly payments over 

the course of the plan year or otherwise 

comply with the final part one guidance 

or the final part two guidance for 

calendar year 2025. CMS further stated 

that, if a Part D plan has any enrollees 

that could pay any cost sharing, even a 

nominal amount, under the Part D plan 

at any point during the year, then this 

clarification would not be applicable to 

such a plan. 

For the reasons articulated in the final 

part two guidance, we intend to 

continue to not expect such plans to 

offer enrollees the option to pay their 

OOP costs through monthly payments 

over the course of the plan year or 

otherwise comply with the Medicare 

Prescription Payment Plan requirements 

set forth in this proposed rule and in the 

proposed new regulation at § 423.137. 

In this proposed rule, we propose to 

codify at § 423.137(a) the rules we 

established in the 2025 guidance to 

apply to plan year 2026 and subsequent 

years and, in the case of a plan 

operating on a non-calendar year basis, 

for the portion of the plan year starting 

on January 1, 2026. CMS recognizes that 

implementing the proposed 

modifications to the requirements 

established in the final part one and 

final part two guidance and the new 

requirements in this proposed rule 

could be operationally challenging for 

plans operating on a non-calendar year 

basis to implement midway through a 

plan year. As such, we intend to not 

expect plans operating on a noncalendar year basis to comply with the 

Medicare Prescription Payment Plan 

requirements set forth in this proposed 

rule and in the proposed new regulation 

at § 423.137 to the extent that those 

requirements differ from those 

established in the final part one and 

final part two guidance during any 

portion of the non-calendar plan year 

that starts in 2025 and continues into 

2026.18 However, such plans would be 

expected to comply with all 

requirements set forth in this proposed 

rule and in the proposed new regulation 

at § 423.137 for non-calendar plan years 

beginning in 2026 and subsequent noncalendar plan years. 

In our final part one guidance, we also 

established definitions of key terms 

related to the Medicare Prescription 

Payment Plan for plan year 2025. We 

now propose to codify our existing 

definitions at § 423.137(b) for plan year 

2026 and subsequent years with certain 

clarifications. Specifically, at 

§ 423.137(b)(1), we propose to define 

‘‘OOP costs for the Medicare 

Prescription Payment Plan’’ as the cost 

sharing amount the Part D enrollee is 

directly responsible for paying. In the 

final part one and final part two 

guidance, we referred to these costs 

simply as ‘‘OOP costs.’ ’’ We propose to 

codify the more specific definition of 

‘‘OOP costs for the Medicare 

Prescription Payment Plan’’ to avoid 

confusion with other uses of the term 

OOP costs, which may be inconsistent 

with the use of that term in the final part 

one and final part two guidance. 

As described in section (b) of this 

proposed rule, the formula for 

calculating the maximum monthly cap 

differs for the first month of 

participation in the program versus the 

remaining months of the year. The cap 

for the first month for which the Part D 

enrollee has opted into the Medicare 

Prescription Payment Plan incorporates 

an enrollee’s TrOOP prior to election 

into the program. However, the 

subsequent month calculation is 

determined by calculating the sum of 

any remaining OOP costs owed by the 

participant from a previous month that 

have not yet been billed and any 

additional OOP costs for the Medicare 

Prescription Payment Plan in the 

subsequent month. As such, for the 

subsequent month calculation of the 

Part D cost sharing incurred by the Part 

D enrollee, the term ‘‘OOP costs for the 

Medicare Prescription Payment Plan’’ 

includes those Part D cost sharing 

amounts that the enrollee is responsible 

for paying after accounting for amounts 

paid by third-party payers. Specifically, 

the OOP costs for the Medicare 

Prescription Payment Plan do not 

include the covered plan pay amount or 

other TrOOP-eligible amount(s), such as 

any amount paid by potential thirdparty payers, such as State 

Pharmaceutical Assistance Programs or 

charities. Additionally, within the 

definition of OOP costs for the Medicare 

Prescription Payment Plan, we propose 

to define ‘‘remaining OOP costs owed 

by the participant’’ to be the sum of 

OOP costs for the Medicare Prescription 

Payment Plan that have not yet been 

billed to the program participant. For 

example, if a Medicare Prescription 

Payment Plan participant incurs $2,000 

in January and is billed $166.67, the 

remaining OOP costs owed by the 

participant are $2,000 ¥ $166.67 = 

$1,833.33. 

Finally, in the final part two 

guidance, CMS stated that it does not 

expect the LI NET program to offer 

enrollees the option to pay their OOP 

costs through monthly payment over the 

course of the plan year or to comply 

with the final part one guidance or final 

part two guidance for calendar year 

2025. CMS clarified that, consistent 

with the agency’s longstanding 

interpretation and implementation of 

the LI NET program, participants in the 

LI NET program are considered to be 

enrolled in a PDP. However, because the 

LI NET program is limited to offering 

Part D-eligible individuals with 

temporary coverage during a limited, 

transitional period, CMS stated it does 

not expect the LI NET program to 

comply with the requirements of the 

final part one guidance or the final part 

two guidance for calendar year 2025 in 

connection with the offering of such 

transitional coverage. Pursuant to our 

authority under section 1860D– 

14(e)(5)(B) of the Act to waive such 

requirements of title XI and title XVIII 

of the Act as may be necessary to carry 

out the purposes of the LI NET program, 

we propose to codify in this rule a 

waiver for the LI NET program with 

respect to the requirements of the 

Medicare Prescription Payment Plan for 

plan year 2026 and subsequent years. 

The LI NET program is limited to 

temporary coverage during a limited, 

transitional period and applying the 

Medicare Prescription Payment Plan to 

the LI NET program would be 

inconsistent with the purposes of such 

transitional coverage and would raise 

various operational challenges for the 

program. Accordingly, we are proposing 

to revise § 423.2536 to redesignate 

paragraphs (c) through (k) as paragraphs 

(d) through (l) and add new paragraph 

(c) to include the proposed Medicare 

Prescription Payment Plan requirements 

at § 423.137 discussed in this section to 

the list of Part D requirements waived 

for the LI NET program. In addition, we 


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Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 99357 

19 Final CY 2025 Part D Redesign Program 

Instructions: https://www.cms.gov/inflationreduction-act-and-medicare/part-d-improvements. 

are proposing to revise newly 

redesignated paragraphs § 423.2536(i)(1) 

and (i)(4) to add the materials proposed 

at §§ 423.2265(b)(16) and 

423.2267(e)(45) through (51) (discussed 

previously) to the list of communication 

requirements waived for the LI NET 

program. 

(b) Calculation of the Maximum 

Monthly Cap on Cost-Sharing Payments 

Section 1860D–2(b)(2)(E)(iv) of the 

Act specifies how the monthly caps on 

OOP cost sharing payments are to be 

calculated. The formula for calculating 

the cap differs for the first month of 

participation in the program, versus the 

remaining months of the year. The 

maximum monthly cap calculations 

include specifics of a participant’s Part 

D drug costs (previously incurred costs 

and new OOP costs), as well as the 

number of months remaining in the plan 

year; as such, the amount can vary from 

person-to-person and month-to-month. 

Assuming a program participant 

remains in the Medicare Prescription 

Payment Plan through the end of the 

plan year, the total amounts billed 

monthly through the December payment 

(which would be billed and paid in the 

following year) will equal the total OOP 

costs for the Medicare Prescription 

Payment Plan during the year. 

Under section 1860D–2(b)(2)(E)(iv)(I) 

of the Act, for the first month for which 

the Part D enrollee has opted into the 

Medicare Prescription Payment Plan, 

the term ‘‘maximum monthly cap’’ 

means an amount calculated by taking 

the annual OOP threshold minus any 

Part D costs the Part D enrollee incurred 

during the year before opting into the 

program, divided by the number of 

months remaining in the plan year. The 

number of months remaining in the plan 

year includes the current reference 

month (for example, for a calendar year 

plan, the months remaining in the 

calculation for the January maximum 

cap would be 12). 

Additionally, incurred costs for the 

Medicare Prescription Payment Plan (as 

used in the statutory definition of the 

first month’s maximum cap calculation) 

means the incurred costs, with the 

meaning set forth at section 1860D– 

2(b)(4)(C) of the Act and described in 

section 30 of the Final CY 2025 Part D 

Redesign Program Instructions (Final 

2025 Program Instructions), that were 

incurred prior to effectuation of an 

election into the Medicare Prescription 

Payment Plan, including all TrOOPeligible costs.19 If election into the 

program occurs mid-month, this would 

include Part D costs incurred within the 

calendar month of election but prior to 

election. 

Under section 1860D–2(b)(2)(E)(iv)(II) 

of the Act, for each subsequent month 

for which the Part D enrollee has opted 

into the program, the maximum 

monthly cap is determined by 

calculating the sum of any remaining 

OOP costs owed by the participant from 

a previous month that have not yet been 

billed and any additional OOP costs for 

the Medicare Prescription Payment Plan 

in the subsequent month, divided by the 

number of months remaining in the plan 

year. The number of months remaining 

includes the month for which the cap is 

being calculated. This calculation 

repeats for each month in which the 

participant remains in the Medicare 

Prescription Payment Plan. The 

resulting maximum monthly cap will 

change if additional OOP costs for the 

Medicare Prescription Payment Plan are 

incurred. 

Under section 1860D–2(b)(4)(B)(i)(VII) 

of the Act, the annual OOP cost 

threshold for 2025 is $2,000. Under 

section 1860D–2(b)(4)(B)(i)(VII) of the 

Act, for 2026 and subsequent years, the 

annual OOP cost threshold is equal to 

the amount specified for the previous 

year, increased by the annual percentage 

increase described in section 1860D– 

2(b)(6). ‘‘Incurred costs’’ means any 

costs incurred or treated as incurred 

under section 1860D–2(b)(4)(C) of the 

Act. 

In the final part one guidance, we 

established standards for calculating the 

maximum monthly cap for the Medicare 

Prescription Payment Plan. The 

participant will not have any monthly 

bills to pay under this program until 

opting into the program and incurring 

OOP costs for covered Part D drugs. 

Once a participant incurs an OOP Part 

D drug cost, all their OOP costs for all 

covered Part D drugs will be billed on 

a monthly basis as long as the 

participant remains in the program. 

Program calculations apply to all OOP 

costs for the Medicare Prescription 

Payment Plan, including those in the 

deductible phase. Part D sponsors must 

include all covered Part D drugs in the 

program. However, non-covered drugs 

are excluded. Part D sponsors are 

responsible for correctly calculating the 

monthly caps based on the statutory 

formulas, determining the amount to be 

billed (not to exceed the cap), and 

sending monthly bills to program 

participants. 

In the final part one guidance, we also 

established that opting into the program 

will not impact how a program 

participant moves through the Part D 

benefit or what counts towards their 

TrOOP costs. Under section 1860D– 

2(b)(4)(F) of the Act, a participant’s 

TrOOP-eligible costs under the 

Medicare Prescription Payment Plan 

will still be treated as incurred based on 

the date each Part D claim is 

adjudicated. Opting into the program 

only provides participants with the 

ability to spread OOP costs over the 

year—the total incurred costs and the 

timing of TrOOP accumulation do not 

change. 

In the final part one guidance, we also 

established standards for how to 

incorporate extended day supplies of 

medications in the calculations. For 

participants who fill prescriptions for an 

extended day supply, their OOP costs 

for those prescriptions will be attributed 

to the month the prescription was filled 

and will not be pro-rated over the 

months covered by the prescription. For 

example, if a participant in the program 

has $300 in OOP costs for the Medicare 

Prescription Payment Plan for a 90-day 

supply dispensed in January, the full 

$300 will be counted as incurred in 

January. 

In addition, we stated that when an 

individual opts into the Medicare 

Prescription Payment Plan during the 

plan year, the individual’s incurred 

costs used to calculate the first month 

maximum cap are equal to the 

individual’s accumulated TrOOP before 

opting into the program. If election into 

the program occurs mid-month, this 

would include Part D costs incurred 

within the calendar month of election 

but prior to election (refer to example 

B4 in Appendix B of the final part one 

guidance for an illustration of a midmonth election). The number of months 

remaining in the plan year includes the 

month when an individual opts into the 

program. When an individual opts into 

the Medicare Prescription Payment Plan 

prior to the start of the plan year (such 

as during open enrollment), the first 

month maximum monthly cap 

calculation applies to their first month 

of active coverage within the plan year. 

The final part one guidance also 

stated that in scenarios where the OOP 

costs for the Medicare Prescription 

Payment Plan in the first month of 

participation in the program are less 

than the maximum monthly cap, a Part 

D sponsor cannot bill the participant 

more than their actual incurred OOP 

costs. Specifically, a Part D sponsor 

must bill the participant the lesser of the 

participant’s OOP costs for the Medicare 

Prescription Payment Plan or the first 

month’s maximum monthly cap. 

Section 1860D–2(b)(2)(E)(iv)(I) of the 

Act clearly states that the first month 

maximum cap calculation applies to the 


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first month an enrollee has elected to 

participate in the Medicare Prescription 

Payment Plan; in scenarios in which a 

participant incurs $0 in OOP costs for 

the Medicare Prescription Payment Plan 

in the first month, the Part D sponsor 

must not bill the participant for the first 

month and would use the subsequent 

month maximum monthly cap 

calculation for all succeeding months in 

the year in which the participant 

remains in the program. 

Finally, the final part one guidance 

established that ‘‘OOP costs’’ (defined as 

‘‘OOP costs for the Medicare 

Prescription Payment Plan’’ for the 

purposes of this rule) refers only to the 

patient pay portion for covered Part D 

drugs that a program participant would 

have paid at the POS if they had not 

opted into the Medicare Prescription 

Payment Plan, not to all incurred costs 

as defined under section 1860D– 

2(b)(4)(C) of the Act. For these 

calculations, the OOP costs for the 

Medicare Prescription Payment Plan do 

not include the covered plan paid 

amount or amounts paid by third 

parties, such as qualified State 

Pharmaceutical Assistance Programs 

(SPAPs) or charities. OOP costs for the 

Medicare Prescription Payment Plan 

also do not include any amounts paid 

by enrollees for monthly premiums. 

In this proposed rule, we propose to 

codify the standards we established in 

the final part one guidance for plan year 

2026 and subsequent years at 

§ 423.137(c). 

(c) Eligibility and Election 

Under section 1860D–2(b)(2)(E)(i) of 

the Act, Part D sponsors must provide 

the option to opt into the Medicare 

Prescription Payment Plan to all Part D 

enrollees, including enrollees who are 

eligible for the Low-Income Subsidy 

(LIS). For 2026 and subsequent years, 

we propose to codify the statutory 

requirement that Part D sponsors must 

offer the program to all Part D enrollees, 

including those who are LIS eligible, at 

§ 423.137(d). 

In the final part one guidance, we 

explained that while the statute requires 

that an LIS enrollee must have the 

option to become a Medicare 

Prescription Payment Plan participant, 

individuals with low, stable drug costs 

(such as LIS enrollees) are not likely to 

benefit from the program. Further, LIS 

enrollment, for those who qualify, is 

more advantageous than participation in 

the Medicare Prescription Payment 

Plan. We are aware that there may be 

limited circumstances in which an LIS 

enrollee would benefit from 

participation in the Medicare 

Prescription Payment Plan, but, in 

general, participation in the Medicare 

Prescription Payment Plan is unlikely to 

benefit LIS enrollees. It is important that 

Part D sponsors inform any individual 

interested in the Medicare Prescription 

Payment Plan of potential eligibility for 

the LIS program. In this rule, for 2026 

and subsequent years, we propose to 

require Part D sponsors to include 

information on the availability of the 

LIS program and other financial 

assistance programs in the electionrelated materials described at proposed 

§ 423.137(d)(10) with the goal of alerting 

Part D enrollees to the availability of 

these programs that can lower costs. 

In addition, under section 1860D– 

2(b)(2)(E)(v)(III)(aa) of the Act, Part D 

sponsors may not restrict the 

application of the Medicare Prescription 

Payment Plan benefit to specific covered 

Part D drugs. To minimize potential 

confusion and operational challenges, in 

the final part one guidance, we stated 

that for 2025, once an individual has 

opted into the program, OOP cost 

sharing for all covered Part D drugs 

must be included in program bills until 

the participant reaches the OOP 

threshold, opts out of the Medicare 

Prescription Payment Plan, or is 

terminated from the Medicare 

Prescription Payment Plan due to failure 

to pay. The program must apply to all 

of a program participant’s prescriptions 

for covered Part D drugs. We propose to 

codify this requirement for 2026 and 

subsequent years at § 423.137(d)(5). 

Section 1860D–2(b)(2)(E)(v)(II) of the 

Act states that a Part D enrollee may opt 

into the Medicare Prescription Payment 

Plan prior to the beginning of the plan 

year or in any month during the plan 

year. In the final part one guidance, we 

established requirements for a process 

for enrollees to opt into the Medicare 

Prescription Payment Plan in 2025, 

consistent with the statutory 

requirement cited previously. The final 

part one guidance set forth the following 

requirements for 2025: 

• Part D sponsors must allow Part D 

enrollees to opt into the Medicare 

Prescription Payment Plan prior to the 

plan year (including the Annual 

Election Period for the subsequent plan 

year, the Part D initial enrollment 

period, and Part D special election 

periods) or at any point during the plan 

year. 

• Part D sponsors must allow Part D 

enrollees to opt into the Medicare 

Prescription Payment Plan after the 

conclusion of an enrollment period and 

before the new plan enrollment effective 

date (for example, an enrollee could opt 

into the program for the upcoming plan 

year after the conclusion of the Annual 

Election Period and in advance of the 

January 1 new plan enrollment effective 

date). 

In this proposed rule, for 2026 and 

subsequent years, we propose to codify 

these requirements at § 423.137(d)(4)(1). 

In the final part one guidance, we also 

established requirements for election 

into the program in 2025, which were 

designed to reduce administrative 

burden by aligning with existing 

requirements and procedures for Part D 

plan enrollment and to provide a 

uniform experience for Part D enrollees 

by reducing potential variation in 

program administration across Part D 

plans. We required the Part D enrollee, 

or their authorized legal representative, 

to complete an election request, provide 

the required information to the Part D 

sponsor, and be approved by the Part D 

sponsor to opt into the Medicare 

Prescription Payment Plan. Part D 

sponsors must have the following 

mechanisms available to Part D 

enrollees who wish to opt into the 

Medicare Prescription Payment Plan: 

• A paper election request form that 

can be mailed. 

• A toll-free telephone number that 

must provide the individual with 

evidence the election request was 

received (for example, a confirmation 

number). 

• A website application that must 

provide the individual with evidence 

the election request was received (for 

example, a confirmation number). 

Part D sponsors must consider 

Medicare Prescription Payment Plan 

election requests regardless of the 

election mechanism or format (for 

example, a handwritten letter). For an 

election request to be considered 

complete, the Part D sponsor must 

receive the name of the Part D enrollee, 

their Medicare ID number, and the 

signature (or verbal attestation, in the 

case of telephonic requests) 

of the Part D enrollee or their 

authorized legal representative 

validating that the requestor 

understands and accepts the Part D 

sponsor’s terms and conditions for the 

program. In this proposed rule, for 2026 

and subsequent years, we propose to 

codify these requirements at 

§§ 423.137(d)(2) and 423.137(d)(3). 

We are committed to ensuring that 

Part D enrollees, once they request to 

participate, are able to access the 

benefits of the program as timely as 

possible and recognize the importance 

of timely access to prevent enrollees 

from not filling prescriptions due to 

affordability challenges. To that end, we 

requested comment in the draft part one 

guidance on real-time or POS election 

approaches that would require Part D 

sponsors to effectuate election into the 


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Medicare Prescription Payment Plan 

without any delay or with only a 

nominal delay between the election 

request and effectuation. As we clarified 

in the final part one guidance, real-time 

election refers to a process that would 

enable a Part D enrollee to request 

election and be effectuated into the 

program in one instance from any 

setting (and so is not limited to only the 

pharmacy POS setting). POS election, 

rather, is limited to the pharmacy POS 

setting and would require updates to 

pharmacies’ claims processing systems. 

In response to the request for 

comment in the draft part one guidance, 

many commenters expressed support for 

real-time election, noting that it would 

prevent dispensing delays and 

prescription abandonment. However, 

due to a number of policy and 

operational barriers and the restricted 

lead-up time to the statutory 

implementation date of January 1, 2025, 

we did not require real-time or POS 

election for 2025. In the final part one 

guidance for 2025, we required a 24- 

hour effectuation timeframe for election 

requests made during the plan year, to 

reduce the likelihood of dispensing 

delays and prescription abandonment 

while reducing operational burden for 

plans and pharmacies. Specifically, we 

stated that when a Part D sponsor 

receives a program election request for 

the next, upcoming plan year (or in 

advance of a new plan enrollment 

effective date during a plan year) 

through either an election request form 

or through other means, the Part D 

sponsor must process the request within 

10 calendar days of receipt, or the 

number of calendar days before the plan 

enrollment starts, whichever is shorter. 

When a current Part D enrollee requests 

to opt into the Medicare Prescription 

Payment Plan during the plan year, Part 

D sponsors must process the election 

request within 24 hours. 

Since publication of the final part one 

guidance, we have conducted extensive 

outreach with a variety of stakeholders 

and conducted in-depth research to 

assess the feasibility of real-time or POS 

election options for 2026 or future years. 

Our research indicates that there is no 

mechanism for program election 

information to be passed through the 

current National Council for 

Prescription Drug Programs (NCPDP) 

Telecommunication Standard and easily 

integrated into Part D sponsor and/or 

pharmacy benefit manager (PBM) 

systems; updates to current standards 

would also be needed to support POS 

election. These updates would require 

significant lead time and coordination 

with industry standards committees that 

have existing processes and timelines 

outside of CMS’s purview. However, 

real-time election (facilitated by Part D 

sponsors outside of the POS) is 

operationally feasible and need not 

involve changes to the current 

Telecommunication Standard; in fact, 

some Part D sponsors have indicated to 

CMS that they plan to offer real-time 

election to their enrollees in 2025. We 

also note that real-time election 

facilitated by Part D sponsors could still 

take place at the POS; for example, an 

individual who receives the ‘‘Medicare 

Prescription Payment Plan Likely to 

Benefit Notice’’ while picking up a highcost prescription could step away from 

the pharmacy counter to call their Part 

D plan or submit an online election 

request, and then return to the counter, 

request that the pharmacist re-process 

the claim, and pay $0 at POS for the 

prescription. 

In this rule, for 2026 and subsequent 

years, we propose to codify the 24-hour 

effectuation requirement at 

§ 423.137(d)(4), but request comment on 

a potential requirement for Part D 

sponsors to effectuate election requests 

received via phone or web in real-time 

for 2026 or future years. In particular, 

we are interested in the operational 

feasibility of implementing a real-time 

election requirement for 2026, what 

technology and processes would be 

required to enable a real-time election 

requirement for 2026, implications for 

Part D enrollees, and potential burden 

on interested parties. We are also 

interested in opportunities for 

pharmacists to support enrollees in 

using any future Part D sponsoradjudicated real-time election 

mechanisms at the POS. 

In the final part two guidance, we 

stated that for 2025, paper election 

requests are considered received on the 

date and time— 

• The Part D sponsor initially stamps 

a document received by regular mail 

(that is, U.S. Postal Service); or 

• A delivery service that has the 

ability to track when a shipment is 

delivered (for example, U.S. Postal 

Service, UPS, FedEx, or DHL) delivers 

the document. 

A telephonic election request is 

considered received on the date and 

time: 

• The verbal request is made by 

telephone with a customer service 

representative; or 

• A message is left on the Part D 

sponsor’s voicemail system if the Part D 

sponsor utilizes a voicemail system to 

accept requests or supporting statements 

after normal business hours. 

An electronic election request is 

considered received on the date and 

time a request is received through the 

Part D sponsor’s website and/or portal. 

This is true regardless of when a Part D 

sponsor ultimately retrieves or 

downloads the request. In this rule, for 

2026 and subsequent years, we propose 

to codify these processing time 

requirements at § 423.137(d)(2). 

In the final part one guidance, we 

stated that in 2025, if a Part D sponsor 

receives an election request that does 

not have all necessary elements required 

to consider it complete, the sponsor 

must not immediately deny the request. 

For requests received prior to the plan 

year, the Part D sponsor must contact 

the individual to request the additional 

documentation necessary to process the 

request within 10 calendar days of 

receipt of the incomplete election 

request. For requests received during 

the plan year, the Part D sponsor must 

contact the individual to request the 

additional documentation necessary to 

process the request within 24 hours of 

receipt of the incomplete election 

request. Additional documentation to 

make the program election request 

complete must be received by the Part 

D sponsor within 21 calendar days of 

the request for additional information. 

The Part D sponsor may deny the 

election request if the requisite 

information is not received from the 

individual in that timeframe. If a Part D 

enrollee has fulfilled all program 

election requirements, but the Part D 

sponsor is unable to process the election 

into the program in the required amount 

of time due to no fault of the individual, 

the Part D sponsor must process a 

retroactive election back to the original 

date when the individual should have 

been admitted into the Medicare 

Prescription Payment Plan (that is, 

within 24 hours of the individual 

providing the requisite information for 

election into the program). In addition, 

the Part D sponsor must reimburse the 

participant for any OOP cost sharing 

paid on or after that date and include 

those amounts, as appropriate, in a 

monthly bill under the program within 

45 calendar days. In this rule, for 2026 

and subsequent years, we propose to 

codify these requirements for how Part 

D sponsors must process program 

election requests, including timing and 

notice requirements, procedures for 

collecting missing information on 

election requests, and requirements for 

retroactive election in the event the Part 

D sponsor fails to process an election 

within 24 hours at § 423.137(d)(4). 

Section 423.137(d)(4)(i) includes 

proposed requirements for processing 

election requests made prior to the plan 

year, and § 423.137(d)(4)(ii) includes 

proposed requirements for processing 


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20 Refer to Medicare Prescription Drug Benefit 

Manual; Chapter 13—Premium and Cost-Sharing 

Subsidies for Low-Income Individuals. 

election requests made during the plan 

year. 

In the final part one guidance, we also 

included requirements for Part D 

sponsors to process retroactive election 

requests in cases where an enrollee 

cannot have immediate election into the 

program and believes that any delay in 

filling a prescription due to the 24-hour 

timeframe required to process a program 

election request may seriously 

jeopardize their life, health, or ability to 

regain maximum function and so must 

pay out-of-pocket to the pharmacy. In 

the final part one guidance, we state that 

in this situation in 2025, the enrollee 

must request retroactive election within 

72 hours of the date and time when the 

claim was adjudicated. In this rule, for 

2026 and subsequent years, we propose 

to codify these requirements at 

§ 423.137(d)(6). These requirements 

ensure that enrollees can participate in 

the program in cases where they believe 

that a delay in filling a prescription 

would seriously jeopardize their life, 

health, or ability to regain maximum 

function and can be reimbursed for 

costs they paid for the prescription 

before being effectuated in the program. 

At § 423.137(d)(7), for 2026 and 

subsequent years, we propose to codify 

requirements for Part D sponsors to 

develop standardized procedures for 

determining and processing 

reimbursements for excess program 

payments made by participants who 

become LIS eligible, consistent with the 

final part one guidance for 2025. CMS 

regulations at 42 CFR 423.800(c) apply 

to all subsidy eligible individuals and 

require Part D sponsors to reimburse 

subsidy-eligible individuals, and any 

organizations paying cost sharing on 

behalf of such individuals, any excess 

premium or OOP cost sharing paid by 

the individual or organization after the 

effective date of the individual’s 

eligibility for a subsidy. This 

requirement applies to any OOP cost 

sharing paid under the Part D benefit, 

including cost sharing paid by or on 

behalf of an enrollee who has 

participated in the Medicare 

Prescription Payment Plan. Under the 

timeframes specified at 42 CFR 

423.800(e) and 423.466(a), Part D 

sponsors must process retroactive 

claims and premium adjustments for 

LIS-eligible individuals and make any 

resulting refunds and recoveries within 

45 calendar days of the Part D sponsor’s 

receipt of complete information 

regarding these adjustments.20 These 

same requirements apply to enrollees 

who have elected into the Medicare 

Prescription Payment Plan and later 

become LIS-eligible. 

Section 1860D–2(b)(2)(E)(v)(II) of the 

Act requires Part D sponsors to offer the 

Medicare Prescription Payment Plan to 

all Part D enrollees in any month during 

the year. At § 423.137(d)(8), for 2026 

and subsequent years, we propose to 

codify requirements for mid-year plan 

switches, consistent with the 

requirements included in the final part 

one guidance for 2025. If a Part D 

enrollee who opted into the Medicare 

Prescription Payment Plan switches 

plans (Plan Benefit Package (PBP)) 

during the plan year or is reassigned by 

CMS, regardless of whether the new 

plan is offered by the same or a different 

Part D sponsor, the Part D sponsor of the 

prior Part D plan must offer the 

participant the option to repay the full 

outstanding amount in a lump sum. If 

the individual chooses to continue 

paying monthly, the Part D sponsor 

must continue to bill the participant 

monthly based on the participant’s 

accrued OOP costs while in the program 

under that sponsor’s Part D plan. The 

Part D sponsor cannot require full 

immediate repayment. 

The Part D sponsor is not permitted 

to automatically sign up the individual 

for the Medicare Prescription Payment 

Plan under the new plan. However, an 

individual must be able to opt into the 

program regardless of whether they had 

participated in the program under the 

prior plan. If an individual opts into the 

Medicare Prescription Payment Plan 

under their new plan after switching 

plans mid-year, the new Part D sponsor 

must calculate the individual’s monthly 

cap for the first month of participation 

under the new plan using the formula 

for the calculation of the maximum 

monthly cap in the first month. This is 

the case even when the first plan and 

the second plan are administered by the 

same Part D sponsor. 

As outlined in section (e) of this 

proposed rule, preclusion is only 

permitted in plans that are offered by 

the same Part D sponsor and may extend 

beyond the immediately subsequent 

plan year if a Part D enrollee remains in 

a plan offered by the same Part D 

sponsor and continues to owe an 

overdue balance. If an individual pays 

off the outstanding balance during a 

subsequent year, the enrollee is eligible 

to request to participate in the Medicare 

Prescription Payment Plan program 

again. 

At § 423.137(d)(9), for 2026 and 

subsequent years, we propose to codify 

requirements related to participation 

renewal year-over-year, a topic CMS did 

not address in the final part one or final 

part two guidance because the IRA 

limited CMS program instruction for a 

single year of the program (CY 2025). To 

streamline the process for Part D 

enrollees and Part D sponsors, we 

propose an automatic election renewal 

process, wherein program participation 

continues into the next upcoming year 

automatically, provided the participant 

remains in the same PBP in the 

upcoming year, unless the program 

participant indicates otherwise. If an 

enrollee is switching Part D plans, 

including switching between two PBPs 

offered by the same Part D sponsor, the 

automatic election renewal process 

would not apply. We propose requiring 

Part D sponsors to send a notice alerting 

the Part D enrollee that their 

participation in the program will 

continue into the next year unless they 

indicate that they would like to opt out 

for the upcoming year. This notice 

would be required to be sent out to 

program participants by the end of the 

Annual Election Period (no later than 

December 7) and must include the Part 

D sponsor’s program terms and 

conditions for the upcoming year. This 

proposed automatic renewal process 

reduces burden for Part D enrollees who 

would like to remain in the program, as 

they would not need to complete 

additional paperwork to renew their 

election, and it is consistent with 

automatic renewal of Part D plan 

enrollment, which provides a seamless 

experience for Part D enrollees. 

Automatic renewal also entails less 

administrative burden for Part D 

sponsors, as they are not required to 

process full election request forms again 

for program participants and would not 

be required to perform ‘‘likely to 

benefit’’ analyses (see section (d) of this 

proposed rule) for the upcoming plan 

year on program participants. CMS also 

considered requiring Part D enrollees to 

actively re-elect into the program each 

year. Under this approach, Part D 

sponsors would be required to terminate 

an enrollee’s participation at the end of 

the contract year and the enrollee would 

be required to opt back into the program 

(with the standard election request form 

or a streamlined renewal form) in order 

to participate in the following year. 

CMS opted to propose the automatic 

election renewal, because the alternative 

active re-election process places 

additional burden on both Part D 

enrollees and Part D sponsors. In 

addition, this approach is consistent 

with the existing Part D enrollment 

process, which automatically renews 

each year. We request comment on the 

proposal for automatic election renewal, 

including the process for enabling 


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automatic election and associated 

notification requirements. 

In the final part two guidance, we 

addressed program election 

communications and notice 

requirements for Part D sponsors, 

including timing, content, and 

supplemental information requirements 

for each required notice in 2025. We 

required Part D sponsors to make an 

election request form available 

throughout the plan year and during the 

Part D plan enrollment periods. 

Part D sponsors must send a paper 

election request form within the same 

timeframe as the membership ID card 

mailing specified at 42 CFR 

423.2267(e)(32)(i). 

The election request form may be sent 

in the membership ID card mailing, or 

in a separate mailing in the same 

timeframe. The election request form 

must include all of the following: 

• Fields for the Part D enrollees’ first 

and last name, Medicare Number, birth 

date, phone number, permanent 

residence street address, and mailing 

address, if different from permanent 

residence street address. 

• A signature field, allowing the 

enrollee to attest that they understand— 

++ That the form is a request to 

participate in the Medicare Prescription 

Payment Plan, and the Part D sponsor 

will contact them if more information is 

needed to complete the request; 

++ That by signing the form, they 

have read and understood the form and 

the Part D sponsor’s terms and 

conditions; and 

++ That the Part D sponsor will 

inform the individual when their 

participation in the program is active, 

and, until the individual receives that 

notification, that they are not a 

participant in the program. 

• Instructions for how to submit the 

form to the Part D sponsor. 

• Instructions for how the Part D 

enrollee can contact the Part D sponsor 

for questions or assistance. 

A Part D sponsor may include the 

program terms and conditions on the 

election request form or may include 

them on a separate attachment. In this 

rule, we propose to codify these 

requirements for 2026 and subsequent 

years at § 423.137(d)(10)(i). 

Once a program election request is 

accepted by the Part D sponsor, the Part 

D sponsor must communicate to the Part 

D enrollee that the request to participate 

in the Medicare Prescription Payment 

Plan has been accepted and effectuated 

via written notice of election approval, 

within the timeframes described at 

§ 423.137(d)(10)(ii)(A). For requests 

received prior to the plan year, Part D 

sponsors are required to send the 

written notice of election approval 

within the timeframe described at 

§ 423.137(d)(10)(ii)(A)(1). For requests 

received during the plan year, regardless 

of how the Part D enrollee submitted the 

election request (paper, telephone, or 

electronic), the Part D sponsor must 

deliver the notice of election approval 

within the timeframe described at 

§ 423.137(d)(10)(ii)(A)(2) first 

telephonically and then via a written 

notice. The call must include the 

required elements for the notice of 

election approval described at 

§ 423.137(d)(10)(ii)(B). The Part D 

sponsor must then deliver the written 

notice of election approval to the 

program participant either via mail or 

electronically, depending on the 

participant’s preferred and authorized 

communication method, within 3 

calendar days of delivering the initial 

telephone notice. 

If a Part D sponsor is processing an 

election request over the phone and is 

able to confirm in that phone call that 

the election request is approved and the 

Part D enrollee’s participation is active, 

that same phone call can serve to meet 

the acceptance of election telephone 

notification requirement. Similarly, if an 

electronic election request is approved 

and effectuated in real time and the Part 

D sponsor is able to provide a digital 

confirmation of program participation, 

the Part D sponsor is not required to 

also deliver the notice of election 

approval via phone call. In either case, 

the Part D sponsor must still deliver the 

written notice within 3 calendar days. 

In the final part two guidance, we set 

forth requirements for Part D plan 

sponsors related to the contents of the 

notice of election approval in 2025. The 

notice of election approval must 

include— 

• The effective date of the 

individual’s participation; 

• A description of how payments for 

covered Part D drugs under the program 

will work, including that the individual 

will pay $0 to the pharmacy for covered 

Part D drugs and the Part D plan will 

bill the individual each month; 

• An overview of how the monthly 

bill is calculated, including a statement 

on how monthly bills may change each 

month, and a statement outlining that 

under the program, the individual will 

not pay more for covered Part D drugs 

than they would have paid without the 

program or more than the Medicare Part 

D annual out-of-pocket maximum; 

• Information about procedures for 

involuntary termination due to failure to 

pay and how to submit an inquiry or file 

a grievance, as well as a statement 

informing the individual that they can 

voluntarily leave the program at any 

time; 

• A statement describing that leaving 

the Medicare Prescription Payment 

Plan, either involuntarily or voluntarily, 

will not affect the individual’s Medicare 

Part D coverage with the Part D plan; 

• A description of how if an 

individual leaves the program, they may 

still owe a program balance, they can 

pay the balance all at once or be billed 

monthly, and they will resume paying 

the pharmacy directly for their Part D 

prescriptions after leaving the program; 

and 

• An overview of other Medicare 

programs that can help lower costs, 

including Extra Help, the Medicare 

Savings Program, the State 

Pharmaceutical Assistance Program, and 

the Manufacturer’s Pharmaceutical 

Assistance Program, and how to learn 

more about these programs. 

In this rule, we propose to codify 

these requirements for 2026 and 

subsequent years at § 423.137(d)(10)(ii). 

Part D sponsors are required to send 

a notice of denial upon denial of an 

election request. In the final part one 

guidance, we set forth the following 

requirements for 2025. For requests 

received prior to the plan year, the 

notice of denial must be sent within 10 

calendar days of receipt of the election 

request. For requests received during 

the plan year, the notice of denial must 

be sent within 24 hours of receipt of the 

election request. For incomplete 

election requests, the notice of denial 

must be sent within 10 calendar days of 

the expiration of the timeframe for 

submission of additional information. 

Finally, the notice of denial must 

explain the reason for denial and 

provide a description of the grievance 

process available to the individual. In 

this rule, for 2026 and subsequent years, 

we propose to codify these requirements 

at § 423.137(d)(10)(iii). 

For 2026, we also propose to require 

Part D sponsors to send a renewal notice 

alerting the program participant that 

their participation in the program will 

continue into the next year unless they 

indicate that they would like to opt out 

for the upcoming year. This notice 

would be required to be sent out to 

program participants by the end of the 

AEP (no later than December 7) and 

must include the Part D sponsor’s 

program terms and conditions for the 

upcoming year and a reminder that the 

participant may opt out of the program 

at any time, including for the upcoming 

plan year. 

In this rule, for 2026 and subsequent 

years, we propose to codify these 

requirements at § 423.137(d)(10)(iv) and 

to add the election request form, notice 


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of election approval, and renewal notice 

as required materials and content for 

Part D sponsors at § 423.2267(e)(45), 

(e)(46) and (e)(51). 

CMS issued model materials that Part 

D enrollees can use to fulfill the election 

request and election approval 

requirements through the Medicare 

Advantage and Prescription Drug 

Programs: Part C and Part D Medicare 

Prescription Payment Plan Model 

Documents (CMS–10882; OMB 0938– 

1475) ICR package. As established in 

§ 423.2267(c), model materials and 

content are required materials and 

content created by CMS as an example 

of how to convey beneficiary 

information. If Part D sponsors choose 

to not use a CMS-developed model 

version of a particular required material 

or content, they must still accurately 

convey the vital information in the 

required material or content to the 

beneficiary. 

For the required program election 

request form that CMS proposes to 

codify at § 423.2267(e)(45), this means 

that a Part D sponsor who chooses to 

develop their own form must include or 

provide all of the elements outlined at 

§ 423.137(d)(10)(i)(B). For the notice of 

election approval that CMS proposes to 

codify at (e)(46), a Part D sponsor who 

chooses to develop their own notice 

must include all of the elements 

outlined at § 423.137(d)(10)(ii)(B). 

Finally, for the renewal notice that CMS 

proposes to codify at (e)(51), a Part D 

sponsor who chooses to develop their 

own notice must include all of the 

elements outlined at 

§ 423.137(d)(10)(iv)(B). These 

notification and content requirements 

are consistent with the requirements 

outlined in the final part two guidance 

for 2025, with the exception of the 

renewal notice, which was not included 

in the program instructions. 

Additionally, Part D sponsors are 

required to furnish additional 

educational information on the 

Medicare Prescription Payment Plan 

with the election request form and the 

notice of acceptance. Part D sponsors 

are encouraged to use the CMSdeveloped program fact sheet available 

on Medicare.gov to satisfy these 

requirements. If the Part D sponsor 

develops and uses alternative 

informational materials in lieu of the 

CMS-developed fact sheet to satisfy 

these requirements, they must ensure 

that these alternative materials 

accurately convey program information 

and are compliant with existing Part D 

requirements specified at 42 CFR part 

423 subpart V. In this rule, for 2026 and 

subsequent years, we propose to codify 

this requirement at 

§ 423.137(d)(10)(i)(C) and 

423.137(d)(10)(ii)(C). 

(d) Part D Enrollee Targeted Outreach 

The statute establishes that some Part 

D enrollees will incur OOP costs that 

make them likely to benefit from 

election into the Medicare Prescription 

Payment Plan. As stated in the final part 

one guidance for 2025, by ‘‘likely to 

benefit,’’ we generally mean that a 

participant’s monthly costs would be 

lower under the program compared to 

any single monthly amount they would 

have had to pay at the pharmacy 

without the program. We acknowledge, 

however, that individuals may consider 

a number of other factors in determining 

whether they, personally, would benefit 

from the program. 

While this program is open to all Part 

D enrollees, Part D enrollees incurring 

high OOP costs earlier in the plan year 

are generally more likely to benefit. 

Section 1860D–2(b)(2)(E)(v)(III)(dd) of 

the Act requires that Part D sponsors 

have a mechanism in place to notify a 

pharmacy when a Part D enrollee incurs 

OOP costs with respect to covered Part 

D drugs that make it likely the enrollee 

may benefit from participating in the 

program. 

CMS recognizes, however, that 

notification of Part D enrollees likely to 

benefit from the Medicare Prescription 

Payment Plan prior to reaching the 

pharmacy POS will be a critical 

component to program success. Early 

notification will streamline the election 

process and prevent potential drug 

dispensing delays. As such, in addition 

to the statutory requirement for 

pharmacy POS notification (as outlined 

in section 1860D–2(b)(2)(E)(v)(III)(dd) of 

the Act), in the final part two guidance, 

CMS also established requirements for 

2025 for Part D sponsors to undertake 

targeted outreach, both prior to and 

during the plan year, directly to Part D 

enrollees likely to benefit from the 

program. 

While the statute requires a likely to 

benefit notification, it does not outline 

the specific criteria or define the profile 

of someone who is likely to benefit 

under the program. In the final part one 

guidance, CMS developed a 

standardized, quantitative framework 

for assessing ‘‘likely to benefit,’’ which 

was used to inform targeted outreach 

requirements both prior to and during 

the plan year. However as noted 

previously, CMS recognizes that an 

individual Part D enrollee may find that 

they would personally benefit from the 

program even if they would not be 

identified as likely to benefit under this 

particular standardized framework. 

Those individuals are certainly 

permitted to opt into the program, as are 

all Part D enrollees. The definition and 

framework for ‘‘likely to benefit’’ 

described in the final part one guidance 

is specifically for identifying Part D 

enrollees for targeted outreach and 

communication in the absence of any 

information regarding an individual’s 

specific financial circumstances. 

As described in the final part one 

guidance, in retrospective modeling of 

prescription drug event (PDE) data, CMS 

found that to be ‘‘likely to benefit’’ from 

the program, the Part D enrollee would 

have to incur some level of substantial 

OOP costs; further, the Part D enrollee’s 

highest monthly OOP cost incurred 

would have to be more than the highest 

monthly paid amount under the 

Medicare Prescription Payment Plan (if 

the program had applied). CMS used 

this approach to identify ‘‘likely to 

benefit’’ because it focuses on 

addressing Part D enrollees’ potential 

cash-flow concerns by lowering their 

maximum OOP costs in a month (and 

limiting the potential for participants to 

be faced with Medicare Prescription 

Payment Plan monthly payments that 

may initially provide substantial 

financial relief but later, due to timing 

constraints, result in monthly 

beneficiary payments that are higher 

than they would have been absent the 

program). This approach strictly 

compares the monthly OOP amounts 

with and without the Medicare 

Prescription Payment Plan, without any 

subjective assessments of what amount 

might be beneficial to an individual Part 

D enrollee. CMS used the approach 

described previously to set thresholds 

for targeted outreach criteria in the first 

year of the program (2025). In the final 

part one guidance, we established a 

2025 POS notification threshold of $600 

for a single prescription. Additional 

details regarding the POS notification 

process are described in section (h) of 

this proposed rule. 

In the final part two guidance, we 

established a requirement for Part D 

sponsors to notify enrollees who were 

likely to benefit prior to the 2025 plan 

year. In setting criteria to identify Part 

D enrollees likely to benefit prior to the 

plan year, CMS seeks to identify 

individuals who have persistently high 

costs for covered Part D prescription 

drugs. That is balanced, however, by a 

desire to limit notifications to Part D 

enrollees who are not likely to benefit 

from participation in the program (such 

as Part D enrollees for whom the 

program would initially provide 

substantial financial relief but later, due 

to timing constraints, would result in 

monthly payments that are higher than 

they would have been absent the 


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program). With the goal of assessing the 

persistence of high OOP costs, and thus, 

the likelihood of a prior year’s OOP 

costs predicting future OOP burden, 

CMS analyzed PDE records. CMS first 

identified Part D enrollees who had 

incurred total OOP costs of at least 

$2,000 in the first three quarters of 2021, 

then examined their total OOP costs in 

the subsequent year, 2022. CMS’s 

analysis was based on the patient 

payment amount for covered Part D 

claims only, reflecting the actual OOP 

financial burden for Part D enrollees. 

In the final part two guidance, we 

established that to fulfill the 

requirements for prior to the plan year 

notification, during the fourth quarter of 

the year, Part D sponsors must review 

their Part D claims history from the first 

three quarters of the year to identify Part 

D enrollees likely to benefit in the 

upcoming year. For CY 2025, Part D 

sponsors are required to conduct 

outreach to Part D enrollees who 

incurred at least $2,000 in OOP costs for 

covered drugs through September of 

2024. Based on this analysis and any 

additional analysis Part D sponsors 

conduct to identify enrollees who may 

be likely to benefit from this program, 

the Part D sponsor must send the 

‘‘Medicare Prescription Payment Plan 

Likely to Benefit Notice’’ to identified 

enrollees no later than the end of the 

Annual Election Period (open 

enrollment), which is December 7 of 

each year. For example, for CY 2025, 

Part D sponsors assessed claims for 

covered Part D drugs with dates of 

services from January through 

September 2024 and sent the ‘‘Medicare 

Prescription Payment Plan Likely to 

Benefit Notice’’ in October, November, 

or early December 2024 (no later than 

December 7, 2024). If Part D sponsors 

develop supplemental strategies for 

identification of Part D enrollees likely 

to benefit prior to the plan year, these 

notifications must be provided during 

the same timeframe. 

In the final part two guidance, we 

established that prior to the plan year, 

when a Part D sponsor identifies current 

Part D enrollees as likely to benefit 

using the methods noted previously, it 

is then required to notify each such Part 

D enrollee in writing that they are likely 

to benefit from the Medicare 

Prescription Payment Plan, using the 

standardized ‘‘Medicare Prescription 

Payment Plan Likely to Benefit Notice.’’ 

This outreach may be done via mail or 

electronically (based on the Part D 

enrollee’s preferred and authorized 

communication methods) and must 

include a Medicare Prescription 

Payment Plan election request form. The 

outreach must also include additional 

information about the Medicare 

Prescription Payment Plan; this 

additional information requirement may 

be fulfilled by including with the notice 

the CMS-developed fact sheet about the 

program. If Part D sponsors develop and 

use alternative informational materials 

in lieu of the CMS-developed fact sheet 

to satisfy this requirement, they must 

ensure that these alternative materials 

accurately convey program information 

and are compliant with existing Part D 

requirements specified at 42 CFR part 

423 subpart V and in the Medicare 

Communications and Marketing 

Guidelines (MCMG) Additionally, the 

initial notice may be provided via 

telephone, so long as the standardized 

‘‘Medicare Prescription Payment Plan 

Likely to Benefit Notice’’ and additional 

information are sent within 3 calendar 

days of the telephone notification. 

In the final part two guidance, we 

established that while Part D sponsors 

are required to notify all Part D 

enrollees who meet the criteria outlined 

previously, Part D sponsors should be 

aware that potential changes to a Part D 

enrollee’s clinical condition, medication 

status, or cost sharing (for example, 

discontinuation of therapy or addition 

of supplemental payers) could affect the 

likelihood that a Part D enrollee may 

benefit from the Medicare Prescription 

Payment Plan. Part D sponsors should 

be aware of potential status changes 

when contacted by an enrollee to 

discuss participation in the program and 

should counsel enrollees accordingly. 

In addition to the criteria for 

identification of Part D enrollees likely 

to benefit from the program in advance 

of an upcoming plan year, in the final 

part two guidance, CMS established a 

requirement for 2025 for Part D sponsors 

to put in place reasonable guidelines for 

ongoing identification of Part D 

enrollees likely to benefit during the 

plan year. For example, Part D sponsors 

may undertake targeted outreach to Part 

D enrollees if they become aware in 

advance of a new high-cost prescription 

for a Part D enrollee that would trigger 

the pharmacy POS notification process. 

If Part D sponsors have prior 

authorization or other utilization 

management edits in place for a drug 

that, based on their benefit structure, 

would result in OOP costs above the 

pharmacy POS notification threshold, 

then the Part D sponsor could initiate 

outreach to the Part D enrollee based on 

approved prior authorization requests, 

informing them of the Medicare 

Prescription Payment Plan and of the 

opportunity to opt into the program. 

A Part D enrollee is less likely to 

benefit from opting in during the last 

quarter of a year (for example, in 

December, the last month of the plan 

year, because OOP costs for the 

Medicare Prescription Payment Plan in 

that month cannot be spread over more 

than 1 month). As such, in the final part 

one and final part two guidance, we 

established that a Part D enrollee should 

not be notified that they are likely to 

benefit in the last month of the plan 

year for that plan year; however, Part D 

sponsors may choose to provide them 

with information on how to opt into the 

program for the upcoming year. 

Participants who have already opted 

into the Medicare Prescription Payment 

Plan should not be notified about opting 

into the program while their 

participation is in effect. Additionally, 

enrollees who are precluded from 

opting into the program due to failed 

monthly payment after conclusion of 

the required grace period should not be 

notified that they are likely to benefit 

from the program during the plan years 

in which they are precluded from 

participating in the program. Finally, 

PDPs that are non-renewing their 

contracts or individual plan benefit 

packages are not required to comply 

with the requirements at 

§ 423.137(e)(3)(i) related to prior to plan 

year targeted outreach. Non-renewing 

PDPs must still comply with the 

requirements at § 423.137(e)(3)(ii) 

related to during the plan year targeted 

outreach through the end of the plan 

year but are not required to identify and 

outreach to Part D enrollees likely to 

benefit from the program in the 

upcoming plan year. 

In the final part two guidance, we 

established that Part D sponsors may 

develop strategies other than the 

approach outlined previously for 

identification of additional Part D 

enrollees likely to benefit during the 

plan year. However, Part D sponsors 

must develop standardized processes for 

implementing their criteria for 

identification of enrollees likely to 

benefit from the program during the 

plan year, including outreach timeframe 

and mode of communication, and must 

apply any identification criteria to every 

Part D enrollee uniformly. 

In the final part two guidance, we 

established that during the plan year, 

when a Part D sponsor identifies current 

Part D enrollees as likely to benefit from 

the program, it is required to provide 

the ‘‘Medicare Prescription Payment 

Plan Likely to Benefit Notice’’ to the 

identified Part D enrollee along with a 

Medicare Prescription Payment Plan 

election request form and additional 

information about the Medicare 

Prescription Payment Plan. This 

additional information requirement may 

be fulfilled by including with the notice 


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the CMS-developed fact sheet about the 

program. If Part D sponsors develop and 

use alternative informational materials 

in lieu of the CMS-developed fact sheet 

to satisfy this requirement, they must 

ensure that these alternative materials 

accurately convey program information 

and are compliant with existing Part D 

requirements specified at 42 CFR part 

423 subpart V and in the MCMG. This 

outreach may be done via mail or 

electronically (based on the Part D 

enrollee’s preferred and authorized 

communication methods). Additionally, 

the initial notice may be provided via 

telephone, so long as the written 

‘‘Medicare Prescription Payment Plan 

Likely to Benefit Notice,’’ election 

request form, and additional 

information are sent within 3 calendar 

days of the telephone notification. Part 

D sponsors are encouraged to inform the 

Part D enrollee that they are likely to 

benefit when contacting the Part D 

enrollee for other reasons, such as while 

communicating a prior authorization 

coverage determination. 

For the initial years of the program, 

we propose to maintain the criteria for 

Part D sponsor outreach prior to the 

plan year, during the plan year, and at 

the point of sale that were established 

in the final part one and final part two 

guidance for 2025. More specifically, we 

propose that Part D sponsors must 

notify a pharmacy when a Part D 

enrollee incurs OOP costs for a single 

prescription that equal or exceed the 

POS threshold of $600. To identify Part 

D enrollees likely to benefit in advance 

of the plan year, we propose that Part D 

sponsors be required to assess their 

current Part D enrollees’ prescription 

drug costs from the current year and 

conduct outreach to Part D enrollees 

who incurred $2,000 in OOP costs for 

covered Part D drugs through September 

of that year. We also propose that Part 

D sponsors will be required to put in 

place reasonable guidelines for ongoing 

identification of Part D enrollees likely 

to benefit during the plan year. As 

described in this section, an example of 

a reasonable guideline for ongoing 

identification during the plan year 

would be a standardized approach in 

which a Part D sponsor undertakes 

targeted outreach to Part D enrollees 

when they become aware in advance 

(such as through the prior authorization 

process) of a new high-cost prescription 

that would trigger the pharmacy POS 

notification process. We remind Part D 

sponsors that they must develop 

standardized processes for 

implementing their criteria for 

identification of enrollees likely to 

benefit from the program during the 

plan year, including outreach timeframe 

and mode of communication, and must 

apply any identification criteria to every 

Part D enrollee uniformly. 

We plan to revisit these requirements 

in future rulemaking, as CMS gains 

program experience and can evaluate 

program data and operations. In general, 

we expect to maintain the same overall 

framework for targeted outreach, which 

will include a POS notification 

threshold based on incurred OOP costs, 

prior to plan year criteria based on 

incurred OOP costs in the current year, 

and requirements for Part D sponsors to 

put in place reasonable guidelines for 

ongoing identification of Part D 

enrollees likely to benefit during the 

plan year. We would assess the targeted 

outreach requirements for the POS 

notification threshold and prior to plan 

year criteria on an annual basis and 

make modifications, if needed, based on 

review and analysis of Medicare 

Prescription Payment Plan data and 

other Medicare data, including: (1) 

analysis of program participation levels; 

(2) analysis of the proportion of 

participants who met our definition of 

‘‘likely to benefit,’’ as established in the 

final part one guidance and described in 

this section, based on actual OOP costs 

incurred and program payments; (3) 

analysis of the proportion of Part D 

enrollees who would have met our 

definition of ‘‘likely to benefit’’ if they 

had elected into the Medicare 

Prescription Payment Plan but were not 

identified based on current targeted 

outreach criteria; (4) program 

operations; and (5) level of burden on 

pharmacies and Part D sponsors. After 

the assessment and review of the 

aforementioned factors, CMS would 

then publish the specific targeted 

outreach parameters for the upcoming 

plan year. In this proposed rule, CMS is 

not codifying an approach to modifying 

targeted outreach criteria for future 

years of the program; however, we seek 

comment on the approach described 

here and will use feedback from 

interested parties to support future 

policy development. 

In addition to the agency’s authorities 

with respect to the Medicare 

Prescription Payment Plan under 

section 11202 of the IRA, CMS also has 

authority under section 1860D– 

12(b)(3)(D) of the Act to impose 

additional contractual terms and 

conditions on Part D plan sponsors that 

are necessary and appropriate. 

Consistent with our authority under 

section 11202 of the IRA and under 

section 1860D–12(b)(3)(D) of the Act, in 

this proposed rule, we propose to codify 

the targeted outreach framework and 

thresholds established in the final part 

one and final part two guidance at 

§ 423.137(e). 

Specifically, we propose to codify the 

likely to benefit criteria at paragraph 

(e)(1), the requirements for the 

pharmacy POS notification at paragraph 

(e)(2), and the requirements for Part D 

sponsor direct outreach to identified 

likely to benefit enrollees prior to and 

during the plan year at paragraph (e)(3). 

Additionally, we propose to codify the 

targeted outreach notification and 

education requirements at paragraph 

(e)(4) and to codify targeted outreach 

exclusions at paragraph (e)(5). Finally, 

we propose to add the ‘‘Medicare 

Prescription Payment Plan Likely to 

Benefit Notice’’ as a required 

standardized communication material 

for Part D sponsors at § 423.2267(e)(47). 

As stated in the final part two 

guidance for 2025, the thresholds 

published by CMS are a minimum 

requirement. Part D sponsors may 

develop supplemental strategies for 

identification of additional Part D 

enrollees likely to benefit prior to and 

during the plan year. If supplemental 

strategies are implemented, then Part D 

sponsors must apply any additional 

identification criteria to every enrollee 

of each plan equally, which we propose 

to codify at paragraph (e)(1)(ii). 

We are not scoring any aspects of this 

provision related to the development 

and distribution of the ‘‘Medicare 

Prescription Payment Plan Likely to 

Benefit Notice’’ in the Collection of 

Information section of this rule since we 

believe all information impacts of those 

provisions have already been accounted 

for under OMB control number 0938– 

1475. 

(e) Termination of Election, 

Reinstatement, and Preclusion 

Section 1860D–2(b)(2)(E)(v)(IV)(aa) of 

the Act requires a Part D sponsor to 

terminate an individual’s Medicare 

Prescription Payment Plan participation 

if that individual fails to pay their 

monthly billed amount. In addition, 

under section 1860D– 

2(b)(2)(E)(v)(IV)(bb) of the Act, Part D 

sponsors may preclude an individual 

from opting into the Medicare 

Prescription Payment Plan in a 

subsequent year if the individual fails to 

pay the amount billed for a month as 

required under the program. 

In the final part one guidance, we 

established standards for termination of 

election, reinstatement, and preclusion 

in 2025 consistent with the statutory 

requirements. CMS established 

procedures for voluntary termination of 

election, under which Part D sponsors 

are required to have a process to allow 

a participant who has opted into the 


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Medicare Prescription Payment Plan to 

opt out during the plan year. In the final 

part two guidance, we stated that the 

Part D sponsor must process the 

participant’s voluntary termination 

request and send the individual a 

notification confirming the termination 

within 10 calendar days of receipt of the 

request but did not specify the effective 

date of termination. For 2026 and 

subsequent years, we propose to 

maintain the requirement for Part D 

sponsors to send the notice of voluntary 

termination within 10 calendar days of 

receipt but require that the effective date 

of termination must be within 24 hours 

of receipt of the voluntary termination 

request. We believe this aligns with the 

required timeframe for processing 

election requests during the plan year 

and ensures timely response to opt out 

requests during the plan year. We seek 

comment on this proposal. 

When a participant opts out of the 

Medicare Prescription Payment Plan, a 

Part D sponsor must provide the 

individual with a notice of termination 

after the individual notifies the Part D 

sponsor that they intend to opt out 

under the Part D sponsor’s established 

process. The notice of voluntary 

termination must include— 

• Pertinent dates, including the date 

on which the individual’s participation 

in the program ends; 

• An explanation that the individual 

is receiving the notice either because 

they requested a voluntary termination 

or because they changed Part D plans; 

• A statement clarifying that the 

notice only applies to participation in 

the Medicare Prescription Payment 

Plan, and that the individual’s Part D 

drug coverage will not be impacted; 

• A statement clarifying that the 

individual will continue to be billed 

monthly or can choose to pay the 

amount owed all at once, and that the 

individual will not pay interest or fees 

on the amount owed; 

• A statement clarifying that the 

individual can join the Medicare 

Prescription Payment Plan again and 

instructions for how to do so, which 

may differ depending on whether the 

voluntary termination was requested by 

the individual or if it was because the 

individual changed Part D plans; and 

• An overview of other Medicare 

programs that can help lower costs, 

including Extra Help, the Medicare 

Savings Program, the State 

Pharmaceutical Assistance Program, and 

a Manufacturer’s Pharmaceutical 

Assistance Program, and how to learn 

more about these programs. 

The Part D sponsor must also offer the 

participant the option to repay the full 

outstanding amount in a lump sum. 

However, the Part D sponsor is 

prohibited from requiring full 

immediate repayment from a participant 

who has been terminated from the 

Medicare Prescription Payment Plan. If 

the participant opts not to repay the full 

outstanding amount in a lump sum, the 

sponsor must continue to bill amounts 

owed under the program in monthly 

amounts not to exceed the maximum 

monthly cap according to the statutory 

formula for the duration of the plan year 

after an individual has been terminated. 

In this rule, for 2026 and subsequent 

years, we propose to codify these 

requirements at § 423.137(f)(2)(i) and to 

add the voluntary termination notice as 

a required material and content for Part 

D sponsors at § 423.2267(e)(50). 

CMS issued model material that Part 

D enrollees can use to fulfill the 

voluntary termination notice 

requirement through the Medicare 

Advantage and Prescription Drug 

Programs: Part C and Part D Medicare 

Prescription Payment Plan Model 

Documents (CMS–10882; OMB 0938– 

1475) ICR package. As established in 

§ 423.2267(c), model materials and 

content are required materials and 

content created by CMS as an example 

of how to convey beneficiary 

information. If Part D sponsors choose 

to not use the CMS-developed model 

notice and develop their own voluntary 

termination notice, they must include 

all of the required elements outlined at 

§ 423.137(f)(2)(i)(A)(2)(ii). These 

notification and content requirements 

are consistent with the requirements 

outlined in the final part two guidance 

for 2025. 

We also established standards for 

involuntary termination in 2025, 

including requirements for the 

provision of a grace period of at least 

two months when an individual has 

failed to pay the billed amount by the 

payment due date. If an individual fails 

to pay the billed amount within 15 

calendar days of the payment due date, 

the Part D sponsor must send the 

individual an initial notice of failure to 

pay. The notice of failure to pay must 

include— 

• Pertinent dates and key pieces of 

information, including the date the 

missed monthly payment was due, the 

amount the individual must pay to 

remain in the program, and the date by 

when payment must be received, which 

is the date of the end of the grace 

period; 

• A statement clarifying that the 

notice only applies to participation in 

the Medicare Prescription Payment 

Plan, and that the individual’s Part D 

drug coverage will not be impacted; 

• Instructions for how to submit 

payment; 

• Information about procedures for 

involuntary termination due to failure to 

pay, including the date on which the 

participant would be removed if 

payment is not received, and how to 

submit an inquiry or file a grievance; 

• A statement on how individuals 

should pay their Part D plan premium 

first if they cannot afford both their 

premium and their program balance; 

and 

• An overview of other Medicare 

programs that can help lower costs, 

including Extra Help, the Medicare 

Savings Program, the State 

Pharmaceutical Assistance Program, and 

the Manufacturer’s Pharmaceutical 

Assistance Program, and how to learn 

more about these programs. 

If the individual fails to pay the 

amount due by the end of the grace 

period, the Part D sponsor must send 

the individual an involuntary 

termination notice explaining that the 

individual has been terminated from the 

Medicare Prescription Payment Plan. 

The involuntary termination notice 

must be sent within 3 business days 

following the last day of the end of the 

grace period, and must include the 

following: 

• Pertinent dates, including the date 

the individual was originally notified of 

the missed monthly payment and the 

due date for that payment, as well as the 

date on which the individual’s 

participation in the program ends, 

which should be the same date as the 

notice; 

• A statement clarifying that the 

notice only applies to participation in 

the Medicare Prescription Payment 

Plan, and that the individual’s Part D 

drug coverage will not be impacted; 

• Instructions for how to submit 

payment and the amount owed; 

• How to submit an inquiry or file a 

grievance; 

• A statement clarifying that the 

individual can join the Medicare 

Prescription Payment Plan again if they 

pay the amount owed; and 

• An overview of other Medicare 

programs that can help lower costs, 

including Extra Help, the Medicare 

Savings Program, the State 

Pharmaceutical Assistance Program, and 

the Manufacturer’s Pharmaceutical 

Assistance Program, and how to learn 

more about these programs. 

If either the notice of failure to pay or 

notice of involuntary termination is 

returned to the Part D sponsor as 

undeliverable, the Part D sponsor must 

immediately implement its existing 

procedure for researching a potential 

change of address. In this rule, for 2026 


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and subsequent years, we propose to 

codify these notice requirement 

standards at § 423.137(f)(2)(ii) and to 

add the notice of failure to pay and 

notice of involuntary termination as 

required model materials and content 

for Part D sponsors at § 423.2267(e)(48) 

and (e)(49). 

CMS issued model materials that Part 

D enrollees can use to fulfill the failure 

to pay and involuntary termination 

notice requirements through the 

Medicare Advantage and Prescription 

Drug Programs: Part C and Part D 

Medicare Prescription Payment Plan 

Model Documents (CMS–10882; OMB 

0938–1475) ICR package. As established 

in § 423.2267(c), model materials and 

content are required materials and 

content created by CMS as an example 

of how to convey beneficiary 

information. If Part D sponsors choose 

to not use the CMS-developed models 

and develop their own notice of failure 

to pay or involuntary termination 

notice, they must include all of the 

required elements for each notice 

outlined at § 423.137(f)(2)(ii)(C)(2) and 

(D)(2), respectively. These notification 

and content requirements are consistent 

with the requirements outlined in the 

final part two guidance for 2025. 

We also set forth requirements for 

2025 related to the grace period and 

reinstatement. When a program 

participant fails to pay a program bill, 

the Part D sponsor must provide 

individuals with a grace period of at 

least two months upon notifying the 

individual of the initial missed 

payment. 

We propose to make certain 

modifications to the timing 

requirements for the grace period and 

initial notice of nonpayment established 

in the final part one guidance. 

Specifically, in the final part one 

guidance, we stated that the grace 

period must begin on the first day of the 

month for which the balance is unpaid 

or the first day of the month following 

the date on which the payment is 

requested, whichever is later. In this 

proposed rule, we propose to change the 

date on which the grace period must 

begin to the first day of the month 

following the date on which the initial 

notice is sent. We believe this would 

simplify the timing requirements for the 

notice of nonpayment and the required 

grace period. We seek comment on 

whether to adopt this change or 

continue with the approach described in 

the final part one guidance. 

In the final part one guidance for 

2025, we also stated that if a participant 

fails to pay their monthly billed amount 

with fewer than two full calendar 

months remaining in the calendar year, 

the grace period must carry over into the 

next calendar year. If the program 

participant is within their grace period 

from the prior year, the Part D sponsor 

must allow the participant to opt into 

the program for the next year, but if the 

participant fails to pay the amount due 

from the prior year during the required 

grace period, the Part D sponsor may 

terminate the individual’s participation 

in the program in the new year. 

A participant must be allowed to pay 

the overdue balance in full during the 

grace period to remain in the program. 

Additionally, Part D sponsors must 

reinstate an individual who has been 

terminated from the Medicare 

Prescription Payment Plan within a 

reasonable timeframe if the individual 

demonstrates good cause for failure to 

pay the program billed amount within 

the grace period and pays all overdue 

amounts billed. In response to public 

comments received on the final part one 

guidance, we clarified that CMS was 

adopting the same meaning of ‘‘good 

cause’’ outlined in section 60.2.4 of the 

Medicare Prescription Drug Benefit 

Manual, Chapter 3—Eligibility, 

Enrollment and Disenrollment that 

applies to reinstatements when an 

enrollee fails to pay their Part D 

premiums. CMS also described specific 

circumstances that constitute good 

cause, including— 

• A serious illness, 

institutionalization and/or 

hospitalization of the program 

participant or their authorized 

representative (that is, the individual 

responsible for the participant’s 

financial affairs), that lasted for a 

significant portion of the grace period 

for Medicare Prescription Payment Plan 

payment; 

• Prolonged illness that is not chronic 

in nature, a serious (unexpected) 

complication to a chronic condition or 

rapid deterioration of the health of the 

participant, a spouse, another person 

living in the same household, a person 

providing caregiver services to the 

participant, or the participant’s 

authorized representative (that is, the 

individual responsible for the 

participant’s financial affairs) that 

occurs during the grace period for the 

Medicare Prescription Payment Plan 

payment; 

• Recent death of a spouse, 

immediate family member, person 

living in the same household, or person 

providing caregiver services to the 

participant, or the participant’s 

authorized representative (that is, the 

individual responsible for the 

participant’s financial affairs); 

• Home was severely damaged by a 

fire, natural disaster or other 

unexpected event, such that the 

participant or the participant’s 

authorized representative was prevented 

from making arrangement for payment 

during the grace period for the Medicare 

Prescription Payment Plan; 

• An extreme weather-related, public 

safety or other unforeseen event 

declared as a Federal or state level of 

emergency prevented premium payment 

at any point during the Medicare 

Prescription Payment Plan grace period. 

For example, the participant’s bank or 

U.S. Post Office closes for a significant 

portion of the grace period; or 

• For Part D plan disenrollments 

effectuated by CMS for failure to pay 

Part D Income Related Monthly 

Adjustment Amount (IRMAA), Federal 

government error (that is, CMS, SSA or 

the Railroad Retirement Board (RRB)) 

caused the Medicare Prescription 

Payment Plan payment to be incorrect 

or late, and the participant was unaware 

of the error or unable to take action 

prior to the disenrollment effective date. 

In addition, we stated that there may 

be circumstances other than those listed 

which meet the definition of good 

cause, provided these circumstances 

meet the standard of being outside of 

the participant’s control or are 

unexpected such that the participant 

could not have reasonably foreseen their 

occurrence, and these circumstances are 

the cause for the non-payment of past 

due program balances. Finally, we 

stated that a Part D sponsor may 

reinstate an individual who has been 

terminated from the Medicare 

Prescription Payment Plan and pays all 

overdue amounts billed in full, at the 

sponsor’s discretion and within a 

reasonable timeframe, even if the 

individual does not demonstrate good 

cause. In this rule, for 2026 and 

subsequent years, we propose to codify 

these grace period and reinstatement 

requirements at § 423.137(f)(3). 

We also established standards for 

2025 for preclusion of election in a 

subsequent plan year. We clarified that, 

consistent with the statute, a Part D 

sponsor may only preclude an 

individual from participating in the 

Medicare Prescription Payment Plan in 

a subsequent year if the individual owes 

an overdue balance to that plan sponsor. 

If an individual enrolls in a Part D plan 

offered by a different Part D sponsor 

than the Part D sponsor to which the 

individual owes an overdue balance, 

that individual cannot be precluded 

from opting into the Medicare 

Prescription Payment Plan in a 

subsequent year by that different Part D 

sponsor. We also stated that preclusion 

may extend beyond the immediate 

subsequent plan year if a Part D enrollee 


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remains in a plan offered by the same 

Part D sponsor and continues to owe an 

overdue balance. While a Part D sponsor 

that offers more than one Part D plan 

may have different preclusion policies 

for its different plans, the Part D sponsor 

must apply its preclusion policy 

consistently among all enrollees of the 

same Part D plan. In this rule, for 2026 

and subsequent years, we propose to 

codify requirements related to 

preclusion of election in a subsequent 

plan year at § 423.137(f)(4). 

For 2025, we established a prohibition 

on Part D enrollment penalties for 

failure to pay a Medicare Prescription 

Payment Plan amount billed. We stated 

that a Part D plan sponsor is prohibited 

from disenrolling a Part D enrollee from 

a Part D plan or declining future 

enrollment into a Part D plan for failure 

to pay any amount billed under the 

Medicare Prescription Payment Plan. In 

this rule, for 2026 and subsequent years, 

we propose to codify this requirement at 

§ 423.137(f)(5). 

Finally, we clarified that, if a 

participant in the Medicare Prescription 

Payment Plan is disenrolled voluntarily 

or involuntarily from their Part D plan 

under the provisions at 42 CFR 

423.44(b), the participant is also 

terminated from the Medicare 

Prescription Payment Plan in that plan. 

In this rule, for 2026 and subsequent 

years, we propose to codify this 

requirement at § 423.137(f)(6). We note 

that nothing in proposed section 

§ 423.137(f) prohibits a Part D sponsor 

from billing an individual for an 

outstanding Medicare Prescription 

Payment Plan amount owed. 

We are not scoring any aspects of this 

provision related to the development 

and distribution of the notice of 

voluntary termination, the notice of 

failure to pay, and the notice of 

involuntary termination in the 

Collection of Information section of this 

rule since we believe all information 

impacts of those provisions have 

already been accounted for under OMB 

control number 0938–1475. 

(f) Participant Billing Rights 

Section 1860D–2(b)(2)(E)(iii) of the 

Act requires Part D sponsors, on a 

monthly basis, to bill participants who 

are in the Medicare Prescription 

Payment Plan and incur OOP costs for 

the Medicare Prescription Payment Plan 

an amount that cannot exceed the 

applicable maximum monthly cap. 

In the final part one guidance, we 

established standards for participant 

billing rights for 2025 consistent with 

the statute. Specifically, we established 

that for each billing period after an 

individual has opted into the program, 

a Part D sponsor must not bill a 

participant who is in the program but 

has not yet incurred any OOP costs for 

the Medicare Prescription Payment Plan 

during the plan year. The Part D sponsor 

will calculate a monthly amount that 

takes into account the OOP costs for the 

Medicare Prescription Payment Plan in 

that month that were incurred on or 

after the date on which the individual 

opted into the program, and that each 

billing period will be a calendar month. 

In the final part one guidance, we 

further explained that the billing period 

begins either on the effective date of a 

Part D enrollee’s participation in the 

Medicare Prescription Payment Plan (for 

the first month a participant elects into 

the program during the plan year) or the 

first day of the month (for each 

subsequent month or for the first month 

of a participant who elects into the 

program prior to the start of the plan 

year). The billing period ends on the last 

date of that month. Additionally, in the 

final part one guidance, we established 

that Part D sponsors must send a bill for 

the Medicare Prescription Payment Plan 

that is separate from the bill for the 

collection of premiums, if applicable, 

and continue to follow existing 

regulations and guidance for the 

collection of premiums as described at 

42 CFR 423.293. 

We clarified that past due balances 

from prior monthly bills may also be 

included in a billing statement, which 

could result in the total amount on the 

billing statement exceeding the 

maximum monthly cap. However, the 

amount billed for the month for which 

the maximum monthly cap is being 

calculated cannot be higher than the cap 

for that month as established in the 

statute. 

We also encouraged Part D sponsors 

to offer multiple means of payment, 

such as an electronic fund transfer 

mechanism (including automatic 

charges of an account at a financial 

institution or credit or debit card 

account) and payment by check and to 

offer participants flexibility around 

requesting a specific day of the month 

for program charges and withdrawals 

from a bank account. We reiterate that 

encouragement here. 

In addition, we stated that, because 

under section 1860D–2(b)(2)(E)(iii) of 

the Act, Part D sponsors may not bill a 

participant more than the maximum 

monthly cap, late fees, interest 

payments, or other fees, such as for 

different payment mechanisms, are not 

permitted under the Medicare 

Prescription Payment Plan. We also 

stated that plan sponsors are responsible 

for ensuring that any third parties they 

contract with also comply with such 

requirements. 

We also reminded Part D sponsors 

(and any third parties Part D sponsors 

contract with) that actions to collect 

unpaid balances related to the Medicare 

Prescription Payment Plan may be 

subject to other applicable Federal and 

state laws and requirements, including 

those related to payment plans, credit 

reporting, and debt collection. These 

requirements also apply in the event of 

a death of a program participant. 

We also stated that, while Part D 

sponsors may create their own billing 

and payment procedures for the 

Medicare Prescription Payment Plan, 

Part D sponsors are required to 

prioritize payments towards Part D plan 

premiums to avoid a Part D enrollee 

losing their Part D coverage when it is 

unclear whether a payment received 

from a participant is intended by the 

participant to cover their outstanding 

Part D plan premium or Medicare 

Prescription Payment Plan balance. 

Specifically, if a Part D enrollee has 

opted into the program and makes 

payments directly to the Part D sponsor, 

and it is unclear whether a payment 

should go towards the participant’s 

outstanding Part D plan premium or 

Medicare Prescription Payment Plan 

balance, the Part D sponsor may contact 

the enrollee to clarify the purpose of the 

payment. If the Part D sponsor does not 

contact the enrollee or is not able to 

ascertain the purpose of the payment, 

then the payment must be applied to the 

Part D premium. 

Under section 1860D–2(b)(2)(E)(v)(VI) 

of the Act, Part D sponsors must treat 

any unsettled balances with respect to 

amounts owed by participants under the 

Medicare Prescription Payment Plan as 

plan losses. In addition, the statute 

requires that the Secretary shall not be 

liable for any such balances outside of 

those assumed as losses estimated in 

plan bids. In the final part two 

guidance, we stated that if a Part D 

sponsor is compensated by or on behalf 

of the participant for an unsettled 

balance or sells an unsettled balance as 

a debt, it cannot treat the amount as a 

loss and cannot include it in its bid. 

Only uncompensated unsettled balances 

can be included in the bid. We also 

stated that the Part D bid pricing tool 

(BPT) has been modified to reflect 

projected losses associated with the 

Medicare Prescription Payment Plan. 

Specifically, these losses must be 

reflected as administrative costs in the 

Part D BPT. 

Under section 1860D– 

2(b)(2)(E)(v)(III)(gg) of the Act, Part D 

sponsors must have a financial 

reconciliation process in place to correct 


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inaccuracies in billing and/or payments. 

In the final part one guidance, we 

established standards for Part D 

sponsors related to financial 

reconciliation for Medicare Prescription 

Payment Plan payments. We stated that 

while a Part D sponsor may not bill a 

program participant an amount for a 

month that is more than the maximum 

monthly cap, a participant may pay 

more than the maximum monthly cap, 

up to the annual OOP threshold. 

However, the participant cannot pay 

more than their total OOP costs for the 

Medicare Prescription Payment Plan. If 

a participant does pay more than their 

total OOP costs for the Medicare 

Prescription Payment Plan, the Part D 

sponsor must reimburse the participant 

the amount that is paid above the 

balance owed. 

In addition, in the final part one 

guidance, we stated that, for 2025, CMS 

expects that Part D sponsors will 

develop standardized procedures for 

determining and processing 

reimbursements for excess Medicare 

Prescription Payment Plan payments 

made by program participants and that 

Part D sponsors bear the responsibility 

for timely financial reconciliation with 

Part D enrollees. Federal regulations at 

42 CFR 423.466(a) require sponsors to 

process the adjustment and issue 

refunds or recovery notices within 45 

calendar days of receipt of LIS changes, 

Financial Information Reporting (FIR), 

or Information Reporting (Nx) 

transactions necessitating the claims 

adjustment. As such, Part D sponsors 

must make the retroactive adjustments 

and promptly issue refunds or initiate 

recovery once complete information 

regarding a claim’s adjustment is 

received. In the final part one guidance, 

we also stated that the plan must work 

with the participant to determine if they 

should either refund the difference 

directly to the Part D enrollee or apply 

the overpayment to the remaining OOP 

costs owed. In addition, Part D sponsors 

are responsible for appropriately 

updating TrOOP accumulators and 

restacking claims. 

We also stated that when 

reconciliation results in an increased 

amount owed by the participant, plans 

should recalculate the maximum 

monthly cap for the month(s) in 

question. As stated in the final part one 

guidance, under section 1860D– 

2(b)(2)(E)(iv)(II) of the Act, for each 

subsequent month for which the Part D 

enrollee has opted into the program, the 

maximum monthly cap is determined 

by calculating the sum of any remaining 

OOP costs owed by the participant from 

a previous month that have not yet been 

billed and any additional OOP costs for 

the Medicare Prescription Payment Plan 

in the subsequent month, divided by the 

number of months remaining in the plan 

year. When Part D claims adjustments 

result in increased amounts owed by the 

participant, and these amounts have not 

yet been billed to the participant, they 

should be included in the revised 

remaining OOP costs owed by the 

participant and, thus, in the subsequent 

month maximum cap for the next billing 

period. Finally, when a covered Part D 

drug claim adjustment occurs after the 

end of a plan year, the Part D sponsor 

should use the general guidance 

provided earlier in this section to 

appropriately recalculate the amount 

owed to or by the participant and issue 

a final bill or refund, as necessary. 

In this proposed rule, we propose to 

codify the requirements established for 

calendar year 2025 in the final part one 

guidance discussed in this section for 

2026 and subsequent years at 

§ 423.137(g) with an exception. In the 

final part one guidance, we stated that 

the plan must work with the participant 

to determine if they should either 

refund the difference directly to the Part 

D enrollee or apply the overpayment to 

the remaining OOP costs owed by the 

participant. In this proposed rule, we 

are proposing to modify that 

requirement and instead require a plan 

follow its normal processes for 

adjustments and issuing refunds. We 

believe this modification will simplify 

operational processes on the part of Part 

D sponsors without negatively 

impacting Medicare Prescription 

Payment Plan participants. In addition, 

in this proposed rule, we are proposing 

to modify the approach when Part D 

claims adjustments result in increased 

amounts owed by the participant; 

instead of stating that Part D sponsors 

‘‘should’’ include the additional costs in 

the revised remaining OOP costs owed 

by the participant, we now propose that 

Part D sponsors ‘‘must’’ include the 

increased amount in this manner. This 

is consistent with the requirement 

established in the final part one 

guidance and included in section (b) of 

this proposed rule, which states that 

once a participant incurs an OOP Part 

D drug cost, all their OOP costs for all 

covered Part D drugs will be billed on 

a monthly basis as long as the 

participant remains in the program as 

well as the uniform benefits 

requirements at § 423.104(b)(2). We seek 

comment on whether we should finalize 

these proposed changes or adopt the 

processes as established in the 2025 

final part one guidance for 2026 and 

subsequent years. 

We propose to codify the requirement 

that the Part D sponsor will calculate a 

monthly amount that takes into account 

the OOP costs for the Medicare 

Prescription Payment Plan in that 

month that were incurred on or after the 

date on which the individual opted into 

the program at paragraph (g)(1). We 

propose to define each billing period as 

a calendar month at paragraph (g)(2). 

We propose to establish requirements 

for the contents of a billing statement at 

paragraph (g)(3). We propose to 

establish that unsettled balances with 

respect to amounts owed under the 

program will be treated as plan losses at 

paragraph (g)(4). We propose to 

establish requirements for prioritization 

of premium payments at paragraph 

(g)(5). Finally, we propose to establish 

general standards for Medicare 

Prescription Payment Plan financial 

reconciliation at paragraph (g)(6). 

(g) Participant Disputes 

In the final part one guidance, we 

stated that Part D sponsors must apply 

their established Part D coverage 

determination and appeals procedures, 

as required under section 1860D–4(g) 

and (h) of the Act and § 423.566(a), to 

any dispute made by a Medicare 

Prescription Payment Plan participant 

about the amount of Part D cost sharing 

owed by that participant for a covered 

Part D drug. We also stated that Part D 

sponsors must apply their established 

Part D grievance procedures, which Part 

D sponsors are required to have in place 

under section 1860D–4(f) of the Act and 

§ 423.562, to any dispute made by a 

Medicare Prescription Payment Plan 

participant related to any aspect of the 

Medicare Prescription Payment Plan. 

This includes election requests, billing 

requirements, and termination-related 

issues other than disputes related to the 

amount of Part D cost sharing owed by 

a participant for a drug. We also 

clarified that a decision on the amount 

of cost sharing for a drug is a coverage 

determination and directed readers to 

§ 423.566(b)(5) and to the latest Parts C 

& D Enrollee Grievances, Organization/ 

Coverage Determinations, and Appeals 

Guidance for requirements related to 

grievances, coverage determinations, 

and redeterminations. We stipulated 

that Part D sponsors must use their 

existing coverage determination, 

appeals, and grievance procedures for 

the Medicare Prescription Payment Plan 

to ensure that Part D enrollees have the 

ability to contest copay amounts and 

any adverse decisions related to 

participation in the Medicare 

Prescription Payment Plan. Applying 

existing procedures required under Part 

D also reduces the need for Part D 

sponsors to develop new processes and 

allows Part D enrollees to use 


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procedures to which they are 

accustomed. 

Consistent with the requirements 

established in the final part one 

guidance, at § 423.137(h), we propose to 

codify requirements for Part D sponsors 

to apply their existing Part D coverage 

determination, appeal, and grievance 

procedures to the Medicare Prescription 

Payment Plan. 

We are not scoring this provision in 

the Collection of Information section of 

this rule because it codifies existing 

guidance, and because the filing of an 

appeal is an information collection 

associated with an administrative action 

pertaining to specific individuals or 

entities and thus is exempt from 

Paperwork Reduction Act requirements 

under 5 CFR 1320.4(a)(2) and (c). We 

seek comment on this assumption. 

(h) Pharmacy POS Notification Process 

Under section 1860D– 

2(b)(2)(E)(v)(III)(dd) of the Act and 

discussed in section (d) of this proposed 

rule, Part D sponsors must have a 

mechanism to notify a pharmacy when 

a Part D enrollee incurs OOP costs with 

respect to covered Part D drugs that 

make it likely the Part D enrollee may 

benefit from participating in the 

program. Furthermore, section 1860D– 

2(b)(2)(E)(v)(III)(ee) of the Act requires 

Part D sponsors to ensure that a 

pharmacy, after receiving such a 

notification from the Part D sponsor, 

informs the Part D enrollee that they are 

likely to benefit from the Medicare 

Prescription Payment Plan. The final 

part one and final part two guidance 

established standards for 2025 related to 

pharmacy POS notification processes. 

In the final part two guidance, we 

established that all Part D sponsors must 

use the standard codes developed by 

NCPDP for communication with 

network pharmacies about enrollees’ 

Medicare Prescription Payment Plan 

status, as appropriate. This includes the 

mechanism to notify the pharmacy that 

a Part D enrollee has been identified as 

likely to benefit based on OOP costs at 

the POS. 

As established in the final part two 

guidance, in pharmacy settings in which 

there is direct contact with enrollees (for 

example, community pharmacies where 

enrollees present in person to pick up 

prescriptions), the Part D sponsor must 

ensure that a hard copy of the 

‘‘Medicare Prescription Payment Plan 

Likely to Benefit Notice’’ is provided to 

enrollees identified as likely to benefit 

(or the person acting on their behalf) at 

the time the prescription is picked up. 

This includes pharmacies with a drivethrough or curbside pick-up option. 

Pharmacies should make available the 

CMS-developed Spanish-language 

version of the notice, in lieu of the 

English-language version, to their 

patients upon request. Identified 

enrollees who receive the notice from 

the pharmacy and need the notice in 

another format or language are 

instructed to call their Part D sponsor 

for assistance. The Part D sponsor 

should ensure compliance with the 

language access and accessibility 

requirements at § 423.2267 in the 

delivery of the ‘‘Medicare Prescription 

Payment Plan Likely to Benefit Notice.’’ 

CMS encourages Part D sponsors to 

provide pharmacies with additional 

educational material on the Medicare 

Prescription Payment Plan, such as the 

CMS-developed fact sheet, which could 

also be distributed to Part D enrollees 

along with the notice. 

The final part two guidance 

established that the requirement to 

provide the ‘‘Medicare Prescription 

Payment Plan Likely to Benefit Notice’’ 

in no way obligates the pharmacy to 

provide additional Medicare 

Prescription Payment Plan counseling 

or consultation to the Part D enrollee. 

Pharmacies are encouraged, but not 

required, to provide educational 

material related to the Medicare 

Prescription Payment Plan at the time 

they provide an enrollee with the 

notice. 

In the final part two guidance, CMS 

established that regardless of the setting, 

if the pharmacy is in contact with a Part 

D enrollee identified as likely to benefit 

and the enrollee declines to complete 

the prescription purchase, the Part D 

sponsor must ensure that the pharmacy 

provides the ‘‘Medicare Prescription 

Payment Plan Likely to Benefit Notice’’ 

to the Part D enrollee. For example, if 

a Part D enrollee visits a retail pharmacy 

to pick up their prescription but then 

declines to complete the transaction 

because of the cost, the Part D sponsor 

must still ensure that the pharmacy 

provides the standardized ‘‘Medicare 

Prescription Payment Plan Likely to 

Benefit Notice’’ to that Part D enrollee. 

In the final part two guidance, we also 

established that when a Part D enrollee 

opts into the Medicare Prescription 

Payment Plan after receiving the 

‘‘Medicare Prescription Payment Plan 

Likely to Benefit Notice’’ from the 

pharmacy, in addition to providing the 

notice of election approval, as described 

in section (c) of this proposed rule, the 

Part D sponsor is responsible for clearly 

communicating additional necessary 

next steps to the Part D enrollee. Next 

steps may include, but are not limited 

to, how to proceed with filling any 

outstanding prescriptions. 

In the final part one and final part two 

guidance, we established that, in 

general, all Medicare Prescription 

Payment Plan requirements are the same 

for every pharmacy type, including mail 

order, home infusion, specialty, and 

long-term care pharmacies. However, 

CMS is aware that some pharmacy types 

may not have direct contact with Part D 

enrollees and/or may lack a practical 

means for providing the physical 

standardized ‘‘Medicare Prescription 

Payment Plan Likely to Benefit Notice’’ 

directly to the Part D enrollee. 

Therefore, in the final part one and final 

part two guidance, we established 

standards for unique pharmacy 

scenarios and different pharmacy types. 

In the final part two guidance, we 

noted that long-term care pharmacies 

typically do not have a POS encounter 

between the pharmacy and the enrollee 

(long-term care resident). In these cases, 

the pharmacy may deliver medications 

that are kept in the custody of long-term 

care facilities until time of 

administration. In addition, long-term 

care pharmacies often use retrospective 

or post-consumption billing (that is, 

billing after the drug is dispensed to the 

facility for an enrollee). As such, when 

the POS notification is received by a 

long-term care pharmacy, the Part D 

sponsor should not require that the 

long-term care pharmacy provide the 

‘‘Medicare Prescription Payment Plan 

Likely to Benefit Notice’’ prior to 

dispensing the medication. Instead, the 

Part D sponsor should require the longterm care pharmacy to provide the 

notice to the Part D enrollee (or their 

authorized representative) at the time of 

its typical enrollee cost-sharing billing 

process. Given our understanding of the 

variation in how long-term care 

pharmacies dispense and bill covered 

Part D drugs, we are not proposing 

specific timing requirements for 

provision of the ‘‘Medicare Prescription 

Payment Plan Likely to Benefit Notice’’ 

via long-term care pharmacies. We 

encourage Part D sponsors to assess the 

particular circumstances of their 

network long-term care pharmacies 

when establishing timing requirements 

for pharmacy distribution of the notice. 

The final part two guidance also 

described special approaches to the POS 

notification requirements for Indian 

Health Service (IHS), Tribe and Tribal 

Organization, and Urban Indian 

Organization (I/T/U) pharmacies. I/T/U 

pharmacies provide no-cost prescription 

drugs to eligible IHS enrollees. When 

IHS-eligible Part D enrollees fill a 

prescription at an I/T/U pharmacy, their 

covered Part D prescription drug cost 

sharing, as defined by their plan’s 

benefit structure, is not collected at the 


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POS. As such, if a high-cost prescription 

drug claim for a Part D enrollee is 

submitted to a Part D sponsor from an 

I/T/U pharmacy, the Part D sponsor is 

not required to return the pharmacy 

notification indicating the enrollee is 

likely to benefit from the program. Part 

D sponsors should also ensure that their 

customer service representatives are 

aware of this situation regarding I/T/U 

pharmacies when receiving inquiries 

from Part D enrollees regarding program 

election. In discussing a Part D 

enrollee’s prescription drug costs, 

customer service representatives may 

need to review the primary pharmacy 

type used by the Part D enrollee. Part D 

enrollees who solely use I/T/U 

pharmacies, and thus have $0 in OOP 

costs for covered Part D drugs, may not 

benefit from participation in the 

Medicare Prescription Payment Plan. 

In the final part two guidance, we 

established that for other pharmacy 

types without in-person encounters 

(such as mail order pharmacies), Part D 

sponsors must require the pharmacy to 

notify the Part D enrollee via a 

telephone call or their preferred contact 

method. This requirement should not, 

however, be interpreted as a 

requirement to delay dispensing the 

medication. Pharmacies are encouraged 

to utilize existing touchpoints with Part 

D enrollees, such as outreach to review 

medication instructions or collect a 

method of payment, to convey the 

content of the ‘‘Medicare Prescription 

Payment Plan Likely to Benefit Notice’’ 

prior to processing payment for the 

prescription that triggered the notice. As 

with retail pharmacies, CMS encourages 

other pharmacy types to consider 

providing the ‘‘Medicare Prescription 

Payment Plan Likely to Benefit Notice’’ 

via additional modes of communication 

beyond the requirements in this section, 

such as through a patient portal or 

secure email. CMS encourages Part D 

sponsors to work with pharmacies to 

establish and maintain reasonable 

procedures related to the timing and 

number of attempts for prompt 

notification of identified Part D 

enrollees. 

In addition to the notification 

mechanisms described in the final part 

two guidance, we also stated that 

pharmacies may also choose to develop 

additional strategies to provide the 

‘‘Medicare Prescription Payment Plan 

Likely to Benefit Notice’’ to enrollees 

identified as likely to benefit. 

In the final part two guidance, we 

established that, given the statutory 

requirement for notification of enrollees 

likely to benefit at the pharmacy point 

of sale, Part D sponsors must ensure that 

their pharmacy network contracts 

include a provision requiring 

pharmacies to provide this notification 

to Part D enrollees. This provision is 

sufficient to meet the proposed 

requirements for Part D sponsors to 

ensure that a pharmacy, after receiving 

such a notification from the Part D 

sponsor, informs the Part D enrollee that 

they are likely to benefit from the 

Medicare Prescription Payment Plan. 

Additional tracking or documentation 

by the pharmacy or on behalf of the 

pharmacy by the Part D sponsor that the 

notice has been delivered to the 

identified enrollee is not required. 

In the final part two guidance, CMS 

acknowledged that a small portion of 

Part D enrollees will have supplemental 

coverage, such as through an SPAP, 

charity, or other health insurance (OHI), 

that will modify the final OOP amount 

the enrollee would otherwise owe at the 

point of sale. The ‘‘Medicare 

Prescription Payment Plan Likely to 

Benefit Notice’’ contains language 

directing enrollees with supplemental 

coverage to seek advice related to their 

specific situation prior to opting into the 

Medicare Prescription Payment Plan. 

Part D sponsors should ensure that their 

customer service representatives are 

aware of this possibility when receiving 

inquiries from Part D enrollees 

regarding program election. When 

discussing a Part D enrollee’s 

prescription drug costs, customer 

service representatives may need to 

review records for Information 

Reporting (Nx) transactions, indicating 

supplemental coverage or OHI. 

As specified by section 1860D– 

2(b)(2)(E)(iv) of the Act, the number of 

months remaining in the plan year is an 

important component of the maximum 

monthly cap calculation. As described 

in the final part one guidance, the 

maximum monthly cap in the first 

month of program participation is 

determined by calculating the annual 

OOP threshold minus any Part D costs 

the Part D enrollee incurred during the 

year before opting in, divided by the 

number of months remaining in the plan 

year. Given that the pharmacy POS 

threshold is a static amount, this may 

result in scenarios late in the plan year 

in which Part D enrollees who receive 

the ‘‘Medicare Prescription Payment 

Plan Likely to Benefit Notice’’ at the 

pharmacy based on their OOP costs, but 

whose costs are below the maximum 

monthly cap, are then required to pay 

the full amount as part of their first 

month’s bill. For example, if a Part D 

enrollee has not yet opted into the 

Medicare Prescription Payment Plan 

and fills a new prescription with an 

OOP cost of $650 in October 2025, their 

maximum monthly cap in the first 

month could be as high as $666.67 

(assuming $0 in prior TrOOP 

accumulation). In this scenario, a Part D 

enrollee could receive the POS 

notification based on their OOP costs 

exceeding the threshold of $600 for 

2025, but if they opted into the 

Medicare Prescription Payment Plan, 

because their OOP costs are below the 

maximum monthly cap, the Part D 

sponsor would bill them for the entire 

$650 as part of their first month’s bill. 

Part D sponsors should ensure that 

customer service representatives are 

aware of this possibility when receiving 

inquiries from Part D enrollees 

regarding program election. 

In this proposed rule, we propose to 

codify the requirements noted 

previously that were established in the 

final part one and final part two 

guidance for 2026 and subsequent years 

at § 423.137(i). Specifically, we propose 

to codify the requirement that the Part 

D sponsor must use standard NCPDP 

codes for notifying the pharmacy that an 

enrollee has been identified as likely to 

benefit at (i)(1). We propose to codify 

point of sale requirements for the 

‘‘Medicare Prescription Payment Plan 

Likely to Benefit Notice’’ at paragraph 

(i)(2). Finally, we propose to codify 

requirements for Part D sponsors to 

include a provision in their pharmacy 

network contracts requiring pharmacies 

to provide the likely to benefit 

notification to Part D enrollees at (i)(3). 

(i) Pharmacy Claims Processing 

In accordance with section 1860D– 

2(b)(2)(E)(v)(III)(ff) of the Act, Part D 

sponsors must ensure that enrollee 

participation in the Medicare 

Prescription Payment Plan does not 

affect the amount paid to pharmacies or 

the timing of such payments. In the final 

part one guidance, we established that 

Medicare Prescription Payment Plan 

participants will pay $0 at the POS 

instead of the OOP cost sharing they 

would normally pay at the POS when 

filling a prescription. Consequently, Part 

D sponsors must pay the pharmacy the 

enrollee’s cost-sharing amount in 

addition to the Part D sponsor’s portion 

of the payment. The final part one and 

final part two guidance established 

standards for 2025 related to pharmacy 

claims processing. Additional details 

related to pharmacy payment 

obligations are discussed in section (j) of 

this proposed rule. 

To ensure a uniform, consistent 

claims adjudication process and to 

leverage existing Part D processes to 

minimize operational burdens, the final 

part one guidance established that Part 

D sponsors and pharmacies must use a 

Bank Identification Number (BIN) and/ 


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or Processor Control Number (PCN) 

electronic claims processing 

methodology for applicable Medicare 

Prescription Payment Plan transactions. 

CMS believes that this standardized 

approach to processing claims under the 

Medicare Prescription Payment Plan 

satisfies the statutory provisions of the 

Medicare Prescription Payment Plan 

(such as enabling $0 OOP cost sharing 

at the POS for all covered Part D drugs) 

while also having minimal effect on 

other existing Part D processes (such as 

COB claims processing with 

supplemental payers, PDE cost/payment 

field reporting, or TrOOP 

accumulation). 

In addition to the agency’s authorities 

with respect to the Medicare 

Prescription Payment Plan under 

section 11202 of the IRA, CMS has 

authority under section 1860D– 

12(b)(3)(D) of the Act to impose 

additional contractual terms and 

conditions on Part D plan sponsors that 

are necessary and appropriate. 

Consistent with our authority under 

section 11202 of the IRA and under 

section 1860D–12(b)(3)(D) of the Act, in 

this proposed rule, we propose to codify 

the requirement that Part D sponsors 

use, and ensure that pharmacies use, the 

Medicare Prescription Payment Plan 

claims processing methodology outlined 

herein. Except for certain scenarios 

discussed in the final part two guidance 

and in detail in this section, Part D 

sponsors must utilize, and must ensure 

that pharmacies utilize, an additional 

BIN/PCN that is unique to the Medicare 

Prescription Payment Plan to facilitate 

electronic processing of supplemental 

COB transactions for program 

participants. Part D sponsors must 

provide the unique Medicare 

Prescription Payment Plan BIN/PCN 

and any other pertinent billing 

information to the pharmacy on paid 

claim responses when the enrollee is 

also a Medicare Prescription Payment 

Plan participant. 

CMS regulations at 42 CFR 

423.120(c)(4) require the Part D sponsor 

to assign and exclusively use unique 

routing and beneficiary identifiers for 

the Medicare Part D program. The intent 

of the requirement is to ensure that: (1) 

pharmacies can routinely identify 

situations in which they are billing a 

Part D claim, and (2) payers secondary 

to Part D can properly coordinate 

benefits on Part D claims. During the 

bidding process, plans are required to 

submit BIN/PCN information; CMS 

periodically extracts and posts the 

information on the CMS website to 

assist those involved in the processing 

of pharmacy claims for beneficiaries 

enrolled in Part D. The posting of BIN/ 

PCN information would also be of 

assistance to pharmacies as part of 

Medicare Prescription Payment Plan 

transaction processing as it provides the 

information necessary for a pharmacy to 

route the claim to the correct processor. 

We required in final part one guidance 

that Part D sponsors assign a programspecific PCN that starts with ‘‘MPPP.’’ 

In addition, Part D sponsors must report 

the new BIN/PCN to CMS. 

The method established in the final 

part one guidance results in two 

transactions being submitted by the 

pharmacy to the same Part D sponsor (or 

their PBM), using two different BIN/ 

PCN combinations. The Part D sponsor’s 

primary unique BIN/PCN (as required 

by 42 CFR 423.120(c)(4)) is used for the 

initial Part D claim adjudication; the 

Part D sponsor then returns the 

appropriate OOP cost sharing amount in 

the NCPDP Telecommunication 

Standard response pricing segment field 

‘‘Patient Pay Amount’’ (505–F5). Then, 

a second Medicare Prescription 

Payment Plan BIN/PCN is used to 

process only the final OOP participant 

liability amount; this process accounts 

for any other payments made by 

supplemental coverage to which the 

participant may be entitled that may 

reduce the participant’s OOP cost. The 

transaction processed through the 

Medicare Prescription Payment Plan 

BIN/PCN must be submitted after 

processing any applicable other payer 

transactions in order to capture the final 

patient responsibility amount after all 

other payers have paid. This allows the 

Part D sponsor to pay the pharmacy for 

the amount the participant would 

otherwise have paid at the POS to 

obtain their prescription. This process 

also allows the ‘‘Patient Pay Amount’’ to 

be used by Part D sponsors for other 

downstream reporting requirements, 

such as PDE records and explanation of 

benefits (EOB) reporting, which reflect 

the actual participant liability amounts 

as incurred. 

To clarify, Medicare Prescription 

Payment Plan payments are not 

considered to be OHI, as the 

participant’s Part D sponsor is the 

source of both primary and Medicare 

Prescription Payment Plan payments to 

the pharmacy. Information Reporting 

(Nx) transactions will not be generated 

for Medicare Prescription Payment Plan 

COB transactions, as the Part D plan is 

the entity processing both the primary 

and Medicare Prescription Payment 

Plan claims and will already be aware 

of necessary transaction data. 

The process established in the final 

part one guidance also allows Part D 

sponsors to continue to adhere to 

Medicare Secondary Payer (MSP) laws 

and any other Federal and state laws 

establishing payers of last resort (for 

example, AIDS Drug Assistance 

Programs (ADAPs)), as discussed in the 

Medicare Prescription Drug Benefit 

Manual Chapter 14, Section 30.3.13. As 

noted earlier in this section, 

transactions submitted through the 

Medicare Prescription Payment Plan 

BIN/PCNs are to be processed after all 

other payers, including SPAPs, ADAPs, 

or charities. CMS is aware of concerns 

that the return of a $0 claim response at 

the POS may inhibit pharmacies from 

offering suggestions for their patients to 

explore other mechanisms to reduce 

OOP costs, like charitable organizations. 

CMS recognizes the importance of 

charitable organizations and other 

supplemental payers in reducing OOP 

costs for eligible Part D enrollees; 

nothing in the final part one or part two 

guidance prohibits pharmacies from 

continuing their current practices with 

regard to recommending charitable 

support to patients. 

The final part two guidance also 

noted that final patient pay amount 

returned to the pharmacy by a 

supplemental payer for a covered Part D 

drug may occasionally be higher than 

the original Part D patient pay amount. 

In these cases, for the program 

participant’s portion of the claim (what 

they would have paid directly to the 

pharmacy), the Part D sponsor may only 

include in the Medicare Prescription 

Payment Plan the participant’s original 

Part D cost sharing, as determined by 

their plan-specific benefit structure. 

The final part one guidance stated 

that Part D sponsors must ensure that 

there is no impact to PDE cost/payment 

field reporting as a result of this claims 

processing methodology. PDE 

submissions must reflect participant 

and plan liability amounts as if the 

Medicare Prescription Payment Plan did 

not apply. Additionally, this approach 

should have no impact to prescriber or 

participant real-time benefit tools, 

meaning participant liability amounts 

must be represented as if the Medicare 

Prescription Payment Plan did not 

apply. If the individual has opted into 

the program, Part D sponsors can 

consider providing patient costs that 

reflect the program in their participant 

real-time benefit tool, as long as the total 

expected cost-sharing is clearly 

communicated to the individual. If the 

individual has not opted into the 

program, the participant real-time 

benefit tool could be used to alert the 

individual about the program (either 

generally or conditionally when the 

participant real-time benefit tool returns 

a liability amount over a particular 

dollar amount). 


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Except as proposed in paragraph 

§ 423.137(d)(6) of this proposed rule, 

Part D sponsors are not required to 

include under this program paper 

claims submitted to the Part D sponsor 

by a Medicare Prescription Payment 

Plan participant. ‘‘Paper claims’’ refer to 

any claims for which the participant 

requests retroactive reimbursement by 

the Part D sponsor (whether the request 

is made via a paper form, 

telephonically, or electronically), 

including requests for direct member 

reimbursement for OON claims. 

In the final part two guidance, we 

established requirements for the 

readjudication of eligible prescription 

drug claims for new Medicare 

Prescription Payment Plan participants. 

When a Part D enrollee receives the 

‘‘Medicare Prescription Payment Plan 

Likely to Benefit Notice’’ from the 

pharmacy, they may choose to take time 

to consider opting into the program and 

leave the pharmacy without the 

prescription that triggered the 

notification. As such, when the Part D 

enrollee returns to the pharmacy to pick 

up their prescription after successfully 

opting into the program, the 

prescription claim that triggered the 

notification must be readjudicated to 

allow for appropriate processing by the 

Part D sponsor and/or PBM. Should a 

Part D enrollee have other unpaid 

claims at the same pharmacy for 

covered Part D drugs from prior dates of 

service, in addition to the prescription 

that may have triggered the likely to 

benefit notification, they may also 

request that those claims be 

readjudicated, so as to be included in 

the Medicare Prescription Payment 

Plan. CMS encourages Part D sponsors 

to provide their enrollees with 

education and information on how to 

proceed with readjudication of other 

unpaid claims for covered Part D drugs. 

For example, a Part D enrollee is 

prescribed a new medication with an 

OOP cost that is above the POS 

notification threshold. The Part D 

sponsor would notify the pharmacy that 

the enrollee is likely to benefit from the 

Medicare Prescription Payment Plan. 

The pharmacy would then provide the 

‘‘Medicare Prescription Payment Plan 

Likely to Benefit Notice’’ to the Part D 

enrollee. The enrollee decides to leave 

the pharmacy without paying for their 

high-cost prescription, so they can 

contact their plan and opt into the 

program. However, the pharmacy also 

has two other covered Part D 

prescriptions filled for the Part D 

enrollee from prior dates of service, for 

which the Part D enrollee also decided 

to leave the pharmacy without picking 

up and paying. When the Part D 

enrollee returns to the pharmacy after 

their election into the Medicare 

Prescription Payment Plan has been 

effectuated, the Part D sponsor must 

require the pharmacy to reverse and 

reprocess the high-cost claim that 

triggered the likely to benefit 

notification. The program participant 

would then pay $0 at the pharmacy for 

the high-cost claim and pay their typical 

plan-defined cost sharing for the other 

claims with prior dates of service. 

Alternatively, the Part D enrollee could 

request that the pharmacy reverse and 

reprocess all three claims, so the 

program participant pays $0 at the 

pharmacy for all three drugs. 

In the case of same-day program 

effectuation (when the Part D claim date 

of service is the same as the date of 

program effectuation), the pharmacy is 

not required to reverse and resubmit the 

Part D claim, provided that the 

pharmacy otherwise obtains the 

necessary Medicare Prescription 

Payment Plan BIN/PCN for the programspecific transaction. 

CMS noted that Part D sponsors are 

not required to provide that pharmacies 

reverse and reprocess claims under the 

Medicare Prescription Payment Plan 

that have already been paid for by the 

Part D enrollee. As noted in the final 

part one guidance and proposed here at 

§ 423.137(d)(6), Part D sponsors must 

have processes in place to reimburse 

enrollee cost sharing when an enrollee 

has met the conditions for a retroactive 

election into the Medicare Prescription 

Payment Plan. 

As noted in section (h) of this 

proposed rule, in the final part one and 

final part two guidance, we established 

that, in general, all Medicare 

Prescription Payment Plan requirements 

are the same for every pharmacy type, 

including mail order, home infusion, 

specialty, and long-term care 

pharmacies. However, CMS is aware 

that different pharmacy types may have 

slightly different approaches to 

processing covered Part D claims for 

Medicare Prescription Payment Plan 

participants. Therefore, in the final part 

one and final part two guidance, we 

established standards for unique 

pharmacy scenarios and different 

pharmacy types. 

The final part two guidance described 

the processing of covered Part D claims 

for Medicare Prescription Payment Plan 

participants in special pharmacy 

settings. As discussed in that guidance, 

CMS is aware that there are multiple 

types of payment arrangements between 

long-term care pharmacies and longterm care facilities and/or Part D 

enrollees. In some situations, long-term 

care pharmacies do not collect Part D 

cost sharing from the enrollee but 

instead bill the long-term care facility 

for the final patient OOP responsibility. 

When such an arrangement is in place 

between a long-term care pharmacy and 

a long-term care facility, and an enrollee 

in a long-term care facility is 

participating in the Medicare 

Prescription Payment Plan, billing the 

participant’s Part D plan’s Medicare 

Prescription Payment Plan BIN/PCN for 

the participant’s OOP costs (when the 

pharmacy would not have otherwise 

directly billed the enrollee) may result 

in additional financial burden on that 

participant. Given our understanding of 

the variation in how long-term care 

pharmacies dispense and bill covered 

Part D drugs, we are not proposing 

specific requirements for Part D 

sponsors related to the use of the 

Medicare Prescription Payment Plan 

BIN/PCN with long-term care 

pharmacies. CMS encourages Part D 

sponsors to take the participant’s 

particular circumstances into account 

when considering Medicare Prescription 

Payment Plan billing practices and to 

work with the participant, their 

authorized representative, and the longterm care pharmacy to understand the 

best billing approach for the participant. 

Additionally, as noted in section (h) 

of this proposed rule, I/T/U pharmacies 

provide no-cost prescription drugs to 

eligible IHS enrollees. When IHSeligible Part D enrollees fill a 

prescription at an I/T/U pharmacy, their 

covered Part D prescription drug cost 

sharing, as defined by their plan’s 

benefit structure, is not collected at the 

POS. Given that, if an IHS-eligible Part 

D enrollee is also participating in the 

Medicare Prescription Payment Plan, 

the Part D plan sponsor must ensure 

that the I/T/U pharmacy does not bill 

the Part D plan’s Medicare Prescription 

Payment Plan BIN/PCN. Instead, the 

Part D plan sponsor must ensure that 

the I/T/U pharmacy processes the claim 

as if the IHS-eligible enrollee were not 

participating in the Medicare 

Prescription Payment Plan. If a Part D 

sponsor receives a claim from an I/T/U 

pharmacy that was submitted to the 

Medicare Prescription Payment Planspecific BIN/PCN, the Part D sponsor 

must reject the claim. To help prevent 

this situation from occurring, Part D 

sponsors must also put in place 

processes to prevent Medicare 

Prescription Payment Plan BIN/PCNs 

from being returned on paid claim 

responses to I/T/U pharmacies. These 

requirements apply only with respect to 

I/T/U pharmacies that dispense 

prescriptions at no cost to the IHS 

enrollee. The Part D sponsor must 


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ensure other network pharmacies 

providing services to Part D enrollees 

process claims in accordance with the 

Medicare Prescription Payment Plan 

requirements, as established in the final 

part one guidance and final part two 

guidance. 

At § 423.137(j)(7), we propose 

requirements related to transparency 

around OOP costs for the Medicare 

Prescription Payment Plan at the 

pharmacy POS, a topic CMS did not 

address through program instruction for 

CY 2025. Once an enrollee is a 

participant in the Medicare Prescription 

Payment Plan, they will pay $0 at the 

pharmacy POS. Part D sponsors then 

correctly calculate the monthly caps 

based on the statutory formulas, 

determine the amount to be billed, and 

send monthly bills to program 

participants. CMS has heard concerns 

about the potential lack of participant 

visibility into their OOP costs for the 

Medicare Prescription Payment Plan at 

the POS, given the $0 final claim 

response from the Part D sponsor to the 

pharmacy. As noted in the final part two 

guidance, CMS strongly encourages Part 

D sponsors to educate program 

participants on the options for assessing 

OOP costs for the Medicare Prescription 

Payment Plan prior to the pharmacy 

POS (such as utilizing interactive 

prescription drug cost tools available on 

the Part D sponsor’s website or calling 

the plan’s customer service line). 

However, to provide additional support 

for OOP cost transparency for Medicare 

Prescription Payment Plan participants, 

we are proposing requirements for Part 

D sponsors to ensure that pharmacies 

can easily access information on a Part 

D enrollee’s OOP costs for the Medicare 

Prescription Payment Plan for 

prescriptions processed under the 

program at the POS. These costs should 

be provided in the paid claim billing 

response on the Medicare Prescription 

Payment Plan COB transaction. In 

addition, Part D sponsors must ensure 

that pharmacies are prepared to provide 

this information to a participant at the 

POS. We seek comment on the proposal, 

including suggested processes for how 

Part D sponsors can provide this 

information to pharmacies in a manner 

that conforms with existing standards. 

In this proposed rule, we propose to 

codify the requirements established in 

the final part one and final part two 

guidance for 2026 and subsequent years 

and noted previously at § 423.137(j). We 

propose to codify that Part D sponsors 

and pharmacies must use a BIN/PCN 

electronic claims processing 

methodology for Medicare Prescription 

Payment Plan transactions at paragraph 

(j)(1). We propose to codify the 

requirement for handling of higher final 

patient pay amounts from supplemental 

payers at paragraph (j)(2). We propose to 

codify that the claims processing 

methodology have no impact on PDE 

reporting at paragraph (j)(3). We propose 

to codify that program participation and 

the associated claims processing 

methodology have no impact on the 

cost-sharing information displayed in 

real-time benefit tools at paragraph 

(j)(4). We propose to establish standards 

for exclusion of retroactive or ‘‘paper’’ 

claims at paragraph (j)(5). We propose to 

codify requirements for the 

readjudication of certain covered Part D 

claims for program participants at (j)(6). 

Finally, we propose to codify new 

requirements for Part D sponsors to 

enhance OOP cost transparency at the 

POS at (j)(7). 

(j) Pharmacy Payment Obligations 

Consistent with 1860D– 

2(b)(2)(E)(v)(III)(ff) of the Act, Part D 

sponsors must pay the pharmacy the 

enrollee’s cost-sharing amount in 

addition to the Part D sponsor’s portion 

of the payment. The final part one and 

final part two guidance established 

standards for 2025 related to pharmacy 

payment obligations. 

Consistent with section 1860D– 

12(b)(4) of the Act and 42 CFR 423.520, 

and as stated in the final part one 

guidance, Part D sponsors must 

reimburse a network pharmacy the total 

of a participant’s OOP costs for the 

Medicare Prescription Payment Plan 

and the Part D sponsor portion of the 

payment for a covered Part D drug no 

later than 14 calendar days after the date 

on which the claim is received for an 

electronic claim or no later than 30 

calendar days after the date on which 

the claim is received for any other 

claim. The timing of payment of the 

total of a participant’s OOP costs for the 

Medicare Prescription Payment Plan 

and the Part D sponsor portion of the 

payment for long-term care and home 

infusion pharmacies should follow 

current practices for payment of the Part 

D sponsor portion to be consistent with 

this requirement. 

Consistent with section 1860D–11(i) 

of the Act, CMS may not interfere with 

the negotiations between Part D 

sponsors and pharmacies and generally 

may not institute a price structure for 

the reimbursement of covered Part D 

drugs. Further, as stated in the final part 

one guidance, CMS does not have the 

statutory authority to directly reimburse 

Part D sponsors’ contracted pharmacies 

for costs associated with administering 

the program. That said, CMS recognizes 

the important role that pharmacies will 

play in the implementation of this 

program and strongly encourages Part D 

sponsors to ensure that pharmacies 

receive adequate reimbursement for 

services provided to Part D enrollees 

related to participation in the Medicare 

Prescription Payment Plan. 

As established in the final part one 

and final part two guidance, any 

additional transaction fees or other costs 

pharmacies incur from processing 

claims under the Medicare Prescription 

Payment Plan or otherwise related to the 

program are considered allowable 

pharmacy costs associated with the 

dispensing of a covered Part D drug that 

may be paid through applicable 

dispensing fees. Consistent with 42 CFR 

423.100 and sections 20.6 and 20.7 of 

Chapter 5 of the Medicare Prescription 

Drug Benefit Manual, a drug’s 

negotiated price must include any 

dispensing fees, and uniform negotiated 

prices must be available to plan 

enrollees for a particular covered Part D 

drug when purchased from the same 

pharmacy. Should Part D sponsors and 

pharmacies come to contractual 

arrangements that reimburse pharmacies 

for program operations through a nondispensing fee mechanism (for example, 

remuneration for administrative 

services), these arrangements must be 

reported appropriately via the bid 

pricing tool and direct and indirect 

remuneration (DIR) reporting, as 

necessary. 

As established in the final part one 

guidance and section (f) of this 

proposed rule, it is not permissible for 

Part D sponsors to charge program 

participants fees related to the Medicare 

Prescription Payment Plan. 

Additionally, section 1860D– 

2(b)(2)(E)(v)(III)(ff) of the Act requires 

Part D sponsors to ensure that enrollee 

participation in the Medicare 

Prescription Payment Plan does not 

affect the amount paid to pharmacies or 

the timing of such payments. As a 

result, Part D sponsors cannot impose 

any fees or costs related to program 

implementation on pharmacies, as such 

fees or costs would affect the amount 

paid to pharmacies in violation of the 

statute. As established in the final part 

one guidance, participation in the 

Medicare Prescription Payment Plan is 

an arrangement between the Part D 

sponsor and the Part D enrollee; 

pharmacies cannot be held responsible 

for any unsettled balances of a 

participant or for collecting unpaid 

balances from the participant on the 

Part D sponsor’s behalf. 

In this proposed rule, we propose to 

codify the requirements established in 

the final part one and final part two 

guidance for 2026 and subsequent years 

as noted previously at § 423.137(k). 


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Specifically, we propose to codify the 

requirement that the Medicare 

Prescription Payment Plan does not 

affect the amount or timing of payment 

to pharmacies at paragraph (k)(1), 

including that Part D sponsors cannot 

impose any fees or costs related to 

program implementation on pharmacies 

and that pharmacies cannot be held 

responsible for any unsettled balances 

of a participant or for collecting unpaid 

balances from the participant on the 

Part D sponsor’s behalf. 

(k) Monitoring, Compliance and Data 

Submission Requirements 

In the final part one guidance, we 

clarified that existing requirements in 

42 CFR 423.514(a) governing data 

collection for Part D sponsors apply to 

the Medicare Prescription Payment 

Plan. Accordingly, in the final part one 

guidance, we stated that Part D sponsors 

must report information related to the 

Medicare Prescription Payment Plan on 

PDE records and through new reporting 

requirements at the beneficiary level 

and contract-PBP levels. Part D sponsors 

must report data at the beneficiary-level 

on election status in the program 

through the MARx System and contractlevel data about the program through 

HPMS. These data elements were 

formally issued for public comment in 

the Federal Register through the Office 

of Management and Budget (OMB) 

Information Collection Request (ICR) 

process. We are not scoring this 

provision in the Collection of 

Information section of this rule since we 

believe all information impacts of this 

provision have already been accounted 

for under OMB control numbers 0938– 

1468, 0938–0982, and 0938–0992. 

In the final part two guidance, we 

stated that CMS will use this data, along 

with data about plan grievances and 

beneficiary complaints entered in the 

Medicare Complaints Tracking Module 

(CTM), to assess compliance with all 

Medicare Prescription Payment Plan 

requirements and ensure program 

integrity. We stated our expectation that 

Part D sponsors incorporate the 

Medicare Prescription Payment Plan 

into their compliance programs in 

accordance with 42 CFR 

423.504(b)(4)(vi) to ensure they are 

meeting program requirements. We also 

noted that, as stated in 42 CFR 

422.504(e) and 423.505(e), CMS and/or 

its contractors may conduct specific 

audits of Part D sponsors’ 

implementation of the Medicare 

Prescription Payment Plan and may 

initiate audit activity that requires 

additional data collection or site visits. 

(l) General Part D Sponsor Outreach and 

Education Requirements 

Under section 1860D– 

2(b)(2)(E)(v)(III)(bb) of the Act, Part D 

sponsors must notify prospective Part D 

enrollees prior to the plan year through 

promotional materials of the option to 

participate in the Medicare Prescription 

Payment Plan. Additionally, under 

section 1860D–2(b)(2)(E)(v)(III)(cc) of 

the Act, Part D sponsors must also 

provide information on such option in 

educational materials to Part D 

enrollees. 

To ensure all prospective and current 

Part D enrollees are aware of the 

program, we propose to codify 

requirements that are consistent with 

those included in the final part two 

guidance for Part D sponsors to provide 

general education on the program via a 

mailing and through their websites for 

2026 and subsequent years at 

§§ 423.137(m)(1) and 423.137(m)(2), 

respectively. We propose requiring Part 

D sponsors to send a program election 

request form and additional educational 

information on the program either in the 

membership ID card mailing, described 

at § 423.2267(e)(32), or in a separate 

mailing sent out within the same 

timeframe. Under § 423.2267(e)(32), 

membership ID cards must be provided 

to new enrollees within 10 calendar 

days from receipt of CMS confirmation 

of enrollment or by the last day of the 

month prior to the plan effective date, 

whichever is later. Part D sponsors may 

send the Medicare Prescription Payment 

Plan mailing described at 

§ 423.137(m)(1) to only new plan 

enrollees who typically receive the 

membership ID card mailing or to all of 

their Part D enrollees. Further, for 2026 

and subsequent years, we propose to 

codify requirements at § 423.137(m)(2) 

for plans to include certain information, 

as described in more detail later in this 

section, on their publicly available 

websites, described at § 423.128(d)(2). 

As we stated in the final part two 

guidance, Part D sponsors are 

encouraged to use the CMS-developed 

educational fact sheet to satisfy 

requirements to provide supplemental 

information on the program. 

In the final part two guidance, we 

explained that CMS has updated 

existing Part D resources that are 

required to be furnished to Part D 

enrollees under § 423.2267(e) to include 

information about the program. These 

include the Annual Notice of Change 

(ANOC, described at § 423.2267(e)(3)), 

the Evidence of Coverage (EOC, 

described at § 423.2267(e)(1)), and the 

Explanation of Benefits (EOB, described 

at § 423.128(e)(7)). Each has been 

updated to include program information 

through the OMB ICR process (for the 

EOB) or through the general annual 

issuance of Part D model materials (for 

the ANOC and EOC). In addition to 

meeting these requirements, we propose 

to codify at § 423.137(m)(2) for 2026 and 

subsequent years the following 

requirements for a Part D sponsor to 

include on its website: 

• An election request mechanism, as 

described at § 423.137(d)(2). 

• An overview of the Medicare 

Prescription Payment Plan. 

• Examples of program calculations 

and explanations. 

• A description of Part D enrollees 

who may be likely to benefit. 

• The financial implications of 

program participation. 

• The implications of missing 

monthly payments. 

• Instructions for opting into and out 

of the program. 

• A description of the standards for 

retroactive election when an enrollee 

believes that a delay in filling a 

prescription due to the 24-hour 

effectuation timeframe may seriously 

jeopardize their life, health, or ability to 

regain maximum function. 

• A description of the dispute and 

grievance procedure, as required under 

§ 423.137(h). 

• Contact information for Part D 

enrollees to obtain further information. 

• General information about the LIS 

program, including how LIS enrollment 

for eligible individuals is likely to be 

more advantageous than participation in 

the Medicare Prescription Payment 

Plan. 

We also propose to amend 

§ 423.2265(b) to add paragraph (b)(16) to 

include information on the Medicare 

Prescription Payment Plan as required 

content for Part D sponsor websites. 

Additionally, as described in the final 

part two guidance, Part D sponsors may 

also include information on the 

Medicare Prescription Payment Plan in 

their marketing materials. In developing 

their materials, Part D sponsors must 

ensure that the materials accurately 

convey program information and are 

compliant with existing Part D 

requirements specified at 42 CFR part 

423 subpart V. Part D sponsors should 

also refer to the MCMG, which provides 

guidance and examples regarding what 

constitutes a marketing material, the 

rules and processes for sponsor 

submission of those marketing materials 

using HPMS, and use of marketing 

materials. 

CMS is aware that health care 

providers and pharmacists play a key 

role in cost-of-care conversations with 

their patients that can include 


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21 73 FR 20489–20490 in ‘‘Medicare Program; 

Policy and Technical Changes to the Medicare 

Prescription Drug Benefit’’ published April 15, 2008 

(73 FR 20486). However, CMS’s longstanding 

interpretation of the phrase ‘‘[a]gents when used for 

. . . weight gain . . . ’’ (emphasis added) in the 

same section of the Act has not included drugs used 

to treat acquired immunodeficiency syndrome 

(AIDS) wasting and cachexia (73 FR 20490). 

22Recognition of Obesity as a Disease H–440.842. 

Accessed June 28, 2024 from https://policysearch.

ama-assn.org/policyfinder/detail/obesity?uri=%2

FAMADoc%2FHOD.xml-0-3858.xml. 

23CDC. Adult Obesity Facts. May 14, 2024. 

Accessed June 28, 2024 from https://www.cdc.gov/ 

obesity/php/data-research/adult-obesity-facts.html. 

24Mechanick J.I., Garber A.J., Handelsman Y, 

Garvey W.T. American Association of Clinical 

Endocrinologists’ position statement on obesity and 

obesity medicine. Endocr Pract. 2012 Sep– 

Oct;18(5):642–8. doi: 10.4158/EP12160.PS. 

25World Health Organization. Obesity and 

Overweight. March 1, 2024. Accessed August 21, 

2024 from https://www.who.int/news-room/factsheets/detail/obesity-and-overweight. 

26American Medical Association House of 

Delegates. Resolution 420 (A–13). Recognition of 

Obesity as a Disease. May 15, 2013. Available from: 

https://media.npr.org/documents2013/jun/amaresolution-obesity.pdf. 

27Mechanick J.I., Hurley D.L., Garvey W.T. 

Adiposity-Based Chronic Disease As a New 

Diagnostic Term: The American Association of 

Clinical Endocrinologists and American College Of 

Endocrinology Position Statement. Endocr Pract. 

2017 Mar;23(3):372–378. doi: 10.4158/ 

EP161688.PS. 

28American Association of Clinical 

Endocrinologists and American College of 

Endocrinology Comprehensive Clinical Practice 

Guidelines for Medical Care of Patients with 

Obesity, Endocrine Practice, Volume 22, 

Supplement 3, 2016, Pages 1–203, https://doi.org/ 

10.4158/EP161365.GL. 

29 Jensen M.D., Ryan D.H., Apovian C.M., et al. 

2013 AHA/ACC/TOS guideline for the management 

of overweight and obesity in adults: a report of the 

American College of Cardiology/American Heart 

Association Task Force on Practice Guidelines and 

The Obesity Society [published correction appears 

in Circulation. 2014 Jun 24;129(25 Suppl 2):S139– 

40]. Circulation. 2014;129(25 Suppl 2):S102–S138. 

doi:10.1161/01.cir.0000437739.71477.ee. 

30CDC. Adult Obesity Facts. May 14, 2024. 

Available from https://www.cdc.gov/obesity/adultobesity-facts/index.html. 

discussions about potential prescription 

drug costs. As noted in the final part 

two guidance, CMS encourages Part D 

sponsors to include information about 

the Medicare Prescription Payment Plan 

in their communications with 

contracted providers and network 

pharmacies. More specifically for 

contracted providers, CMS encourages 

Part D sponsors to target these 

communications to subgroups of 

providers based on provider specialty 

and likelihood of prescribing high cost 

covered Part D drugs. 

With regard to network pharmacies, 

CMS encourages Part D sponsors to 

provide pharmacies with education and 

resources related to the Medicare 

Prescription Payment Plan. While some 

pharmacies, such as specialty 

pharmacies, may be more likely to 

dispense high-cost drugs that trigger the 

POS notification, all pharmacy types 

would benefit from program resources 

and a thorough understanding of how 

the Medicare Prescription Payment Plan 

works and how it can benefit 

participants. 

The CMS-developed fact sheet may 

serve as a useful tool for Part D sponsors 

to communicate information on the 

Medicare Prescription Payment Plan 

with both contracted providers and 

pharmacies. 

We are not scoring any aspects of this 

provision related to the inclusion of 

Medicare Prescription Payment Plan 

information in the ANOC, EOC, or EOB 

in the Collection of Information section 

of this rule since we believe all 

information impacts of those provisions 

have already been accounted for under 

OMB control numbers 0938–1051 and 

0938–1228. We are also not scoring the 

requirement to provide the election 

request form, as we believe the 

information impact of that provision has 

already been accounted for under OMB 

control number 0938–1475. 

(m) Severability 

The Medicare Prescription Payment 

Plan provisions proposed herein are 

separate and severable from one 

another. If any of these provisions, once 

finalized, is held to be invalid or 

unenforceable by its terms, or as applied 

to any person or circumstance, or stayed 

pending further agency action, it is our 

intention that such provision shall be 

severable from this rule and not affect 

the remainder thereof, or the application 

of such provision to other persons not 

similarly situated or to other, dissimilar 

circumstances. 

III. Strengthening Current Medicare 

Advantage, Medicare Prescription Drug 

Benefit, and Medicaid Program Policies 

A. Part D Coverage of Anti-Obesity 

Medications (AOMs) (§ 423.100) and 

Application to the Medicaid Program 

1. Background 

The statutory definition of a covered 

Part D drug at section 1860D–2(e)(2) of 

the Social Security Act (the Act) 

excludes certain drugs and uses— 

specifically, those that may be excluded 

by Medicaid under section 1927(d)(2) of 

the Act. This includes ‘‘[a]gents when 

used for anorexia, weight loss, or weight 

gain.’’ Since the drugs, classes of drugs, 

and medical uses listed in section 

1927(d)(2) of the Act ‘‘may be excluded 

from coverage’’ (emphasis added) under 

Medicaid, state Medicaid programs have 

discretion over whether to provide such 

coverage, whereas Medicare does not. 

Since the beginning of the Part D 

program in 2006, CMS has interpreted 

the statutory exclusion of ‘‘[a]gents 

when used for . . . weight loss . . . ’’ 

at section 1927(d)(2)(A) of the Act to 

mean that a drug when used for weight 

loss, even when not used for cosmetic 

purposes, is excluded from the 

definition of covered Part D drug.21 All 

drugs used for weight loss have been 

excluded historically from the 

definition of covered Part D drug and 

considered to be an optional benefit 

under the Medicaid program, at the 

discretion of the state Medicaid 

program, regardless of their use to treat 

the disease of obesity. Drugs used for 

weight loss or chronic weight 

management can be covered by Part D 

plans only as a supplemental benefit. 

Multiple medical and scientific 

organizations consider obesity to be a 

chronic disease.22 23 24 25 In its 2013 

resolution to recognize obesity as a 

disease, the American Medical 

Association (AMA) noted that although 

obesity is characterized by increased 

adiposity (body fat), obesity is a 

hormonal disease state with impaired 

functioning of multiple metabolic 

processes.26 Similarly, the American 

Association of Clinical Endocrinologists 

and American College of Endocrinology 

(AACE/ACE) recognizes obesity as a 

chronic disease state with adipositybased complications and 

pathophysiologic processes resulting 

from the dysregulated secretion of 

inflammatory and hormonal factors 

from fat cells.27 Obesity increases the 

risk of, or exacerbates, hypertension, 

dyslipidemia, type 2 diabetes, 

cardiovascular disease, obstructive sleep 

apnea, nonalcoholic steatohepatitis 

(NASH)/metabolic dysfunctionassociated steatohepatitis (MASH), and 

some cancers, among other 

conditions.28 Obesity also is associated 

with increased risk of all-cause 

mortality and death due to 

cardiovascular disease.29

The prevalence of obesity in both the 

United States (U.S.) population, and in 

the Medicare population more 

specifically, has increased since the 

beginning of the Part D program. 

According to the Centers for Disease 

Control and Prevention (CDC), the 

prevalence of obesity (defined by CDC 

as body mass index [BMI] of 30 kg/m2

or greater) in the U.S. population 

increased from 30.5 percent in 1999 to 

2000 to 41.9 percent from 2017 to March 

2020.30 The prevalence of obesity from 

2017 to March 2020 was 49.9 percent of 

non-Hispanic Black adults, 45.6 percent 


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31Stierman, B., et al. National Health and 

Nutrition Examination Survey 2017–March 2020 

Prepandemic Data Files—Development of Files and 

Prevalence Estimates for Selected Health Outcomes. 

2021. Available from https://stacks.cdc.gov/view/ 

cdc/106273. Note that race and ethnicity categories 

reflect the 1997 Standards for the Classification of 

Federal Data on Race and Ethnicity (62 FR 58782) 

which have since been updated in 2024 (89 FR 

22182). 

32 Internal analysis of 2022 Chronic Conditions 

Data. 

33Chronic Conditions Data Warehouse. Other 

Chronic or Disabling Conditions Trends, 2012– 

2021. April 2023. Available from: https://www2.ccw

data.org/web/guest/medicare-charts/medicareother-chronic-and-disabling-condtions/#b2bother

trend. See also: https://www2.ccwdata.org/ 

documents/10280/19099072/b2b-other-trend.jpg. 

34Obesity Disparities in Medicare Fee-ForService Beneficiaries Data Snapshot. January 2022. 

Available from: https://www.cms.gov/files/ 

document/omh-datasnapshot-obesity.pdf. 

35Stierman, B., et al. National Health and 

Nutrition Examination Survey 2017–March 2020 

Prepandemic Data Files—Development of Files and 

Prevalence Estimates for Selected Health Outcomes. 

2021. Available from https://stacks.cdc.gov/view/ 

cdc/106273. 

36https://www.niddk.nih.gov/health-information/ 

health-statistics/oversight-obesity. 

37Mylona E.K., Benitez G., Shehadeh F., Fleury 

E., Mylonakis S.C., Kalligeros M., Mylonakis E. The 

association of obesity with health insurance 

coverage and demongraphic characteristics: a 

statewide cross-sectional study. Medicince 

(Baltimore). 2020 Jul 2;99(27):e21016. doi: 10.1097/ 

MD.0000000000021016. 

38https://www.cdc.gov/obesity/php/dataresearch/adult-obesity-prevalence-maps.html#cdc_

data_surveillance_section_4-across-states-andterritories. 

39White-House-National-Strategy-on-HungerNutrition-and-Health-FINAL.pdf. 

40Table: GLP–1 and GIP/GLP–1 receptor agonists 

for chronic weight management. Med Lett Drugs 

Ther. 2024 Aug 5;66(1708):e1-e2. doi: 10.58347/ 

tml.2024.1708d. 

41HPMS email. Part D Coverage of Anti-Obesity 

Medications with Medically Accepted Indications. 

March 20, 2024. Available from: https://

www.cms.gov/about-cms/information-systems/ 

hpms/hpms-memos-archive-weekly/hpms-memoswk-4-march-18-22. 

42CMS-approved compendia are described in 

section 1927(g)(1)(B)(i) of the Act. The recognized 

compendia are American Hospital Formulary 

Service Drug Information and DRUGDEX®

Information System. See section 10.6 in chapter 6 

of the Prescription Drug Benefit Manual. Available 

from https://www.cms.gov/medicare/prescriptiondrug-coverage/prescriptiondrugcovcontra/ 

downloads/part-d-benefits-manual-chapter-6.pdf. 

of Hispanic adults, 41.4 percent of nonHispanic white adults, and 16.1 percent 

of non-Hispanic Asian adults.31 With 

respect to the Medicare population, 

CMS data indicate that approximately 

22 percent of all Medicare beneficiaries 

had a diagnosis of obesity in 2022 32

compared to 8.7 percent in 2012.33 As 

of 2020, the proportion of Medicare feefor-service beneficiaries with obesity 

was 24 percent of the Black/African 

American population, 19 percent of the 

White population, 18 percent of the 

Hispanic population, 17 percent of the 

American Indian/Alaska Native 

population, and 7 percent of the Asian/ 

Pacific Islander population.34 However, 

obesity prevalence based on Medicare 

claims data likely underestimates actual 

obesity prevalence in the Medicare 

population since data are dependent on 

the degree to which obesity was 

recorded as a diagnosis code on medical 

claims. This assumption is supported by 

the fact that available National Health 

and Nutrition Examination Survey 

(NHANES) data from 2017 to March 

2020 indicate that the prevalence of 

obesity in the U.S. population age 60 

and older was 41.5 percent, which 

parallels the trend in the general U.S. 

population described in the CDC 

statistics and is much higher than the 

obesity prevalence calculated based on 

Medicare claims data.35

Data on obesity prevalence across the 

entire Medicaid population are limited. 

For example, available state-level data 

indicate that 43.7 percent of adult 

Medicaid enrollees in Rhode Island had 

obesity in 2017 to 2018, which was 

similar to the rate of obesity in the U.S. 

adult population at the same time (42.4 

percent), but higher than the prevalence 

of obesity among adults in the state with 

commercial insurance (36.0 

percent).36 37 The prevalence of obesity 

varies by state; 38 therefore, the 

prevalence of obesity among each state’s 

Medicaid enrollees may be proportional. 

Given the prevalence and the impact 

of obesity in the U.S., the Biden-Harris 

Administration released the National 

Strategy on Hunger, Nutrition, and 

Health focused on ending hunger and 

reducing diet-related diseases such as 

obesity.39 One of the Strategy’s pillars is 

integrating nutrition and health, which 

recognizes the opportunities within 

Medicare and Medicaid to support 

beneficiaries’ access to nutritious foods, 

obesity counseling, and other nutritionrelated services. Reinterpreting the 

statute to provide for coverage for AOMs 

for individuals who have obesity would 

build on that National Strategy by 

offering another tool that can support 

Medicare and Medicaid beneficiaries in 

addressing obesity and living healthier 

lives. Further, CMS believes that 

excluding AOMs from Part D coverage 

has created a scenario where Medicare 

Part D enrollees with obesity have been 

unable to access drug therapy to treat 

what is recognized as a chronic disease, 

potentially exacerbating health 

disparities in groups disproportionately 

affected by obesity. 

Available AOMs in the glucagon-like 

peptide-1 (GLP–1) and glucosedependent insulinotropic polypeptide 

(GIP)/GLP–1 receptor agonist classes 

contain the same active ingredients 

initially approved by the U.S. Food and 

Drug Administration (FDA) to improve 

glycemic control in patients with type 2 

diabetes, and later approved to reduce 

the risk of major adverse cardiovascular 

events in adults with type 2 diabetes 

mellitus and established cardiovascular 

disease. One AOM in the GLP–1 

receptor agonist class has received FDA 

approval for the reduction of the risk of 

major adverse cardiovascular events in 

non-diabetic adults with established 

cardiovascular disease and either 

obesity or overweight.40 The scientific 

evidence on AOMs continues to 

evolve—novel AOMs are in 

development or new indications for 

existing AOMs may be approved in the 

future. A medically accepted indication 

(MAI), as defined in section 1860D– 

2(e)(4) of the Act, refers, in part, to the 

definition of MAI in section 1927(k)(6) 

of the Act. CMS issued guidance on 

March 20, 2024 via a Health Plan 

Management System (HPMS) email 

clarifying that AOMs that receive FDA 

approval for an additional indication 

other than chronic weight management 

can be considered a Part D drug for that 

specific use since the use is an MAI that 

is not a use that is excluded from the 

definition of a Part D drug.41 Therefore, 

under current policy, AOMs are 

coverable under Part D for individuals 

with obesity or overweight only if the 

drug is being prescribed for another 

condition (other than weight loss or 

chronic weight management) for which 

the drug has an FDA-approved 

indication or its use is supported by 

CMS-approved compendia.42 Currently, 

this means that AOMs (or drugs with 

the same active ingredients) are 

coverable under Part D for individuals 

with obesity or overweight for the FDAapproved uses of glycemic control in 

patients with type 2 diabetes, reduced 

risk of major adverse cardiovascular 

events in adults with type 2 diabetes 

mellitus and established cardiovascular 

disease, reduced risk of major adverse 

cardiovascular events in non-diabetic 

adults with established cardiovascular 

disease. Should our proposed 

reinterpretation be finalized, Part D 

enrollees with obesity could receive 

coverage for AOMs even in cases where 

the AOM is prescribed for treatment of 

obesity, and not prescribed for another 

condition that is an FDA-approved 

indication or that is supported by CMSapproved compendia. 

While we refer to AOMs generally 

throughout the discussion of this 

proposed reinterpretation and have 

referred to specific classes of AOMs, 

this proposal is not limited to particular 

drugs or drug classes. Currently 


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43FDA. Draft Guidance for Industry Developing 

Products for Weight Management. February 2007. 

Available from https://www.fda.gov/media/71252/ 

download. 

44American Association of Clinical 

Endocrinologists and American College of 

Endocrinology Comprehensive Clinical Practice 

Guidelines for Medical Care of Patients with 

Obesity, Endocrine Practice, Volume 22, 

Supplement 3, 2016, Pages 1–203, https://doi.org/ 

10.4158/EP161365.GL. 

45Since the inception of the Part D program, CMS 

has aligned Part D with the Medicaid policy that 

prescription drug products being used to treat AIDS 

wasting and cachexia are not considered agents 

used for weight gain, and therefore such products 

are not excluded under in section 1927(d)(2)(A) of 

the Act. The Medicaid policy was effective April 5, 

1999. See Medicaid Drug Rebate Program Release 

#88. March 5, 1999. Available from https://

www.medicaid.gov/medicaid-chip-programinformation/by-topics/prescription-drugs/ 

downloads/rx-releases/state-releases/state-rel088.pdf. 

46American Association of Clinical 

Endocrinologists and American College of 

Endorinology Comprehensive Clinical Practice 

Guidlines for Medical Care of Patients with Obesity, 

Endocrine Pratice, Volume 22, Supplement 3, 2016, 

Pages 1–203, https://doi.org/10.4158/EP161365.GL. 

47Mechanick J.I., Hurley D.L., Gavery W.T. 

Adiposity-Based Chronic Disease As a New 

Diagnostic Term: The American Association of 

Continued 

available AOMs achieve therapeutic 

action through a variety of mechanisms 

including slowed gastric emptying, 

inhibiting dietary fat absorption, and 

targeting receptor pathways in the brain 

that are involved in hunger, cravings, 

and feelings of fullness. We also 

acknowledge that ‘‘AOM’’ is a term used 

pervasively throughout the medical 

literature but is not a term used by the 

FDA in reference to drug development. 

For purposes of this proposal, we use 

the term ‘‘AOM’’ to refer to products 

(drugs and biologicals) for the 

indication of weight management that 

are intended to be used for medical 

weight loss, as described in FDA draft 

guidance 43, consistent with clinical 

practice guidelines.44 We also 

acknowledge that AOMs, when used for 

medical weight loss, are generally 

indicated to reduce excess body weight 

and maintain weight reduction longterm, and not overtly for ‘‘treatment of 

obesity.’’ 

2. Proposed Reinterpretation 

Given the changes in how the medical 

community has come to regard obesity 

as a disease since the start of the Part 

D program, CMS believes that its 

longstanding interpretation of the 

reference in section 1927(d)(2) of the 

Act to ‘‘[a]gents when used for . . . 

weight loss’’ as including AOMs when 

used for weight loss or chronic weight 

management regardless of whether the 

AOMs were used to treat obesity reflects 

an outdated medical understanding, and 

that it would be more consistent with 

current medical views to propose to 

reinterpret the phrase ‘‘[a]gents when 

used for . . . weight loss’’ to exclude 

AOMs when used for the treatment of 

obesity. As a result of this proposed 

reinterpretation, AOMs— when used for 

weight loss or chronic weight 

management for the treatment of 

obesity—would no longer be excluded 

from Part D coverage based on section 

1860D–2(e)(2) of the Act, which 

prohibits Part D coverage of ‘‘drugs or 

classes of drugs. . .which may be 

excluded from coverage or otherwise 

restricted under section 1927(d)(2).’’ In 

addition, CMS would no longer 

consider AOMs when used for weight 

loss or chronic weight management for 

the treatment of obesity to be excluded 

from the definition of Part D drug at 

§ 423.100, which at paragraph (2)(ii) 

excludes drugs that may be excluded 

from Medicaid coverage under section 

1927(d)(2). Our proposal is not 

contingent on the underlying etiology of 

obesity (for example, due to unspecified 

causes or specified causes such as druginduced obesity or obesity due to 

specific genetic variants or syndromes) 

and would encompass any drugs that 

are indicated for weight loss or chronic 

weight management for the treatment of 

obesity. In table 2., we provide 

examples to illustrate the effect of our 

proposal on AOM coverage in Medicare 

Part D. 

This proposed reinterpretation would 

align with our longstanding policy 

interpreting the phrase ‘‘[a]gents when 

used for. . .weight gain’’ in section 

1927(d)(2)(A) to not include drugs used 

to treat acquired immunodeficiency 

syndrome (AIDS) wasting and cachexia 

(73 FR 20490).45 CMS believes that its 

longstanding interpretation of the 

phrase ‘‘[a]gents when used for . . . 

weight gain’’ in section 1927(d)(2)(A) is 

correct, and by adjusting its 

interpretation of ‘‘[a]gents when used 

for . . . weight loss,’’ we would be 

bringing the interpretation of these two 

phrases into alignment. 

We are not proposing to reinterpret 

the statutory exclusion of ‘‘[a]gents 

when used for . . . weight loss’’ in 

section 1927(d)(2) of the Act to permit 

Part D coverage of AOMs when used for 

weight loss or chronic weight 

management in individuals with 

overweight, even if such individuals 

have weight-related comorbid 

conditions. We are not proposing such 

a change in interpretation because, 

unlike obesity, overweight is not 

recognized as a disease. The FDAapproved indications for most AOMs 

used for weight loss or chronic weight 

management specify that individuals 

with overweight must also have weightrelated conditions, but there is no such 

requirement for the presence of 

comorbid conditions in individuals 

with obesity. We believe this supports 

recognizing obesity as a distinct disease. 

Our proposal to limit the 

reinterpretation to AOMs used for 

weight loss or weight management for 

the treatment of obesity is based on the 

distinction between obesity as a disease 

and overweight, which is not recognized 

as a disease, but may occur in 

combination with other conditions that 

are weight related. As we have 

discussed, some AOMs are FDAapproved to improve glycemic control 

in patients with type 2 diabetes and 

reduce major cardiovascular events in 

adults with established cardiovascular 

disease (in adults with type 2 diabetes, 

obesity, or overweight), independent of 

the indication for weight loss or chronic 

weight management. AOMs that have 

received FDA approval for these uses 

have demonstrated effectiveness in 

these conditions (which are common 

weight-related conditions) independent 

of weight loss. Therefore, we believe 

that for individuals with overweight, the 

current policy for coverage under Part D 

should be maintained to permit 

coverage of an AOM when the AOM is 

used for a weight-related condition for 

which the AOM has demonstrated 

effectiveness independent of weight loss 

and is an MAI. By contrast, in obesity, 

we consider weight loss to be the 

mechanism for reducing excess 

adiposity and mitigating its 

accompanying hormonal and metabolic 

dysregulation. We acknowledge, 

however, that by limiting our proposed 

reinterpretation, we could create a 

perverse incentive for some individuals 

with overweight to gain additional 

weight in order to meet criteria for 

obesity. We solicit comment on our 

proposed reinterpretation, including our 

underlying assumptions and the 

decision not to extend our 

reinterpretation of the statutory 

exclusion to provide that individuals 

with overweight and at least one weightrelated comorbidity could receive 

coverage of AOMs for weight loss or 

chronic weight management under Part 

D. 

We are not proposing a definition of 

obesity for the purpose of determining 

eligibility for Part D coverage of AOMs. 

Obesity is most commonly defined as a 

BMI of 30 kg/m 2 or greater, but AACE/ 

ACE has described the limitations of 

relying on BMI alone to adequately 

characterize obesity as a chronic disease 

of excess adiposity.46 47 For purposes of 


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Clinical Endocrinologists and American College of 

Endocrinology Position Statement. Endor Pract. 

2017 Mar;23(3):372–378. doi: 10.4158/ 

EP161688.PS. 

48 HPMS memorandum. Issuance of the 2010 Call 

Letter. March 30, 2009. Available from https://

www.cms.gov/Medicare/Prescription-DrugCoverage/PrescriptionDrugCovContra/downloads/ 

2010callletter.pdf. Note, Part D sponsors may limit 

PA criteria to cover only certain FDA-approved 

indications if they are implementing indicationbased formulary design, consistent with the August 

29, 2018 HPMS memorandum, ‘‘Indication-Based 

Formulary Design Beginning in Contract Year (CY) 

2020.’’ Available from: https://www.cms.gov/ 

research-statistics-data-and-systems/computerdata-and-systems/hpms/hpms-memos-archiveweekly-items/syshpms-memo-2018-aug-29th. 

49 See section 30.2.2.3 in chapter 6 of the 

Prescription Drug Benefit Manual. Available from 

https://www.cms.gov/medicare/prescription-drugcoverage/prescriptiondrugcovcontra/downloads/ 

part-d-benefits-manual-chapter-6.pdf. 

defining ‘‘individuals at risk for 

diabetes’’ who may receive diabetes 

screening tests, section 1861(yy)(2)(C) of 

the Act defines obesity as a BMI greater 

than or equal to 30 kg/m 2. Some 

available AOMs specify obesity as a BMI 

greater than or equal to 30 kg/m 2 in the 

FDA-approved indication. The FDAapproved indications for other AOMs 

initially specified obesity as a BMI 

greater than or equal to 30 kg/m 2, but 

the indications have since been revised 

and reference to a specific BMI has been 

removed. We would permit Part D 

sponsors to define obesity for the 

purposes of their prior authorization 

(PA) criteria as long as the Part D 

sponsor’s PA criteria are not more 

restrictive than the FDA labeling for the 

particular AOM. This approach is 

consistent with other disease states for 

which CMS does not specify diagnostic 

criteria, but reviews Part D plansubmitted PA criteria for clinical 

appropriateness. 

As required under § 423.120(b)(1)(vi), 

Part D sponsors’ Pharmacy and 

Therapeutics (P&T) committees are 

required to consider the therapeutic 

advantages in terms of safety and 

efficacy of Part D drugs that are 

included in the plan formulary. This 

process includes drug-specific safety 

considerations for the elderly or 

individuals with disabilities. Further, as 

required under § 423.120(b)(1)(x), Part D 

sponsors’ P&T committees must review 

utilization management (UM) criteria for 

clinical appropriateness. CMS maintains 

a robust, clinical formulary review 

process to ensure that all Part D plan 

formularies comply with statutory and 

regulatory requirements, including the 

requirement under section 1860D– 

11(e)(2)(D)(i) of the Act that CMS may 

only approve a Part D plan if it ‘‘does 

not find that the design of the plan and 

its benefits (including any formulary 

and tiered formulary structure) are 

likely to substantially discourage 

enrollment by certain Part D eligible 

individuals under the plan.’’ As part of 

the formulary content review, CMS 

reviews submitted UM criteria, which 

include PA criteria and step therapy 

(ST) requirements, to ensure these 

criteria are consistent with the FDA 

labeling and widely used treatment 

guidelines, as appropriate. Recognizing 

that obesity is a chronic disease and 

weight gain is common if drug therapy 

for obesity is discontinued, we would 

review Part D sponsors’ PA criteria for 

AOMs in the same manner that we 

would review the PA criteria for drugs 

used to treat other chronic conditions 

that require ongoing drug therapy to 

maintain successful treatment. PA 

criteria for AOMs that are overly 

restrictive may be deemed to be 

inconsistent with CMS’ formulary 

review requirements if the criteria 

appear to be likely to substantially 

discourage enrollment of individuals 

with obesity in the Part D plan. 

Similarly, CMS would not approve ST 

requirements for AOMs that are 

inconsistent with clinical guidelines. 

In general, Part D sponsors must cover 

formulary drugs for all FDA-approved 

indications that are not excluded from 

Part D coverage.48 Most available AOMs 

are also indicated for use in individuals 

with overweight with weight-related 

comorbid conditions. A weight-related 

comorbid condition might include, for 

example, hypertension, type 2 diabetes, 

dyslipidemia, sleep apnea, or 

cardiovascular disease. As stated 

previously, some available AOMs 

contain the same active ingredients 

approved by the FDA to improve 

glycemic control in patients with type 2 

diabetes and reduce major 

cardiovascular events in adults with 

established cardiovascular disease and 

type 2 diabetes, and one AOM has 

received FDA approval to reduce the 

risk of major adverse cardiovascular 

events in non-diabetic adults with 

established cardiovascular disease and 

either obesity or overweight. Therefore, 

individuals with type 2 diabetes or 

established cardiovascular disease (with 

type 2 diabetes, obesity, or overweight) 

are already eligible for AOM coverage 

under current policy because these 

FDA-approved indications are distinct 

from the indication of weight loss or 

chronic weight management. Should 

our reinterpretation be finalized as 

proposed, individuals with obesity 

would be eligible for AOM coverage 

covered regardless of weight-related 

comorbid conditions. In comparison, 

AOMs used for weight loss or chronic 

weight management in individuals with 

overweight, who do not have another 

condition that is an MAI for the AOM, 

would continue to be excluded from the 

definition of a Part D drug and would 

not be coverable under Part D. In other 

words, Part D sponsors would continue 

to exclude drugs with FDA-approved 

indications of weight loss or chronic 

weight management in individuals with 

overweight with weight-related 

comorbidities from Part D coverage, 

unless the individual has another 

condition that is an MAI for the AOM. 

See examples in table 2 illustrating the 

effect of our proposal as it relates to 

AOM coverage for individuals with 

overweight. Consistent with current 

guidance, CMS expects Part D sponsors 

to consistently utilize PA for drugs with 

the highest likelihood of non-Part D 

covered uses, including when there is a 

high likelihood that a drug’s medical 

use is excluded from Part D coverage.49

3. Impact on Medicaid Coverage 

Our proposal to reinterpret the 

reference to ‘‘[a]gents when used for 

. . . weight loss’’ in section 

1927(d)(2)(A) of the Act to allow for 

Medicare Part D coverage of drugs used 

for the treatment of obesity would also 

apply to the Medicaid program. Since 

both Medicaid and Medicare reference 

the Medicaid definition of covered 

outpatient drugs in section 1927(k)(2) of 

the Act and rely on section 

1927(d)(2)(A) of the Act for what may 

constitute ‘‘[a]gents when used for . . . 

weight loss,’’ it follows that CMS should 

apply the same interpretation of these 

provisions for Medicare and Medicaid. 

Thus, if finalized, our proposed 

reinterpretation would mean that 

AOMs, when used for weight loss or 

chronic weight management for the 

treatment of obesity, could not be 

excluded from Medicaid drug coverage. 

States would continue to have the 

discretion to utilize preferred drug lists 

and PA to establish certain limitations 

on the coverage of these drugs as long 

as such practices are consistent with the 

requirements of section 1927(d) of the 

Act to ensure appropriate utilization. In 

the case of an individual without 

obesity seeking coverage for an AOM for 

weight loss or chronic weight 

management, a state’s coverage 

determinations and State Plan 

requirements related to ‘‘[a]gents when 

used for . . . weight loss,’’ under 

section 1927(d)(2)(A) of the Act would 

govern. AOMs and drugs that contain 

the same active ingredient as AOMs that 

meet the definition of a covered 

outpatient drug are already subject to 

section 1927 requirements, and 


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Medicaid must cover those products 

when the prescribed use is an MAI other 

than weight loss or chronic weight 

management when they are medically 

necessary. In table 2, we provide 

examples to illustrate the effect of our 

proposal on AOM coverage in Medicaid. 

We believe that our proposed 

interpretation for the Medicaid program 

is consistent with the relevant statutory 

provisions and with our reinterpretation 

for the Medicare program and would 

result in the same benefits and achieve 

the same goals for the Medicaid program 

as those articulated for the Medicare 

program. This proposed policy is 

intended to facilitate access to these 

medications for individuals who meet 

the criteria for obesity whether they are 

enrolled in Medicaid, Medicare, or both. 

We seek comments on how this 

interpretation can best be implemented 

for state Medicaid programs and 

Medicaid enrollees. Among other areas, 

we seek comment on potential 

interactions with rate setting and 

coverage standards for Medicaid 

managed care plans, and ways to ensure 

adequate notice to beneficiaries and 

other stakeholders of the changes 

resulting from this interpretation should 

this proposal be finalized. 

4. Coverage Considerations 

CMS is considering what an 

appropriate applicability date for the 

reinterpretation in the Part D program 

would be in light of section 1860D–12(f) 

of the Act and § 423.516, which provide 

that CMS may not implement, other 

than at the beginning of a calendar year, 

regulations that impose new, significant 

regulatory requirements on a 

prescription drug plan (PDP) sponsor or 

a PDP, and seeks comment on this issue. 

We have not identified any similar 

basis for delaying the applicability date 

for Medicaid to align with a Part D 

applicability date at the beginning of a 

calendar year. Accordingly, any 

reinterpretation of section 1927(d)(2) of 

the Act would be applicable under the 

Medicaid program as of the effective 

date of the rule in which this provision 

is finalized. Therefore, should this 

proposal be finalized, state Medicaid 

programs that provide drug coverage 

would generally be required to provide 

coverage of AOMs for weight loss or 

chronic weight management for treating 

obesity in Medicaid-enrolled 

individuals as of the effective date of the 

final rule, which is generally 60 days 

after the final rule is published. Should 

the proposed reinterpretation be 

applicable to Medicare at the beginning 

of a calendar year, consistent with 

section 1860D–12(f) of the Act and 

§ 423.516, there could be a time period 

during which AOMs used for weight 

loss or chronic weight management for 

treatment of obesity would be required 

to be covered by state Medicaid 

programs that cover prescription drugs, 

but would not be covered by Part D. As 

a result, Medicaid programs that 

provide drug coverage would be 

required to cover AOMs used for weight 

loss or chronic weight management for 

certain dually eligible individuals until 

such time as Part D coverage began. 

We invite commenters to share 

feedback on the impact of this 

reinterpretation to Part D sponsors and 

their enrollees. We also solicit 

comments on the impact of our proposal 

on state Medicaid programs and 

Medicaid enrollees, including dually 

eligible enrollees. Specifically, we seek 

comment on the implications of aligning 

or not aligning the applicability dates 

for coverage under Medicaid and 

Medicare. We also seek comments on 

implementation considerations this 

proposal might raise under Medicaid, 

including related to any potential 

coverage changes, state plan changes, 

coordination of care, or budget 

implications, and any implications 

related to state contracts with Medicaid 

managed care organizations. 

5. Summary 

In summary, due to changes in the 

prevailing medical consensus towards 

recognizing obesity as a disease, we are 

re-evaluating Part D coverage of AOMs 

for Medicare beneficiaries with obesity 

who do not have another condition for 

which an AOM is indicated and for 

whom the prescribed use would be 

otherwise coverable under Part D. As a 

result of our proposed reinterpretation 

of the phrase ‘‘[a]gents when used for 

. . . weight loss’’ in section 1927(d)(2) 

of the Act, AOMs that are used for 

treating obesity and that otherwise meet 

the definition of Part D drug at § 423.100 

would no longer be excluded from Part 

D coverage pursuant to the exclusion in 

paragraph (2)(ii) of that definition for 

drugs that may be excluded from 

Medicaid coverage under section 

1927(d)(2) of the Act. Our proposed 

reinterpretation would also apply to 

Medicaid such that state Medicaid 

programs would no longer have the 

discretion to exclude AOMs from 

Medicaid drug coverage as ‘‘[a]gents 

when used for . . . weight loss’’ when 

used for weight loss or weight 

management for the treatment of 

obesity. If our reinterpretation is 

finalized as proposed, states that are not 

already covering AOMs for weight loss 

or weight management would be 

required to do so to treat obesity in 

Medicaid enrollees with obesity. AOMs, 

when used for weight loss or chronic 

weight management in individuals who 

do not have obesity, would continue to 

be excluded from the definition of Part 

D drug, and may be excluded at state 

option from coverage by state Medicaid 

programs, unless the AOM is being used 

for a condition other than weight loss or 

chronic weight management for which 

such use would be covered as an MAI 

as defined in section 1927(k)(6) of the 

Act. 

We solicit comment on this proposal. 

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50Federal Trade Commission, ‘‘Pharmacy Benefit 

Managers: The Powerful Middlemen Inflating Drug 

Costs and Squeezing Main Street Pharmacies: 

Interim Staff Report’’, July 2024, available at https:// 

www.ftc.gov/reports/pharmacy-benefit-managersreport, pp. 48–49. 

51 Id, at p. 50. 

52 Ibid. 

B. Network Transparency for 

Pharmacies 

At § 423.505(i), we propose to require 

Part D sponsors to notify network 

pharmacies which plans the pharmacies 

will be in-network for in a given plan 

year by October 1 of the year prior to 

that plan year. We also propose to 

require sponsors to provide pharmacies 

with such a list of in-network plans on 

request after October 1. We believe this 

change is necessary to ensure that 

pharmacies can provide their customers 

with accurate information about which 

plans the pharmacy is participating in. 

Part D sponsors contract with network 

pharmacies, either directly or through 

pharmacy benefit managers (‘‘PBMs’’), 

to provide Part D drugs to their 

enrollees. Sponsors and PBMs can 

contract with pharmacies at any time, 

but they generally perform most of their 

contracting activities for a plan year in 

the winter and spring of the prior year 

(for example, between January and May 

of 2024 for the 2025 plan year). 

However, sponsors do not submit bids 

for their Part D plans until the first 

Monday in June of the year prior to the 

plan year (for example, bids for the 2025 

plan year were submitted by June 3, 

2024) and do not receive final approval 

of those bids until August. Because 

sponsors and PBMs typically offer more 

than one plan in a service area, 

sometimes under more than one 

contract and under more than one 

marketing name, neither they nor the 

pharmacies they contract with know 

which plans will be served by the 

networks the pharmacies agree to join 

until months after executing network 

contracts. 

Pharmacies often do not have the 

ability to meaningfully negotiate with or 

demand clear information from PBMs 

and plans regarding which networks 

they will participate in. Congress and 

the Federal Trade Commission (‘‘FTC’’) 

have initiated inquiries into PBM 

practices, including pharmacy 

contracting practices, in recent years. 

The FTC determined that large PBMs 

employ ‘‘lopsided and unfair 

contracting practices’’ that prevent 

pharmacies, particularly smaller 

pharmacies not affiliated with large 

chains, from engaging in meaningful 

negotiations about contracting terms, 

including monetary and non-monetary 

terms.50 The FTC highlighted PBM’s 

practice of unilaterally amending 

contracts by requiring pharmacies to opt 

out of new terms, rather than 

affirmatively opt in, as making it 

difficult for pharmacies to understand 

what terms apply at any given time.51

This ‘‘passive contracting’’ often 

changes the networks pharmacies 

participate in with little notice or clear 

communication.52

Part D beneficiaries often base their 

enrollment decisions in part on whether 

the pharmacies they wish to use are in 

a plan’s network. At the beginning of 

each plan year, CMS commonly receives 

complaints from beneficiaries reporting 

that they enrolled in a plan because they 

believed their preferred pharmacy was 

in the network, only to discover that it 

was not when they attempted to fill a 

prescription. These beneficiaries often 

request special enrollment periods 

(‘‘SEP’’) based on this 

misunderstanding. Beneficiaries may 

ask their pharmacies which plans the 

pharmacies are or will be in network for 

prior to selecting a plan. Pharmacies 

have reported to CMS that they often do 

not know which plans they will be in 

network for in the following plan year 

unless they check Medicare Plan Finder 

(‘‘MPF’’). While the individuals can use 

MPF to identify whether a particular 

pharmacy is in a particular plan for the 

following plan year during the AEP, 

MPF does not provide users a 

comprehensive list of all the plans in a 

service area that a particular pharmacy 

is in network for. Rather, a user must 

select each Part D plan to identify 

whether the pharmacy is in network. 

Pharmacies report that this cumbersome 

process hinders their ability to provide 

timely and accurate information to their 

Part D-eligible customers during the 

AEP in particular. 

In order to allow pharmacies to 

provide accurate information to Part D 

beneficiaries about their network 

participation, we propose to require 

sponsors (or first tier, downstream, or 

related entities (‘‘FDRs’’), such as PBMs, 

on the sponsors’ behalf) to provide each 

network pharmacy a list of the plans the 

network pharmacy will be participating 

in for a plan year by October 1 of the 

year prior to the plan year. We propose 

to adopt this requirement pursuant to 

our authority at section 1857(e) of the 

Act, made applicable to Part D through 

section 1860D–12(b)(3)(D) of the Act, 

which authorizes the Secretary to adopt 

contract terms and conditions as 

necessary and appropriate, so long as 

those terms are not inconsistent with 

the Part D statute. This will allow 

pharmacies to efficiently provide 

customers accurate information about 

their network participation during the 

AEP that commences on October 15 of 

each year. We also propose to require 

that sponsors provide this information 

on request to network pharmacies after 

October 1. The information provided 

must include the contract number, plan 

ID, and marketing name for each of the 

sponsor’s plans for which the pharmacy 

is in network. We propose to allow the 

sponsor to provide the information in 

hard copy and/or electronically. 

We solicit comments on this proposal. 

C. Part D Medication Therapy 

Management (MTM) Program Eligibility 

Criteria (§ 423.153(d)(2)) 

Section 1860D–4(c)(2) of the Act 

requires all Part D sponsors to have an 

MTM program designed to assure, with 

respect to targeted beneficiaries as 

described in section 1860D– 

4(c)(2)(A)(ii) of the Act, Part D drugs are 

appropriately used to optimize 

therapeutic outcomes through improved 

medication use, and to reduce the risk 

of adverse events, including adverse 

drug interactions. Section 1860D– 

4(c)(2)(A)(ii) of the Act requires Part D 

sponsors to target those Part D eligible 

individuals who have multiple chronic 

diseases, are taking multiple covered 

Part D drugs, and are identified as likely 

to incur annual costs for covered Part D 

drugs that exceed a level specified by 

the Secretary. Since January 1, 2022, 

Part D sponsors are also required by 

section 1860D–4(c)(2)(A)(ii)(II) of the 

Act to target all at-risk beneficiaries 

(ARBs) in their Part D drug management 

program (DMP) for MTM. CMS codified 

the MTM targeting criteria at 

§ 423.153(d)(2). 

The regulation at § 423.153(d)(2)(i)(A) 

specifies that to be targeted for MTM, 

beneficiaries must have multiple 

chronic diseases, with three chronic 

diseases being the maximum number a 

Part D sponsor may require for targeted 

enrollment. CMS established improved 

targeting criteria for the Part D MTM 

program to help ensure more consistent, 

equitable, and expanded access to MTM 

services, effective January 1, 2025, in 

the April 2024 final rule (89 FR 30448). 

Specifically, CMS finalized the 

provision at § 423.153(d)(2)(iii) that Part 

D sponsors must include all core 

chronic diseases in their targeting 

criteria for identifying beneficiaries who 

have multiple chronic diseases, as 

provided under § 423.153(d)(2)(i)(A). 

The 10 core chronic diseases are: (1) 

Alzheimer’s disease; (2) Bone diseasearthritis (including osteoporosis, 

osteoarthritis, and rheumatoid arthritis); 

(3) Chronic congestive heart failure 

(CHF); (4) Diabetes; (5) Dyslipidemia; (6) 


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Year 2025 Part D Medication Therapy Management 

Program Guidance and Submission Instructions 

available at: https://www.cms.gov/files/document/ 

memo-contract-year-2025-medication-therapymanagement-mtm-program-submissionv050624.pdf. 

54https://www.alz.org/media/Documents/ 

alzheimers-facts-and-figures.pdf. 

55Maidment I.D., Fox C., Boustani M., Katona C. 

Medication management—the missing link in 

dementia interventions. Int J Geriatr Psychiatry. 

2012 May;27(5):439–42. doi: 10.1002/gps.2745. 

Epub 2011 Jun 29. PMID: 21714119. 

56Rao P., Hung A. Impact of medication therapy 

management programs on potentially inappropriate 

medication use in older adults: A systematic 

review. J Manag Care Spec Pharm. 2024 Jan;30(1):3– 

14. doi: 10.18553/jmcp.2024.30.1.03. PMID: 

38153866; PMCID: PMC10775773. 

57 Dong X., Tsang C., Wan J., Chisolhm-Burns M., 

et al. Effects of Medicare Part D medication therapy 

management on racial/ethnic disparities in 

adherence to antidementia medications among 

patients with Alzheimer’s disease and related 

dementias: An observational study. Exploratory 

Research in Clinical and Social Pharmacy. 2024 

March; Volume 13, Article 100420:2667–2766. 

https://doi.org/10.1016/j.rcsop.2024.100420. 

6 Dong, X., Tsang, C. C. S., Zhao, S., Browning, 

J. A., Wan, J. Y., Chisholm-Burns, M. A., . . . Wang, 

J. (2021). Effects of the Medicare Part D 

comprehensive medication review on medication 

adherence among patients with Alzheimer’s 

disease. Current Medical Research and Opinion, 

37(9), 1581–1588. https://doi.org/10.1080/ 

03007995.2021.1935224. 

End-stage renal disease (ESRD); (7) 

Human immunodeficiency virus/ 

acquired immunodeficiency syndrome 

(HIV/AIDS); (8) Hypertension; (9) 

Mental health (including depression, 

schizophrenia, bipolar disorder, and 

other chronic/disabling mental health 

conditions); and (10) Respiratory 

disease (including asthma, chronic 

obstructive pulmonary disease (COPD), 

and other chronic lung disorders). 

Sponsors retain the flexibility to target 

additional chronic diseases beyond 

those codified as core chronic diseases. 

The Affordable Care Act amended the 

Act by adding section 1860D– 

4(c)(2)(C)(i), which requires all Part D 

sponsors to offer all enrollees targeted 

for MTM an annual comprehensive 

medication review (CMR). Part D 

sponsors must offer each beneficiary 

enrolled in the MTM program an annual 

CMR with written summaries in CMS’ 

Standardized Format under 

§ 423.153(d)(1)(vii)(B) and (D). We 

recognize that some MTM enrollees may 

suffer cognitive impairments and, 

therefore, may not be able to participate 

in the CMR. In the April 2024 final rule, 

CMS codified at 

§ 423.153(d)(1)(vii)(B)(2) its 

longstanding policy that the pharmacist 

or qualified provider may perform the 

CMR with the beneficiary’s prescriber, 

caregiver, or other authorized individual 

if the beneficiary is offered the CMR and 

is unable to accept the offer to 

participate in the CMR due to cognitive 

impairment. Furthermore, CMS 

acknowledges that beneficiaries may 

invite other individuals, such as their 

caregiver or authorized representative, 

to join them in the CMR53 under any 

circumstance. This situation is outside 

of the policy established under 

§ 423.153(d)(1)(vii)(B)(2) for when the 

beneficiary is unable to accept the offer 

to participate due to cognitive 

impairment. CMS requires Part D 

sponsors to comply with all Federal and 

State laws regarding confidentiality and 

disclosure of medical records or other 

health and enrollment information per 

§ 423.136. Accordingly, we expect Part 

D sponsors and MTM providers to 

comply with the Health Insurance 

Portability and Accountability Act of 

1996 (HIPAA) and its implementing 

regulations and maintain 

documentation of who participated in 

the CMR in accordance with 

§ 423.153(d)(1)(vii)(B). 

In response to the December 2022 

proposed rule (87 FR 79452), some 

commenters suggested expanding the 

inclusion of Alzheimer’s disease on the 

list of core chronic diseases to include 

other dementias such as Lewy Body 

disease or frontotemporal lobar 

degeneration. In our responses to those 

comments in the April 2024 final rule, 

we stated that we would continue to 

analyze chronic diseases that are highly 

prevalent in the Part D population, align 

with common targeting practices across 

sponsors, and are commonly treated 

with covered Part D drugs, where MTM 

services could most impact therapeutic 

clinical outcomes, including those 

suggested by the commenters, and that 

we may consider proposing additional 

core chronic diseases in future 

rulemaking. 

We agree that beneficiaries with other 

dementias may benefit from MTM 

services. Although Alzheimer’s disease 

is the most common cause of dementia 

at 60 to 80 percent of dementia cases, 

the 2024 Alzheimer’s Disease Facts and 

Figures Special Report: Mapping a 

Better Future for Dementia Care 

Navigation 54 notes that many people 

with dementia, especially those over the 

age of 85, have two or more causes of 

dementia (mixed dementia) including 

cerebrovascular disease, hippocampal 

sclerosis, and Parkinson’s Disease. The 

report discusses that it is not possible to 

definitively distinguish one cause of 

dementia from another based on 

symptoms alone. The same report 

further notes that autopsy and 

biomarker-based studies have found that 

15 to 30 percent of individuals who met 

the criteria for clinical Alzheimer’s 

dementia based on symptoms did not 

have the specific brain changes 

associated with Alzheimer’s disease. 

Since Alzheimer’s disease is just one of 

many possible causes of dementia, 

changing the core chronic disease from 

Alzheimer’s disease to ‘‘Alzheimer’s 

disease and dementia’’ would allow 

enrollment of more beneficiaries with 

other causes of dementia who could 

potentially benefit from MTM services. 

MTM services are beneficial for 

people with dementia. One report notes 

that complex medication regimens for 

such individuals may lead to 

polypharmacy and increased adverse 

drug reactions (ADRs) and interactions, 

especially if the beneficiary is taking 

potentially inappropriate medications 

(PIMs).55 The same report states, for 

instance, that people with dementia are 

frequently prescribed medications that 

can impair cognition, such as 

anticholinergics or sedatives, and that 

antipsychotics are also often 

inappropriately prescribed to people 

with dementia to treat behaviors that 

can be a symptom of dementia. A CMR 

with a pharmacist or other trained 

clinician could help reduce PIM use in 

this population.56 We believe that MTM 

services such as CMRs empower 

beneficiaries to speak with their 

prescribers about preventing any ADRs. 

There is also evidence that access to 

MTM services would improve 

medication adherence for beneficiaries 

with dementia. Medication 

nonadherence is a common problem in 

people with dementia due to memory 

loss and cognitive impairment; one 

article estimated that somewhere from 

33 to over 40 percent of such 

individuals are nonadherent to their 

oral antidementia medications.57 The 

article stated that Black, Hispanic, and 

Asian dementia patients were more 

likely to be nonadherent to 

antidementia medications than white 

patients, and that MTM services 

significantly reduced nonadherence in 

Black and Hispanic dementia patients. 

Having a CMR has also been associated 

with reduced nonadherence to 

medications for diabetes, hypertension, 

and hyperlipidemia in people with 

Alzheimer’s disease.6

Therefore, we have concluded that it 

would be appropriate to update the list 

of core chronic diseases used to identify 

Part D enrollees who have multiple 

chronic diseases for purposes of 

determining eligibility for MTM 

enrollment to include not only 


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58Federal Trade Commission, ‘‘Pharmacy Benefit 

Managers: The Powerful Middlemen Inflating Drug 

Continued 

Alzheimer’s disease but also all other 

causes of dementia to improve 

medication adherence and to reduce the 

risk of adverse events. Consistent with 

this proposal, we propose to modify the 

regulatory text at § 423.153(d)(2)(iii)(A) 

identifying ‘‘Alzheimer’s disease’’ as a 

core chronic disease to include 

‘‘Alzheimer’s disease and dementia’’ 

effective January 1, 2026. 

D. Part D Sponsors Must Provide 

Network Pharmacies Reciprocal Rights 

To Terminate Contracts Without Cause 

and Request for Information on Access 

to Pharmacy Services and Prescription 

Drugs 

1. Terminate Contracts Without Cause 

At § 423.505(i), we propose to require 

Part D sponsors to allow pharmacies to 

terminate their network contracts 

without cause after the same notice 

period that the sponsor is allowed to 

terminate network pharmacy contracts 

without cause. This provision would 

only apply if the network pharmacy 

contract allows terminations without 

cause by the sponsor; if the contract 

does not allow terminations without 

cause by the sponsor, it would not be 

required to allow such terminations by 

the pharmacy. This change would 

prohibit the current practice CMS has 

observed by some sponsors and their 

FDRs to only allow pharmacies to 

terminate their network contracts 

without cause after giving a relatively 

long period of notice (sometimes 

exceeding one year), while preserving 

their right to terminate without cause on 

much shorter notice. We believe this 

change to provide greater fairness in 

contracting terms is necessary to protect 

beneficiaries from disruptions in 

receiving Part D benefits that would 

occur if network pharmacies stop 

providing services before formally 

terminating their contracts. 

Part D sponsors contract with network 

pharmacies, either directly or through 

FDRs, to their enrollees. Under 

§ 423.505(b)(18), Part D sponsors must 

have a standard contract with 

reasonable and relevant terms and 

conditions of participation whereby any 

willing pharmacy may access the 

standard contract and participate as a 

network pharmacy. This requirement 

was adopted pursuant to section 1860D– 

4(b) of the Act, which requires 

prescription drug plan sponsors to 

permit the participation of any 

pharmacy that meets the terms and 

conditions under the plan. In addition 

to the standard terms and conditions 

that sponsors must offer to any willing 

pharmacy, sponsors may negotiate nonstandard terms and conditions with 

certain pharmacies that would govern 

those pharmacies’ participation in the 

sponsor’s Part D network. 

Both the Part D statute and 

regulations require that all network 

contracts with pharmacies, including 

both the standard contract and any nonstandard contract a sponsor may use to 

contract with a network pharmacy, 

contain certain terms meant to protect 

beneficiaries and ensure compliance 

with Part D requirements. For example, 

section 1860D–4(b)(1)(E) of the Act 

prohibits sponsors from requiring 

network pharmacies to accept insurance 

risk in their network contracts. Section 

1860D–4(m) of the Act prohibits 

sponsors from restricting a pharmacy 

from informing an enrollee of any 

differential between the negotiated price 

of, or copayment or coinsurance for, a 

drug or biological and a lower price the 

enrollee would pay for the drug or 

biological without using health 

insurance coverage. Finally, § 423.505(i) 

requires that contracts between sponsors 

and network pharmacies contain several 

provisions, including— 

• Provisions prohibiting pharmacies 

from holding an enrollee liable for 

payment of any fees that are the 

responsibility of the Part D sponsor 

(§ 423.505(i)(3)(i)); 

• A provision requiring prompt 

payment of clean claims 

(§ 423.505(i)(3)(v)); and 

• A provision requiring disclosure 

and updating of any drug pricing 

standards used to determine payment, 

in accordance with § 423.505(b)(21)(i) 

(§ 423.505(i)(3)(vii)). 

Part D sponsors often use FDRs, such 

as PBMs, to contract with network 

pharmacies on their behalf. In 

accordance with § 423.505(i)(3)(iii) and 

(iv), contracts between sponsors and 

PBMs must contain the same provisions 

required for all FDR contracts, including 

a provision requiring that the PBM 

perform activities in a manner that 

complies with all applicable regulations 

and with the Part D sponsor’s 

contractual obligations to CMS. 

Therefore, any network pharmacy 

contracts a PBM enters into as part of its 

services to the Part D sponsor must 

contain the same terms that would be 

required for the contracts if they were 

directly between the sponsor and the 

network pharmacy. 

In recent years, CMS has received an 

increasing number of complaints from 

pharmacies about sponsors’ and PBMs’ 

Part D network pharmacy contracts. 

Specifically, pharmacies often report 

being dissatisfied with reimbursement 

terms. Many of these pharmacies report 

that they would like to exit their Part D 

network contracts, but that they are 

unable to do so without providing 

extensive notice. Some of these reports 

have included copies of the executed 

contracts in question that include the 

termination terms. At least one PBM 

requires 3-years notice for a retail 

pharmacy in its network to terminate 

the contract without cause. The notice 

provisions are often not reciprocal—one 

PBM network contract requires at least 

ten months’ notice from a pharmacy 

seeking to exit its network without 

cause but allows the PBM to terminate 

the contract without cause on a 90-day 

notice. 

CMS has also received reports of 

pharmacies that are unable to formally 

terminate their networks contracts 

simply refusing to fill prescriptions for 

Part D beneficiaries covered by the 

plans using those networks. Such ad 

hoc refusals to fill prescriptions are very 

disruptive to beneficiaries. The 

pharmacies that refuse to fill 

prescriptions for a particular network 

continue to appear in Medicare Plan 

Finder and on sponsor websites as 

network pharmacies until and unless 

the plan takes action to terminate the 

pharmacy, which results in beneficiaries 

receiving misleading information about 

where they may obtain Part D drugs 

under the plans they are enrolled in. 

Because these refusals occur without 

official terminations, sponsors and 

PBMs do not receive advance notice of 

them and cannot perform the transition 

activities they ordinarily would when a 

pharmacy leaves a network. These 

transition activities often include 

notifying affected beneficiaries and 

arranging for transfer of prescriptions. 

We do not believe that pharmacies— 

particularly small pharmacies 

unaffiliated with larger chains—have 

the ability to negotiate such reciprocal 

termination terms on their own. As 

described in section III.B. of this 

proposed rule, pharmacies often do not 

have the ability to meaningfully 

negotiate with or demand clear 

information from PBMs and plans 

regarding contracting terms. Congress 

and the FTC have initiated inquiries 

into PBM practices, including pharmacy 

contracting practices, in recent years. 

The FTC determined that large PBMs 

employ ‘‘lopsided and unfair 

contracting practices’’ that prevent 

pharmacies, particularly smaller 

pharmacies not affiliated with large 

chains, from engaging in meaningful 

negotiations about contracting terms, 

including monetary and non-monetary 

terms.58 The FTC highlighted PBMs’ 


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Costs and Squeezing Main Street Pharmacies: 

Interim Staff Report’’, July 2024, available at https:// 

www.ftc.gov/reports/pharmacy-benefit-managersreport, pp. 48–49. 

59 Id, at 50, 54. 

60https://www.cms.gov/files/document/ 

pharmacy-benefit-manager-insurer-letter.pdf. 

practice of unilaterally amending 

contracts by requiring pharmacies to opt 

out of new terms, rather than 

affirmatively opt in, making it difficult 

for pharmacies to understand what 

terms apply at any given time.59

To prevent disruptions in care for 

beneficiaries, CMS proposes to require 

contracts with pharmacies for 

participation in Part D networks that 

allow the sponsor or FDR, such as a 

PBM, to terminate the contract without 

cause to allow pharmacies to terminate 

the contract without cause after 

providing the same notice that the 

contract requires the sponsor or FDR to 

provide the pharmacy. A single network 

pharmacy contract often governs 

participation in multiple networks, with 

some pharmacies participating in all the 

Part D networks offered by a sponsor or 

FDR and some only participating in 

some of the networks. Therefore, we 

also propose that if the network 

pharmacy contract allows the sponsor or 

FDR to terminate the pharmacy’s 

participation in some, but not all, of the 

networks covered by the contract 

without cause, that the contract allow 

the network pharmacy to terminate its 

participation in some, but not all, 

networks without cause after providing 

the same notice the contract requires the 

sponsor or FDR to provide. We propose 

to adopt this requirement under our 

authority at section 1857(e) of the Act, 

made applicable to Part D through 

section 1860D–12(b)(3)(D) of the Act, 

which authorizes the Secretary to adopt 

contract terms and conditions as 

necessary and appropriate, so long as 

those terms are not inconsistent with 

the Part D statute. This requirement 

would be consistent with other 

requirements CMS currently imposes for 

downstream contracts, including 

pharmacy contracts, such as the 

requirement at § 423.505(i)(3)(v) that 

contracts require sponsors to promptly 

pay clean claims and at § 423.505(i)(5) 

that contracts allow Part D sponsors to 

approve, suspend, or terminate 

contracts with network pharmacies. 

2. Request for Information on Access to 

Pharmacy Services and Prescription 

Drugs 

As noted in a December 14, 2023 

letter from the CMS Office of the 

Administrator to pPlans and PBMs, 

pharmacies serve a critical role in 

Medicare Part D by providing access to 

medications across the country, 

including to Part D beneficiaries.60 CMS 

is concerned about the sustainability of 

these businesses, especially small and 

independent pharmacies, and their 

potential closures that may leave Part D 

beneficiaries without convenient access 

to pharmacy services—especially in 

rural and underserved areas. We have 

also heard that pharmacies may decline 

to fill certain prescriptions that would 

result in a net loss in reimbursement. 

CMS reminds plans that under section 

1860D–4(b)(1)(A) of the Act and 

§ 423.505(b)(18), they must offer a 

standard contract with reasonable and 

relevant contract terms whereby any 

willing pharmacy may participate as a 

network pharmacy. Additionally, under 

section 1860D–4(b)(1)(C) of the Act and 

§ 423.120(a), plans must have a 

contracted pharmacy network that is 

sufficient to ensure that Part D 

beneficiaries have convenient access to 

pharmacy services. CMS seeks comment 

on what additional data or information 

to consider—such as reimbursement 

rates, underlying costs, steering, 

contracting terms, and other elements 

which may affect pharmacies’ ability to 

continue providing Part D drugs to 

beneficiaries—to improve our ability to 

protect beneficiaries’ convenient access 

to Part D drugs consistent with current 

access standards at § 423.120. 

E. Modifying the Definition of ‘‘Service 

area’’ § 422.2 

In § 422.2, CMS defines service area to 

include ‘‘a geographic area that for local 

MA plans is a county or multiple 

counties’’. We are proposing to modify 

the definition to align with our proposal 

to include a definition of county in 

§ 422.116 that includes ‘‘countyequivalents’’ as recognized by the 

United States Census Bureau for 

economic census purposes. To ensure 

consistency in the use of the term 

‘‘county’’ across service area and 

network adequacy requirements and to 

codify our longstanding policy of 

treating county-equivalents the same as 

counties for these purposes, we are 

proposing to amend the definition of 

service area in § 422.2 to refer to ‘‘a 

geographic area that for local MA plans 

is one or more counties, as defined in 

§ 422.116(a)(1)’’. 

F. Administration of Supplemental 

Benefits Coverage Through Debit Cards 

§§ 422.2, 422.102, 422.102, 422.111, and 

422.2263 

1. Background 

We have made a concerted effort in 

the past several years to better 

understand how supplemental benefits 

are provided by MA plans, how they are 

being used by enrollees, and how the 

provision of these benefits can be 

improved. These most recent efforts 

began with a request for information 

(RFI) published in in the August 1, 

2022, Federal Register (87 FR 46918) 

that solicited feedback on ways to 

strengthen the MA program, including 

ways to improve the transparency of 

supplemental benefits. We received 

thousands of responses to these 

requests, and we have used this 

information to inform our efforts to 

improve how benefits are administrated 

within the MA program. A few 

commenters to the RFI suggested that 

CMS collect information regarding the 

usage of Special Supplemental Benefits 

for the Chronically Ill (SSBCI) so that 

there would be increased transparency 

around utilization patterns and costs 

associated with supplemental benefits, 

including SSBCI. We finalized a 

reporting requirement regarding the 

usage of supplemental benefits in the 

Paperwork Reduction Act package 

released on March 14, 2023, and expect 

to receive this data for the first time in 

2025 (88 FR 15726). This data should 

promote greater transparency regarding 

the overall utility of these benefits while 

also helping to inform future decision 

making. Most recently, in the April 2024 

final rule, we added evidentiary 

standards to SSBCI requirements by 

requiring MA plans to establish a 

bibliography of relevant acceptable 

evidence that an item or service offered 

as SSBCI has a reasonable expectation of 

improving or maintaining the health or 

overall function of a chronically ill 

enrollee (89 FR 30560). CMS has already 

begun implementing this requirement 

and will continue to review these 

bibliographies to ensure that MA plans 

are offering SSBCI that are supported by 

evidence and consistent with statutory 

and regulatory standards. Overall, 

through these initiatives, we have 

focused our efforts on ensuring 

supplemental benefits improve health 

outcomes and are continuing this theme 

in this proposed rule. 

Section 1852(a)(3)(A) of the Act gives 

MA organizations the ability to offer 

supplemental benefits to plan enrollees, 

subject to the Secretary’s approval. CMS 

has adopted rules—primarily in 

§§ 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 Medicare 

Program, Establishment of the Medicare 


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61https://www.federalregister.gov/documents/ 

2005/12/23/05-24446/medicare-programestablishment-of-the-medicare-advantage-program. 

62https://www.govinfo.gov/content/pkg/FR-2021- 

01-19/pdf/2021-00538.pdf. 

Advantage Program Final Rule,61 which 

appeared in the Federal Register on 

January 28, 2005, we established at 

§ 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 AllInclusive Care for the Elderly Final 

Rule 62 (January 19, 2021; 86 FR 5913) 

(hereinafter referred to as the January 

2021 final rule), we further clarified the 

scope of supplemental benefits that 

reduce cost sharing by adding rules at 

§ 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 § 422.102(b), optional 

supplemental benefits are benefits that 

are available to plan enrollees who 

choose to pay an additional premium in 

order to receive those services. The 

majority of supplemental benefits that 

beneficiaries receive in MA are 

mandatory supplemental benefits, and 

we refer to mandatory supplemental 

benefits in this section unless otherwise 

specified. 

In the January 2021 final rule, we 

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 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. We remind 

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). 

We further explained in the January 

2021 final rule that 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 §§ 422.100(c)(2) and 

422.102(a) through (f). To summarize, 

CMS’s prior rulemakings provided 

standards around supplemental 

benefits, including codifying the 

definition of a supplemental benefit, 

identifying the requirements for a 

benefit to be considered primarily 

health related, and in regard to Special 

Supplemental Benefits for the 

Chronically Ill (SSBCI), requiring plans 

to establish a bibliography of relevant 

acceptable evidence that an item or 

service offered as SSBCI has a 

reasonable expectation of improving or 

maintaining the health or overall 

function of a chronically ill enrollee. 

The use of debit cards is permitted for 

administering both mandatory 

supplemental benefits for all MA 

enrollees and mandatory supplemental 

benefits available as Special 

Supplemental Benefits for the 

Chronically Ill (SSBCI) as defined at 

§ 422.102(f). We 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), § 40.3, we 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, we’ve 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, fitnessrelated benefits, food and produce, 

transportation, and utilities support. In 

recent years, based on questions from 

stakeholders, including beneficiaries, 

we have also become aware that there is 

some confusion around the use of debit 

cards. For example, we have received 

many stakeholder questions requesting 

CMS clarify what these cards are and 

how they can be used. We have 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 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 


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63 § 422.112 (a)(1)(iii); Chapter 4, section 30.2 of 

the Medicare Managed Care Manual; 88 FR 22200. 

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, we are proposing 

requirements on the proper 

administration of supplemental benefits. 

Based on our authority under section 

1856(b)(1) of the Act to establish 

standards for MA organizations, along 

with our 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, we propose to codify 

in regulation text the requirements and 

limitations discussed in the preamble of 

the 2022 final rule and later in the May 

6, 2024, 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 plan debit cards. We believe 

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 nonprimarily health related SSBCI. We also 

propose 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, we propose to add a new 

paragraph (g) at § 422.102 to codify 

existing guidelines for administering 

supplemental benefits, including the 

use of debit cards to administer plancovered 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 

Our regulations at § 422.100(c)(2) 

define a mandatory or optional 

supplemental health care benefit (with 

the exception of Special Supplemental 

Benefits for the Chronically Ill (SSBCI) 

as defined at § 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 

§ 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, we have 

codified numerous requirements that 

MA organizations must comply with 

when delivering supplemental benefits 

at § 422.102(a) through (e). More 

recently, we codified standards for 

SSBCI benefits at § 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 

§ 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. 

We are proposing in this rule that MA 

organizations must have processes for 

delivering all MA plan covered 

supplemental benefits to enrollees that 

ensure compliance with §§ 422.100(c)(2) 

and 422.102(a) through (f) and 

appropriate access to suppliers and 

providers in accordance with 

§ 422.112(a) as applicable. Per 

§ 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. We note that 

section 1854(a)(6)(B)(iii) of the Act, 

commonly known as the ‘‘noninterference 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 § 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.) 

We also note that all coordinated care 

plans are required to cover benefits, 

including supplemental benefits, at innetwork cost sharing when an innetwork provider or benefit is 

unavailable or inadequate to meet an 

enrollee’s medical needs in accordance 

with the standards set forth in our rules 

and regulations.63 This is required for 

all benefits, regardless of how they are 

administered. 

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 § 422.112(a)(1)(iii) 

are met. However, given inconsistencies 

in how supplemental benefits are 

provided, we believe it is necessary to 

clarify this requirement in regulatory 

text. Therefore, we propose and seek 

comment on new § 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 §§ 422.100(c)(2) and 

422.102(a) through (f) and appropriate 

access to all covered services in 

accordance with § 422.112(a). 

3. New Guardrails for Plan Debit Cards 

As described in section III.H.2 of this 

proposed rule, we are proposing to 

include a clarification in § 422.102(g)(1) 

requiring that MA organizations have 

processes for delivering all MA 

organization covered supplemental 

benefits to enrollees that ensure 

compliance with §§ 422.100(c)(2) and 

422.102(a) through (f) and appropriate 

access to all covered services per 

§ 422.112(a). Thus, we believe it is 

necessary to specify that this 

requirement would apply to all plan 

covered supplemental benefits, 

including supplemental benefits 

administered through debit cards. 


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64 https://www.ecfr.gov/current/title-42/part-422/ 

section-422.111#p-422.111(k). 

65 https://www.ecfr.gov/current/title-42/part-422/ 

section-422.111#p-422.111(k). 

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 

§ 422.112(a) are met. This means 

regardless of the mode of delivery (e.g., 

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, we require that plancovered 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. We also note 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.64 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.65 These EOB requirements 

include supplemental benefits that MA 

plans elect to cover through a debit 

card. 

However, given stakeholder and 

enrollee feedback, we believe 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, we 

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. 

We 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. We believe 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, we propose at 

§ 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. We are 

proposing at § 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 realtime 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 

to ensure 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. 

We are not proposing to prescribe 

exactly how plans effectuate the 

proposed requirements at 

§ 422.102(g)(2)(i) because we believe 

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 proposed 

requirements. 

Next, we propose at § 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 § 422.112(a). We 

believe 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, we 

propose to state at § 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, we 

amended § 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 

§ 422.102(g)(1), we also propose to 

revise § 422.102(a)(6) by removing ‘‘or 

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 § 422.102(g) for covered 

items and services. We believe this 

revision ensures that when providing 

reduced cost sharing through a debit 

card, that card is governed by the 

proposed requirements at 

§ 422.102(g)(1)(i). This proposal would 


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66https://www.fiscal.treasury.gov/stored-valuecard/. 

prohibit plans from using other 

mechanisms not directly described in 

§ 422.102(a)(6)(i). 

We further believe this revision is 

necessary because ‘‘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 § 422.102(g)(1)(i). Further, 

MA organizations are required to 

administer reductions in cost sharing in 

a manner that ensures the debit card, 

reimbursement, or allowance can only 

be used towards plan-covered services 

and are limited to the specific plan year. 

The use of an unrestricted card cannot 

guarantee compliance with these 

requirements. 

While we are proposing to remove ‘‘or 

other means,’’ we solicit comment on 

what other means, outside of manual 

reimbursement or a debit card, would be 

unintentionally removed as options to 

plans should we finalize this proposed 

revision. We also solicit comment on 

how these other means or mechanisms 

may still guarantee compliance with 

existing requirements at § 422.102(a)(6) 

and the requirements proposed at 

§§ 422.102(g) and 422.111(b)(6) 

(discussed in section III.H.2 of this 

proposed rule). For example, it is not 

our intent that the proposed changes at 

§ 422.102(a)(6) prohibit an organization 

from using a stored value card,66

provided the use of these cards by MA 

plans complies with the requirements at 

§ 422.102(g). Therefore, we also solicit 

comment on whether the use of stored 

value cards meets the requirements at 

§ 422.102(g). Specifically, we solicit 

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. We also 

solicit comment on whether stored 

value cards should be explicitly added 

to § 422.102(a)(6) and § 422.102(g) as an 

acceptable means of administering 

reductions in cost sharing and the 

coverage of supplemental benefits. 

We solicit comment on all aspects of 

this proposal and may consider 

finalizing revisions to our policies based 

on the comments received. 

4. Access 

While a 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 

§ 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, 

our 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.’’ We 

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. We believe 

that it is important to adopt a similar 

policy here in order to maintain enrollee 

access for all benefits administered 

through a debit card, not just OTC 

benefits. 

Therefore, we propose at 

§ 422.102(g)(2)(iii) that a plan must have 

an alternative process that allows for 

reimbursement of eligible expenses for 

plan covered benefits. We believe 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. We believe 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 nontechnical 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 

proposed requirement protects 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). 

This alternative process must be in 

place for both in-network and out-ofnetwork 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 would still be responsible for 

ensuring out of network access at in 

network cost sharing. We expect MA 

organizations to adequately disclose the 

process by which reimbursement may 

be made to enrollees and to ensure that 

the process is accessible to all enrollees. 

We also encourage 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. This is 

consistent with and will further ensure 

compliance by MA coordinated care 

plans with § 422.112(a). 

We also note 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 § 422.4(a)(1)(v). 

Regarding reimbursement, 

§ 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 

(we note that in this scenario, an 

enrollee may be subject to increased 

cost sharing). For example, a MA 

organization may contract with a 

particular grocery store to furnish their 


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food and produce benefit. However, in 

a PPO, enrollees may purchase eligible 

food and produce at another noncontracted grocer (out of network 

provider) and be reimbursed for those 

covered items. We expect MA PPOs to 

have processes to verify out of network 

reimbursement is only made for plancovered 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 internetbased communication methods. 

Finally, we remind MA plans that our 

regulations at § 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, 

§ 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. We strongly 

encourage, 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. We understand that in some 

areas there may be a limited number of 

community-based providers, including 

small businesses. However, we strongly 

encourage plans 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 

§ 422.102(f). We believe that 

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, we also propose to add 

additional disclosure requirements 

specific to supplemental benefits under 

§ 422.111. Section 422.111(b) currently 

requires MA organizations to disclose 

mandatory and optional supplemental 

benefits and the premium for those 

benefits. We propose to amend 

§ 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. We 

propose 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. We believe 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 

§ 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 

§ 422.100(c)(2), plans may never offer as 

a supplemental benefit something that is 

covered under Part B or that is paid for 

under 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. 

We have also received feedback that a 

non-exhaustive list could provide 

further clarity for MA organizations. 

Therefore, we include a non-exhaustive 

list 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, nonprescription 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, 

petroleum jelly), witch hazel, sleep aids, 

soap (doctor recommended 

antibacterial/antimicrobial), sunscreen, 

supportive items (such as compression 

hosiery, rib belts, 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 

OTC items, we solicit comment on 

whether there are additional items that 

stakeholders believe should be included 

on this list. 

CMS has also reviewed items that 

CMS has 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, breath mints), bagging 

fees, body scrubs, cannabidiol, cleaning 

products (Clorox, 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, 


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67https://www.ncbi.nlm.nih.gov/pmc/articles/ 

PMC5291496/. 

68We strongly encourage MA organizations that 

are looking to cover new or novel benefits 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. 

toilet paper, paper towels), perfume, 

pest control, skin moisturizers used for 

anti-aging, teeth whiteners, water 

bottles, and personal coolers. We note 

that items such as air conditioners, 

cleaning products, dehumidifiers, 

humidifiers, grooming supplies to assist 

with hygiene, paper products (tissue, 

toilet paper, paper towels), and pest 

control may be permissible as a nonprimarily 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 § 422.102(f). For 

example, research indicates that air 

conditioners may improve the breathing 

of patients with COPD and asthma.67

We solicit comment on these listed 

items and may revise the list based on 

feedback received. 

Again, we reiterate that the list of 

permissible primarily health related 

OTC items set forth in this proposed 

rule is non-exhaustive. We’ve 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 § 422.102(f) are met. 

CMS reviews bids each year to ensure 

that proposed supplemental benefits 

meet the applicable regulatory and 

statutory standards.68 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 we believe do not meet 

the definition of a supplemental benefit 

per § 422.100(c)(2) or are not primarily 

health related per § 422.100(c)(2)(ii). 

However, we believe including these 

lists in this preamble discussion will 

help MA organizations consistently 

apply the requirements at 

§§ 422.100(c)(2) and 422.100(c)(2)(ii) 

and assist MA organizations when 

planning and preparing their annual bid 

packages. 

6. Marketing Supplemental Benefits 

Another important consideration 

related to debit cards is MA 

organizations’ marketing tactics. We 

have 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, that it can be used 

to purchase anything and can be used 

anywhere, and that an individual can 

receive it automatically by enrolling in 

the advertised MA plan. 

CMS has concerns with these 

advertisements. As discussed 

previously, the debit card itself is not 

the supplemental benefit, rather, it is 

the mechanism through which the MA 

organization administers and pays for 

the covered supplemental benefit. There 

is 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. 

In reality, that is not the case because 

debit cards used by MA plans in 

administering MA supplemental 

benefits have various restrictions, 

including restrictions related to 

eligibility, the timeframe in which the 

debit card may be used, the providers 

with whom the debit card may be used, 

and the covered items and services for 

which the debit card may be used. 

To prevent such inaccurate or 

misleading advertising, we are 

proposing new parameters for MA 

organizations’ marketing of 

supplemental benefits. Specifically, we 

propose to add new paragraph (b)(11) to 

§ 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. We believe that 

this proposed requirement is necessary 

to promote informed choice among 

prospective and current MA enrollees. 

By prohibiting the dollar value and 

administration method in marketing 

materials, it will provide the beneficiary 

with enough information to inquire 

further if the supplemental benefit 

would be helpful to their care, rather 

than an overly simplified advertisement 

that does not include the level of 

information required for an informed 

enrollment decision. Our proposal 

would also reduce the number of 

misleading MA supplemental benefit 

advertisements. 

We solicit comment on all aspects of 

this proposal and may consider 

revisions based on the comments 

received. 

This proposal primarily codifies and 

clarifies existing guidance and practices 

and is not expected to have additional 

impact above current operating 

expenses. This proposal would not 

impose any new collection of 

information requirements. 

G. Non-Allowable Supplemental 

Benefits for the Chronically Ill (SSBCI) 

(§ 422.102) 

Section 1852(a)(3)(D)(ii)(I) of the Act 

requires that an item or service offered 

as SSBCI have a reasonable expectation 

of improving or maintaining the health 

or overall function of the chronically ill 

enrollee. The 2024 final rule titled 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)’’ (the ‘‘April 2024 Final 

Rule’’) (89 FR 30448) finalized 

requirements at § 422.102(f)(3) that, by 

the date on which it submits its bid to 

CMS, an MA organization must 

establish a bibliography of relevant 

acceptable evidence that an item or 

service offered as an SSBCI has a 

reasonable expectation of improving or 

maintaining the health or overall 

function of a chronically ill enrollee. In 

the 2024 Final Rule, we also codified at 

§ 422.102(f)(5) that CMS may decline to 

approve an MA organization’s bid, if 

CMS determines that the MA 

organization has not demonstrated, 

through relevant acceptable evidence, 

that an SSBCI has a reasonable 

expectation of improving or maintaining 

the health or overall function of the 

chronically ill enrollees that the MA 

organization is targeting. In addition, in 

the April 2024 final rule (89 FR 30448), 

we modified and strengthened the 

current requirements in 

§ 422.2267(e)(34) for the SSBCI 

disclaimer that MA organizations 

offering SSBCI must use whenever 

SSBCI are mentioned. Specifically, we 

required that the SSBCI disclaimer list 

the relevant chronic condition(s) the 

enrollee must have to be eligible for the 

SSBCI offered by the MA organization. 

We also finalized specific font and 

reading pace parameters for the SSBCI 

disclaimer in print, television, online, 

social media, radio, other voice-based 

ads, and outdoor advertising (including 

billboards). Finally, we required that 

MA organizations include the SSBCI 

disclaimer in all marketing and 

communications materials that mention 

SSBCI. These requirements further help 

to ensure that the marketing of and 

communication about these benefits was 

not misleading or potentially confusing 


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69https://www.ncbi.nlm.nih.gov/pmc/articles/ 

PMC5291496/. 

70https://www.ncbi.nlm.nih.gov/pmc/articles/ 

PMC2900329/. 

to enrollees who rely on these materials 

to make enrollment decisions. 

Section 1852(a)(3)(A) provides CMS 

the authority to approve supplemental 

benefits. Supplemental benefits must 

meet the regulatory and statutory 

requirements for approval, including 

that the benefits may not be approved if 

the agency finds that including such 

supplemental benefits would 

substantially discourage enrollment by 

Medicare+Choice (now Medicare 

Advantage) eligible individuals with the 

organization. Further, per section 

1854(a)(5)(C) of the Act, CMS is not 

obligated to accept any or every bid 

submitted by an MA organization. Based 

on our experience reviewing, approving, 

and denying bid proposals throughout 

the years, we are relying upon these 

authorities to propose in regulation 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 standard as 

described in section 1852(a)(3)(D)(ii)(I) 

of the Act and at CMS regulations at 

§ 422.102(f)(1)(ii). Therefore, none of 

these items and services are permissible 

SSBCI. We believe that codifying this 

non-exhaustive list of examples of items 

or services that do not meet these 

standards provides transparency and 

greater certainty for MA organizations 

and enrollees about the rules that 

govern these benefits, which is 

necessary and appropriate to ensure that 

supplemental benefits coverage is 

properly furnished by all MA 

organizations that choose to offer these 

supplemental benefits. 

SSBCI must meet the regulatory 

requirements set forth under 

§ 422.102(f). They must also meet the 

requirements to be a supplemental 

benefit as described at 422.100(c)(2), 

with the exceptions that the benefits 

need not be primarily health related, as 

described at § 422.100(c)(2)(ii)(A), and 

the MA organization must incur a nonzero direct non-administrative cost (as 

opposed to a non-zero medical cost) in 

covering the benefit. Further, while an 

SSBCI may be non-primarily health 

related, there must still be a reasonable 

expectation that the item or service will 

improve or maintain the health or 

overall function of the chronically ill 

enrollee. For example, an air 

conditioner is not a primarily health 

related item or service, but there is 

acceptable evidence that using an air 

conditioner may improve the health of 

patients with asthma, chronic 

obstructive pulmonary disease 

(COPD),69 or other breathing problems 

for whom an air conditioner might keep 

them from being hospitalized during 

times of excessive heat or wildfires.70 A 

health plan’s care coordination team 

might be able to identify these 

individuals in advance to provide them 

access to an air conditioner. 

We propose to codify a nonexhaustive list of non-primarily health 

related items or services that do not 

have a reasonable expectation of 

improving or maintaining the health of 

a chronically ill enrollee and therefore 

cannot be offered as SSBCI. Those items 

include— 

• Procedures that are solely cosmetic 

in nature and do not extend upon 

Traditional Medicare coverage (for 

example, cosmetic surgery such as 

facelifts or cosmetic treatment for facial 

lines, atrophy of collagen and fat, and 

bone loss due to aging); 

• Alcohol, tobacco, and cannabis 

products; 

• Funeral planning and expenses; 

• Life insurance; 

• Hospital indemnity insurance; and 

• Broad membership-type programs 

inclusive of multiple unrelated services 

and discounts. 

These items and services cannot be 

offered as SSBCI for the following 

reasons: 

Regarding cosmetic services, CMS 

explained in previous guidance (see 

HPMS memorandum, ‘‘Final Contract 

Year (CY) 2025 Standards for Part C 

Benefits, Bid Review and Evaluation,’’ 

dated May 6, 2024, pp. 30–31) that 

coverage for procedures that are 

cosmetic in nature are not permitted to 

be offered as SSBCI because these 

benefits do not meet the statutory 

requirement of a ‘‘reasonable 

expectation of improving or maintaining 

the health or overall function of the 

enrollee.’’ CMS may decline an MA 

organization’s bid if CMS determines 

that the MA organization has not 

demonstrated, through relevant 

acceptable evidence, that an SSBCI has 

a reasonable expectation of improving 

or maintaining the health or overall 

function of the chronically ill enrollees 

that the MA organization is targeting. 

Some plans have proposed to offer 

cosmetic services for aesthetic purposes 

only, such as botulinum toxin injections 

for lines and wrinkles, in their bids. 

CMS disapproved these proposals 

during bid review. While MA 

organizations are permitted to offer nonprimarily health related benefits to 

chronically ill enrollees, these benefits 

must still have a direct impact on the 

enrollee’s health. Purely cosmetic 

procedures are not health related and 

thus cannot be permitted as a 

supplemental benefit. For these reasons, 

procedures that are solely cosmetic in 

nature and do not extend upon 

Traditional Medicare coverage cannot 

be offered as SSBCI. 

We do note however that some 

cosmetic procedures may be acceptable 

to be offered as an SSBCI benefit if used 

to treat medical conditions that affect 

health or overall function and would 

not be considered purely cosmetic in 

nature. For example, the use of 

botulinum toxin injections is acceptable 

when treating medical conditions such 

as an overactive bladder, bladder 

leakage issues due to neurologic disease, 

headache prevention in adults with 

chronic migraine, increased muscle 

stiffness in adults with limb spasticity, 

cervical dystonia (CD), strabismus, 

eyelid spasms or blepharospasm, and 

hyperhidrosis. There are some 

circumstances in which Traditional 

Medicare (i.e., Medicare Parts A and B) 

provides coverage for these items. These 

would be acceptable as a supplemental 

benefit in situations in which the MA 

organization is extending upon or 

providing coverage, beyond that which 

is provided under Traditional Medicare, 

related to these procedures. 

Additionally, coverage for 

reconstructive medical procedures that 

extend upon or wrap around Traditional 

Medicare coverage and are not solely 

cosmetic in nature (for example, 

reconstructive surgery for 

blepharoplasty, subperichondrial 

hematoma, sebaceous cysts, cleft palate, 

or trauma related injuries) would also be 

permitted as a supplemental benefit. 

In the 2019 HPMS memo titled 

‘‘Implementing Supplemental Benefits 

for Chronically Ill Enrollees,’’ we stated 

that MA organizations may offer food 

and produce to assist chronically ill 

enrollees in meeting nutritional needs 

assuming all requirements for SSBCI 

under § 422.102(f) are met, and that 

such items may include items such as 

(but not limited to) produce, frozen 

foods, and canned goods. We noted that 

tobacco and alcohol are expressly 

prohibited however, as neither are 

considered food or nutritional. In 

addition, CMS has received inquiries 

from MA organizations about whether 

they are permitted to offer cannabisbased products as a supplemental 

benefit. In response to these inquiries, 

CMS has stated that medical marijuana 

or derivatives, such as cannabis oil, 

cannot be covered by MA organizations 


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as they are illegal substances under 

Federal law. 

In the 2019 HPMS memo titled 

‘‘Implementing Supplemental Benefits 

for Chronically Ill Enrollees,’’ we also 

stated that while MA organizations may 

provide services to assist in the 

establishment of decision-making 

authority for health care needs (for 

example, power of attorney for health 

services) and/or may provide education 

such as financial literacy classes, 

technology education, and language 

classes, assuming all requirements for 

SSBCI under § 422.102(f) are met, but 

coverage of funeral expenses is not 

permitted. Funeral services are provided 

after the death of the beneficiary and, as 

such, cannot be tied to improving or 

maintaining that individual’s health or 

overall function. Similarly, life 

insurance would not be permissible as 

SSBCI. 

We also do not consider hospital 

indemnity insurance to meet the 

definition of a supplemental benefit. 

MA organizations offering supplemental 

benefits must incur a non-zero direct 

medical cost, except that in the case of 

an SSBCI that is not primarily health 

related the MA organization may 

instead incur a non-zero, direct nonadministrative cost 

(§ 422.100(c)(2)(ii)(B)). Reductions in 

cost sharing fit into the definition of a 

supplemental benefit as they are 

increases in the MA organization’s share 

of the overall payment for the covered 

health care item or service. However, 

payment for hospital indemnity 

insurance premiums would not fit this 

definition because an MA organization 

paying for separate, third-party 

insurance for the enrollee does not incur 

a direct cost on behalf of the enrollee. 

Rather, it shifts payment for medical 

costs to another payer. 

Additionally, MA organizations are 

already permitted to reduce cost sharing 

for inpatient and other covered benefits 

as part of an SSBCI reduction in cost 

sharing package. Therefore, MA 

organizations already have a mechanism 

to reduce cost sharing under existing 

rules that do not require offering 

separate, third-party insurance coverage. 

Finally, 42 CFR part 422 subpart M 

appeal and grievance requirements 

require all covered benefits to be subject 

to the MA appeal rights. The purchase 

of a hospital indemnity insurance policy 

would mean that the actual benefits 

from the policy to enrollees (that is, 

payment toward or reimbursement of 

the costs of health care items and 

services) would not be covered by 

subpart M. Having only the payment of 

premium subject to appeal is 

inconsistent with how other benefits 

available through the MA organizations 

are subject to appeal and potentially 

creates enrollee confusion or misleads 

enrollees as to what the MA 

organization is responsible for 

furnishing and paying and thus is 

inappropriate as a supplemental benefit. 

Finally, CMS has received and 

declined proposals from MA 

organizations to offer broad membership 

programs, inclusive of multiple 

unrelated services discounts, such as 

Amazon Prime, Costco, and others, as 

SSBCI. A generic membership is not 

permissible as SSBCI because it is not 

limited to items or services that have a 

reasonable expectation of improving or 

maintaining the health or overall 

function of the enrollee. That is not to 

say that an MA organization cannot 

contract with any of these retailers to 

offer covered benefits in some capacity 

(for example, benefits administered via 

a restricted debit card). However, a 

generic membership that would include 

items or services that do not have a 

reasonable expectation of improving or 

maintaining the health or overall 

function of the enrollee and no 

mechanism to ensure that enrollees 

receive only covered benefits is not 

compliant with CMS rules regarding 

supplemental benefits and thus not 

allowable as a supplemental benefit. 

Lastly, we reiterate the statutory 

prohibition against MA organizations 

offering cash or monetary rebates 

(section 1851(h)(4)(A) of the Act), and 

we further reiterate that items or 

services that are not intended to 

improve the enrollee’s health, such as 

gambling items (e.g., online casino 

games, lottery tickets), firearms and 

ammunition, would not meet our 

requirements for supplemental benefits. 

We propose to codify examples 

discussed here as items and services 

that cannot be offered as SSBCI at 

§ 422.102(f)(1)(iii). We solicit comment 

on all aspects of this proposal and may 

consider revisions to our proposal based 

on the comments received. These 

revisions may include, but are not 

limited to, a revision to the nonexhaustive list of non-primarily health 

related items and services that do not 

have a reasonable expectation of 

improving or maintaining the health of 

a chronically ill enrollee and may not be 

offered as SSBCI. 

CMS also solicits comment on other 

items and services not listed here that 

would be appropriate to include in the 

list of items that may not be offered as 

SSBCI. 

We ask that commenters include in 

their comments explanations and why 

they believe suggested items do not 

meet the statutory requirement of 

having a reasonable expectation of 

improving or maintaining the health or 

overall function of the enrollee and 

include any relevant information and 

research for CMS to consider. Based on 

the comments received, we may 

consider finalizing revisions to this 

proposed policy. 

Finally, we note that just because we 

are proposing to codify a nonexhaustive list of benefits and services 

that may not be offered as an SSBCI, this 

does not mean that all items not 

included on this list are allowable. All 

benefits must be proposed in a plan’s 

annual bid and are subject to review by 

CMS. Further, all SSBCI must meet the 

requirements under § 422.102(f), 

including the requirement of a written 

bibliography of relevant acceptable 

evidence that demonstrates the impact 

of a service on the health or overall 

function of its recipient (§ 422.102(f)(3)), 

and the requirement that any enrollees 

targeted with an SSBCI service or 

benefit must meet all the eligibility 

requirements under § 422.102(f). 

This proposal primarily codifies and 

clarifies existing guidance and practices 

and is not expected to have additional 

impact above current operating 

expenses for MA organizations. This 

proposal would not impose any new 

collection of information requirements. 

We seek comment on all aspects of 

this proposal and may consider 

revisions to the final policy based on the 

comments received. 

H. Eligibility for Supplemental Benefits 

for the Chronically Ill (SSBCI) and 

Technical Changes to the Definition of 

Chronically Ill Enrollee (§ 422.102) 

1. Eligibility for Supplemental Benefits 

for the Chronically Ill (SSBCI) 

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. We addressed 

these new supplemental benefits 

extensively in the Medicare Program; 

Contract Year 2021 Policy and 

Technical Changes to the Medicare 

Advantage Program, Medicare 

Prescription Drug Benefit Program, and 

Medicare Cost Plan Program (hereafter 

referred to as ‘‘June 2020 final rule’’) (85 

FR 33800 through 33805), where we 

referred to them as Special 

Supplemental Benefits for the 

Chronically Ill (SSBCI). 

Supplemental benefits, including 

SSBCI, are generally funded using MA 

plan rebate dollars. The MA rebate 

dollars may be used for mandatory, but 

not optional, supplemental benefits 


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71Rebates can also be used to buy down Part B 

and D premiums under § 422.266(b)(2) and (b)(3). 

72https://www.cms.gov/medicare/health-plans/

healthplansgeninfo/downloads/supplemental_

benefits_chronically_ill_hpms_042419.pdf. 73 89 FR 30551. 

74https://www.federalregister.gov/d/2024-07105/ 

p-1069. 

75Prior to the effective date the April 2024 final 

rule, this requirement was codified at 42 CFR. 

422.102(f)(3)(iii). The April 2024 final rule slightly 

reorganized § 422.102(f) as part of amendments to 

adopt new requirements. 

76https://www.federalregister.gov/d/2020-11342/ 

p-59. 

offered by the plan (§ 422.266(b)(1)).71

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 our subsequent 

guidance in a Health Plan Management 

System (HPMS) memorandum dated 

April 24, 2019 (‘‘2019 HPMS memo’’ 

hereafter),72 the number of MA plans 

that offer SSBCI—and the number and 

scope of SSBCI offered by an individual 

plan—has significantly increased. We 

have observed these trends in reviewing 

PBPs from MA plans submitted over the 

last 5 years. 

As we 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) (hereafter 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 

the 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 lifethreatening 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 

§ 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 § 422.2. 

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.73

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 

MA plans must 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, we stated 

that it is our expectation 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). We made further changes to our 

regulations in our April 2024 final rule, 

where we modified the disclaimer 

requirements at § 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. Taken 

together, these previous actions and the 

proposed changes to the regulation here 

demonstrate our broader concern about 

the importance of transparency as it 

applies to SSBCI eligibility. 

Currently, as permitted by 

§ 422.504(f)(2), CMS may review SSBCI 

eligibility criteria by requesting it from 

plans. This is currently done on a caseby-case basis. Since there is no public 

posting of a plan’s criteria for 

determining how an enrollee may or 

may not qualify for an SSBCI, enrollees 

are left to speculate whether a particular 

benefit, which may be attractive to an 

enrollee and spur them to enroll in a 

plan, is even available to them. This 

lack of transparency limits a potential 

enrollee’s ability to review and 

determine whether they may be eligible 

for SSBCI based on the plan’s eligibility 

criteria. Additionally, we received 

several 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, we noted that CMS would 

consider taking this action in future 

rulemaking (89 FR 30558).74

Further, when reviewing SSBCI 

eligibility criteria, we have discovered 

that several plans offering SSBCI 

benefits do not determine eligibility in 

an objective manner, as required at 

§ 422.102(f)(4)(iii)(A).75 For example, an 

enrollee may self-attest that they are 

eligible for SSBCI without additional 

criteria or any verification from the plan 

of this eligibility status. This would not 

meet our requirements. Additionally, 

we have noted in our reviews 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. One 

of the three requirements in the 

statutory definition of ‘‘chronically ill 

enrollee’’ is that the individual requires 

intensive care coordination. As we 

noted in the June 2020 Final Rule, we 

did not define ‘‘intensive care 

coordination’’ or establish standards for 

when an MA enrollee requires such 

services.76 We wished to allow plans 

flexibility in determining what the 

phrase meant to best serve their 

enrollees. However, we noted some 

examples of methods through which 


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77As 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 § 422.2. 78 29 U.S.C. 794; 45 CFR pt. 84. 

plans may determine an enrollee 

required intensive 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. 

CMS reaffirms its position stated in the 

June 2020 final rule, that objective 

criteria which utilize the above 

mechanisms for meeting the threepronged definition are present in the 

medical community and may be readily 

accessible to the plan. 

We have identified that the current 

regulation text (§ 422.102(f)(1)(i)(A)) 

may need further clarification for plans. 

It was never our 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, we are clarifying that having 

a medically complex chronic condition 

or comorbidity by itself is insufficient to 

satisfy the requirements in 

§ 422.102(f)(1)(i)(A)(1), (f)(1)(i)(A)(2), 

and (f)(1)(i)(A)(3), and are proposing a 

technical edit to clarify this 

requirement. We propose to amend 

§ 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: 

• 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. (3) 

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 

would allow the definition of a 

chronically ill enrollee at 

§ 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. 

Additionally, we propose that plans 

must demonstrate that an enrollee has 

met all three of the criteria set forth in 

§ 422.102(f)(1)(i)(A) through the use an 

objective process (for example, either a 

health risk assessment, a claims review, 

or other similar means). We wish to 

continue to allow plans flexibility in the 

methods they use to determine that 

enrollees have met all three criteria. 

By way of example, a plan could 

establish that in order 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 77.’’ 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 § 422.102(f)(1)(i)(A). 

Given the variability, inconsistency and 

subjective eligibility determinations by 

plans that we have observed or been 

notified about as part of our routine 

monitoring, we are proposing three 

additional amendments to the 

regulation text. First, we propose to 

codify at a new paragraph at 

§ 422.102(f)(1)(i)(C) a provision 

prohibiting MA plans from using the 

presence of a chronic illness as the sole 

basis for determining eligibility for 

SSBCI, in accordance with statute and 

the minimum requirements for an MA 

plan to determine that an individual 

meets the statutory definition of 

‘‘chronically ill enrollee.’’ As described 

previously, it has become evident 

through our routine monitoring that 

some plans are not abiding by the 

statutory requirements to determine 

eligibility for SSBCI. CMS has 

proceeded with compliance actions in 

these cases, and while we noted in the 

June 2020 final rule that we wished to 

allow flexibility for plans to identify 

needs within their unique plan 

population, some plans have 

inappropriately determined eligibility 

for SSBCI when the enrollee does not 

meet the three-pronged criteria set forth 

at section 1852(a)(3)(D)(iii) of the Act to 

receive SSBCI. As we make the 

technical edit to clarify our regulation, 

we also propose to add regulation text 

to § 422.102(f)(1)(i)(C) which provides 

that 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 that 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). Our proposal to make a 

technical correction would clarify our 

policy as it regards SSBCI eligibility and 

would not impose any new collection of 

information requirements. 

We further propose that plans must 

publish on their public-facing website 

the objective criteria developed and 

used by the MA plan as required in 

§ 422.102(f)(4)(i) and (iii)(A) to 

determine whether an enrollee is 

eligible to receive any, and which 

particular, SSBCI benefits the plan 

offers. These objective criteria must set 

forth how the plan evaluates each 

enrollee and determines whether the 

enrollee meets the three-pronged 

definition of a chronically ill enrollee as 

set forth in the statute. Specifically, we 

are proposing that 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. Plans must 

make this information available to all 

persons on their public-facing website. 

We remind MA plans of their digital 

accessibility obligations as recipients of 

Federal assistance under section 504 of 

the Rehabilitation Act.78 We propose 

this requirement be codified in the 

regulation text at § 422.102(f)(4)(iii)(C). 

In addition, we propose minor 

reorganization of paragraph (f)(4)(iii) by 

adding the words, ‘‘Have objective 

criteria for SSBCI. Specifically, the plan 

must’’ and then listing the requirements 

in paragraphs (f)(4)(iii)(A) through (C). 

We believe this proposal would 

provide greater transparency and 


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consistency to the eligibility 

determination process for potential 

enrollees and will enhance the 

enrollees’ ability to make informed 

decisions about their enrollment and the 

benefits. We remind plans that 

§ 422.102(f)(4)(v) requires that plans 

maintain their evidentiary standards or 

objective criteria for enrollee eligibility 

for the entire coverage year. 

In addition, we remind plans that 

under § 422.2262, general 

communications materials and activities 

requirements, MA organizations may 

not mislead, confuse, or provide 

materially inaccurate information to 

current or potential enrollees. 

Consistent with these existing 

requirements, we expect that MA 

organizations, as well as the agents and 

brokers that are operating on behalf of 

such organizations, will provide 

appropriate information on how the 

plan evaluates each enrollee and 

determines whether the enrollee meets 

the three-pronged definition of a 

chronically ill enrollee when discussing 

SSBCI benefits with a current or 

potential enrollee, to ensure that 

information about SSBCI provided in 

such discussions is accurate and not 

misleading. 

Additionally, while there is not 

currently a consistent manner by which 

plans publicly report this information or 

submit the information directly to CMS, 

we believe these proposals will provide 

an increased level of compliance 

oversight, increase good governance and 

oversight of the Medicare Trust Fund, 

and improve patient participation in 

their care and awareness of their 

eligibility for benefits, by making this 

information publicly available rather 

than only available upon request by 

CMS. 

We seek public comment on both 

proposals and may, based on the 

comments received, consider finalizing 

revisions to this final policy. 

I. Risk Adjustment Data Updates 

1. Update Hierarchical Condition 

Categories (HCC) Definition (§ 422.2) 

The current definition of Hierarchical 

Condition Categories (HCC) at 42 CFR 

422.2 references the International 

Classification of Diseases, Ninth 

Revision, Clinical Modification (ICD–9– 

CM), which was the standard medical 

data code set HHS adopted for health 

conditions from October 16, 2002, to 

September 30, 2015 (45 CFR 

162.1002(a)(1) and 45 CFR 

162.1002(b)(1)). For the period starting 

on October 1, 2015, HHS adopted an 

updated version of the ICD, ICD–10–CM, 

as the standard medical data code set for 

health conditions (45 CFR 

162.1002(c)(2)). The ICD diagnosis 

codes—referred to as disease codes in 

the current HCC definition—that are 

grouped in an HCC for risk score 

calculation are only those valid codes 

that are from the ICD version that is in 

place during a respective year. For 

example, for dates of service starting on 

October 1, 2015, only valid ICD–10–CM 

codes would have been included in 

HCCs, since ICD–9–CM codes were no 

longer in use. 

We are proposing to remove the 

reference to a specific version of the ICD 

from the definition of HCC in § 422.2, 

while maintaining a reference to the ICD 

in general. The ICD is updated as 

advances are made in healthcare, and as 

new editions are issued, the code set 

standard adopted by HHS may change 

to use the most current edition. See 

section 1173(c) of the Act for the 

Secretary’s authority to adopt code sets, 

as well as 45 CFR part 162 (specifically, 

§§ 162.1000 through 162.1011) for the 

diagnosis code sets adopted for HIPAA 

transactions. The current HCC 

definition in § 422.2 states that disease 

groupings consist of ‘‘disease codes 

(currently ICD–9–CM codes) that predict 

average healthcare spending.’’ 

Amending the HCC definition to remove 

reference to a specific version of the ICD 

would keep the definition in § 422.2 

current as updates are made to the HCCs 

in model calibrations and newer 

versions of the ICD are created and 

adopted by the Secretary. We are also 

proposing to substitute the terms 

‘‘disease codes’’ with ‘‘diagnosis codes’’ 

and ‘‘disease groupings’’ with 

‘‘diagnosis groupings’’ to be consistent 

with ICD terminology. 

The proposed update at § 422.2 is a 

technical change to the longstanding 

definition of HCC. The proposal to 

remove the reference to a specific 

version of the ICD from the HCC 

definition does not change the meaning 

of HCC or how it is used in § 422.311, 

which has been defined and used in MA 

regulations since 2010 (75 FR 19803) as 

part of describing risk adjustment data 

validation audit reports and the 

voluntary dispute resolution process 

available for MA organizations to 

dispute errors identified during those 

audits. For this reason, we do not expect 

the proposed change to result in 

additional costs or savings and are not 

scoring this provision in the Regulatory 

Impact Analysis section. Further, as we 

are not imposing any new reporting 

requirements, we do not believe that our 

proposal will result in additional 

paperwork burden and have not 

incorporated a burden increase in the 

Collection of Information section. 

2. Clarifying the Obligation of PACE 

Regulations To Submit Data 

(§ 460.180(b)) 

CMS is authorized under section 

1894(d)(1) of the Act to make payments 

to PACE organizations in the same 

manner as MA organizations. Consistent 

with that, PACE organizations must 

submit data in accordance with the risk 

adjustment data requirements for MA 

organizations at § 422.310. Codified at 

42 CFR 460.200, PACE organizations are 

required to collect data, maintain 

records, and submit reports as required 

by CMS to establish payments rates. We 

are proposing to codify our longstanding 

practice of requiring the collection and 

mandatory submission of risk 

adjustment data by PACE organizations 

by adding a new paragraph at 42 CFR 

460.180(b)(3) that requires the data they 

submit is in accordance with risk 

adjustment data submission 

requirements in § 422.310. By codifying 

this longstanding requirement of PACE 

organizations, the proposed provision 

does not create any new requirements or 

make changes to payment for PACE 

organizations. See, for example, 64 FR 

66234, 66266 (Nov. 24, 1999) (‘‘We will 

subsequently require PACE 

organizations to submit additional 

encounter data consistent with the 

encounter data requirements for [MAOs] 

set forth in 42 CFR 422.257 [the 

precursor to § 422.310] . . . .’’); see also 

the system of record notice (SORN) for 

the CMS Encounter Data System (EDS), 

System No. 09–70–0506, at 79 FR 34539 

(July 17, 2014) and the CMS Risk 

Adjustment Suite of Systems (RASS), 

System No. 09–70–0508, at 80 FR 49237 

(August 17, 2015). 

We are proposing to add a new 

paragraph at § 460.180(b)(3) to codify 

existing longstanding practice for the 

collection and mandatory submission of 

risk adjustment data, as specified in 

§ 422.310, for PACE organizations. The 

proposed provision does not create any 

new requirements or make any changes 

to payment for PACE organizations. The 

proposed regulatory changes will not 

result in additional costs, nor do we 

expect the impact of these changes to 

result in savings. For this reason, we do 

not expect the proposed change to result 

in additional costs or savings and are 

not scoring this provision in the 

Regulatory Impact Analysis section. 

Further, as we are not imposing any 

new reporting requirements, we do not 

believe that our proposal will result in 

additional paperwork burden and have 

not incorporated a burden increase in 

the Collection of Information section. 


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79https://www.whitehouse.gov/ostp/ai-bill-ofrights/. 80https://www.federalregister.gov/documents/

2023/11/01/2023-24283/safe-secure-andtrustworthy-development-and-use-of-artificialintelligence. 81https://www.federalregister.gov/documents/ 

2024/01/30/2024-01832/medicare-program-requestfor-information-on-medicare-advantage-data. 82 Khosravi M., Zare Z., Mojtabaeian S.M., Izadi 

R., Artificial Intelligence and Decision-Making in 

Healthcare: A Thematic Analysis of a Systematic 

Review of Reviews. Health Serv Res Manag 

Epidemiol. 2024 Mar 5;11:23333928241234863. doi: 

10.1177/23333928241234863. PMID: 38449840; 

PMCID: PMC10916499. 

83Executive Office of the President, May 2016, 

‘‘Big Data: A Report on Algorithmic Systems, 

Opportunity, and Civil Rights.’’ https:// 

obamawhitehouse.archives.gov/sites/default/files/ 

microsites/ostp/2016_0504_data_

discrimination.pdf. 

84Hoffman and Podgurski, ‘‘Artificial Intelligence 

and Discrimination in Health Care, Yale Journal of 

Health Policy, Law, and Ethics,’’ Vol. 19 [2020], Iss. 

3, Art. 1. https://yaleconnect.yale.edu/get_file?

pid=bbaf6b35fe2b49fd1f4c39fbb91951db5b

92a42618d4fd2a6724813f4cf64872. 

85 Getzen, Emily et al. ‘‘Mining for equitable 

health: Assessing the impact of missing data in 

electronic health records.’’ Journal of biomedical 

informatics vol. 139 (2023): 104269. doi:10.1016/ 

j.jbi.2022.104269. 

86Hoffman and Podgurski, ‘‘Artificial Intelligence 

and Discrimination in Health Care, Yale Journal of 

Health Policy, Law, and Ethics,’’ Vol. 19 [2020], Iss. 

3, Art. 1. 

3. Clarifying the Obligation of Cost 

Plans To Submit Certain Data 

(§ 417.486(a)) 

Currently, we require the submission 

of risk adjustment data from 

organizations that operate cost plans 

under section 1876 of the Act in the 

same manner as MA organizations. 

Codified at 42 CFR 417.486(a), the 

contract of Section 1876 Cost plans 

must provide that the plan agrees to 

submit to CMS: (1) all financial 

information required under subpart O of 

this part and for final settlement; and (2) 

any other information necessary for the 

administration or evaluation of the 

Medicare program. 

In this proposed rule, we propose to 

amend § 417.486(a) to add a new 

§ 417.486(a)(3) to codify existing 

longstanding practice of requiring the 

collection and mandatory submission of 

risk adjustment data as specified in 42 

CFR 422.310 by 1876 Cost plans. As 

stated in the 2012 Advance Notice, we 

have required the submission of 

encounter data for Cost plans under our 

authority in sections 1876(h)(3), 

1833(a)(1)(A), and 1861(v) to determine 

‘‘reasonable costs.’’ Also see 42 CFR 

417.568 (requiring Cost plans to 

‘‘provide adequate cost and statistical 

data . . . that can be verified by 

qualified auditors’’) and 

§ 417.576(b)(2)(iii) (requiring Cost plans 

to submit ‘‘[a]ny other information 

required by CMS’’). These proposed 

regulatory changes will not result in 

additional costs, nor do we expect the 

impact of these changes to result in 

savings. For this reason, we do not 

expect the proposed change to result in 

additional costs or savings and are not 

scoring this provision in the Regulatory 

Impact Analysis section. Further, as we 

are not imposing any new reporting 

requirements, we do not believe that our 

proposal will result in additional 

paperwork burden and have not 

incorporated a burden increase in the 

Collection of Information section. 

J. Ensuring Equitable Access to 

Medicare Advantage (MA) Services— 

Guardrails for Artificial Intelligence 

(§ 422.112) 

1. Background 

On January 25, 2021, the Biden-Harris 

Administration released an Executive 

Order, ‘‘Advancing Racial Equity and 

Support for Underserved Communities 

Through the Federal Government’’ (E.O. 

13985), directing agencies to embed 

equity principles, policies, and 

approaches across Federal Government 

programs. In October 2022, the White 

House Office of Science and Technology 

Policy (OSTP) released the Blueprint for 

an AI Bill of Rights,79 identifying five 

principles to protect the public from the 

misuse of artificial intelligence, 

including eliminating discriminatory 

practices by algorithms and systems. On 

October 30, 2023, the Biden-Harris 

Administration also released an 

Executive Order, ‘‘Executive Order on 

the Safe, Secure, and Trustworthy 

Development and Use of Artificial 

Intelligence,’’ directing agencies to 

ensure that artificial intelligence tools 

do not impede the advancement of 

equity and civil rights, and that the use 

of AI within health care organizations 

does not deny equal opportunity and 

justice for the American people.80 On 

January 30, 2024, CMS published 

‘‘Medicare Program; Request for 

Information on Medicare Advantage 

Data’’ which received several comments 

related to the use and regulation of AI 

and requests for CMS ensure that MA 

plans’ use of AI complies with existing 

CMS rules without negatively impacting 

health disparities.81

15 U.S.C. 9401(3) defines ‘‘artificial 

intelligence’’ or ‘‘AI’’ as ‘‘a machinebased system that can, for a given set of 

human-defined objectives, make 

predictions, recommendations or 

decisions influencing real or virtual 

environments. Artificial intelligence 

systems use machine- and human-based 

inputs to—(A) perceive real and virtual 

environments; (B) abstract such 

perceptions into models through 

analysis in an automated manner; and 

(C) use model inference to formulate 

options for information or action.’’ 

The health care industry has seen the 

adoption of AI in multiple capacities, 

such as, but not limited to, AI-based 

patient care decision support tools, 

vision transformer-based AI methods for 

lung cancer imaging applications, and 

AI and machine learning based decision 

support systems in mental health care 

settings.82 In some instances, 

automation has created efficiencies, cost 

savings, and time management 

improvements for health providers and 

support staff. 

However, there have been many 

instances of algorithmic discrimination, 

where the use of AI has resulted in 

deepening bias and discrimination, 

exacerbating existing inequities within 

the health care system.83 Often, these 

individual patients are members of 

historically underserved and 

marginalized groups, which, increases 

the risk of automated bias and 

discrimination for these populations 

when AI tools are used within their 

health care.84 A study in the Journal of 

Biomedical Informatics determined that 

people of color or individuals with 

lower socioeconomic status typically 

have less complete electronic health 

records (EHRs). The study demonstrates 

that as advances in AI are incorporated 

into the clinic, patients of lower 

socioeconomic status and patients of 

color, can receive differential treatment 

in early disease detection and risk 

prediction.’’ 85 Also, AI and related tools 

rely on large data sets which can have 

missing or incorrect information. The 

massive volume of data needed to train 

an AI model amplifies bias and may 

result in low quality AI 

recommendations without complete and 

substantial data. It is not uncommon for 

individual patients to have incorrect or 

missing data in their medical records, 

which produces flawed AI 

recommendations.86 In addition, CMS 

has received concerns from external 

stakeholders through various formats 

about beneficiary harm potentially 

resulting from MA organizations’ use of 

AI. 

One example of algorithmic 

discrimination involves the use of AI to 

predict which patients are most likely to 

miss their medical appointments. The 

AI often uses data, such as prior noshow history, to advise providers to 

double-book certain patients. In this 

instance, lower-income patients were 

more likely to miss their medical 

appointments due to challenges around 

transportation, childcare, and work 

schedules. As a result of using this data 


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87Hoffman and Podgurski, ‘‘Artificial Intelligence 

and Discrimination in Health Care, Yale Journal of 

Health Policy, Law, and Ethics,’’ Vol. 19 [2020], Iss. 

3, Art. 1. https://yaleconnect.yale.edu/get_file?pid=

bbaf6b35fe2b49fd1f4c39fbb91951db5b92a4

2618d4fd2a6724813f4cf64872. 

88https://www.federalregister.gov/d/2023-07115/ 

p-361. 

89https://www.federalregister.gov/d/2023-07115/

p-361. 

within the AI tool, providers doublebooked lower-income patients, causing 

longer wait times for lower-income 

patients and perpetuating the cycle of 

additional missed appointments for 

vulnerable patients.87

Our proposed policy intends to make 

clear that MA organizations must 

provide all enrollees, without exception, 

equitable access to services, including 

when MA organizations use AI or other 

automated systems to aid their decisionmaking. 

2. Proposed Policy 

On June 29, 2000 (65 FR 40170), we 

issued a final rule titled, Medicare 

Program; Medicare+Choice Program (the 

June 2000 final rule), which described 

the requirement that MA plans must 

provide services in a culturally 

competent manner that addresses 

unique racial and ethnically related 

health care concerns. We stated that 

these services should accommodate the 

unique health-related beliefs, attitudes, 

practices, and communication patterns 

of beneficiaries and their caregivers to 

improve services, strengthen programs, 

increase community participation and 

eliminate disparities in health status 

among diverse population groups (65 FR 

40217). Furthermore, we required that 

MA organizations ensure that all 

covered benefits are ‘‘available and 

accessible to all enrollees.’’ As such, 

§ 422.112(a)(8) requires MA 

organizations that offer coordinated care 

plans to 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. 

In the April 2023 final rule (88 FR 

22120), CMS revised the paragraph 

heading at § 422.112(a)(8), from 

‘‘Cultural considerations’’ to ‘‘Ensuring 

Equitable Access to Medicare 

Advantage (MA) Services.’’ 

Additionally, in the April 2023 final 

rule (88 FR 22120), at § 422.112(a)(8), 

CMS replaced the phrase, ‘‘those with 

limited English proficiency or reading 

skills, and diverse cultural and ethnic 

backgrounds’’ after the word 

‘‘including’’ and added in its place 

paragraphs (i) through (vii), listing more 

examples of underserved populations to 

whom an MA organization must ensure 

that services are provided in a culturally 

competent manner and promote 

equitable access to services in order to 

satisfy the existing requirement. CMS 

noted specifically in the April 2023 

final rule that, ‘‘MA organizations must 

provide all enrollees, without exception, 

accommodations to equitably access 

services according to applicable 

statutory, regulatory, and other 

guidance.’’ 88

Given the growing use of AI within 

the health care sector, we believe it is 

necessary to ensure that the use of AI 

does not result in inequitable treatment, 

bias, or both, within the health care 

system, and instead is used to promote 

equitable access to care and culturally 

competent care for all enrollees. As 

such, we propose to revise 

§ 422.112(a)(8), Ensuring equitable 

access to Medicare Advantage (MA) 

Services, by moving the examples listed 

in paragraphs (i) through (vii) under a 

new paragraph (i)(A) through (G), and 

creating a new paragraph (ii) that 

requires MA organizations to ensure 

services are provided equitably 

irrespective of delivery method or 

origin, whether from human or 

automated systems. We specify that 

artificial intelligence or automated 

systems, if utilized, must be used in a 

manner that preserves equitable access 

to MA services. 

In the same way that MA 

organizations, ‘‘must provide all 

enrollees, without exception, 

accommodations to equitably access 

services according to applicable 

statutory, regulatory, and other 

guidance,’’ 89 MA organizations must 

provide enrollees with equitable access 

to services under the MA plan design or 

benefits or both regardless of the tools 

or methods utilized to make care 

decisions or to provide that care. 

Section 1852(b) of the Act and 

§ 422.110(a) prohibit an MA 

organization from denying, limiting, or 

conditioning the coverage or furnishing 

of benefits to individuals eligible to 

enroll in an MA plan offered by the 

organization on the basis of any factor 

that is related to health status. 

Additionally, § 422.100(f)(2) provides 

that plan designs and benefits may not 

discriminate against beneficiaries, 

promote discrimination, discourage 

enrollment, encourage disenrollment, 

steer subsets of Medicare beneficiaries 

to particular MA plans, or inhibit access 

to services. We are not proposing any 

regulatory modifications to these 

requirements, as these existing 

requirements already apply to MA plans 

if they use AI or automated systems. 

Instead, we reiterate that in the event 

that an MA plan uses AI or automated 

systems, they must comply with section 

1852(b) of the Act, § 422.110(a) and 

other applicable regulations and 

requirements, provide equitable access 

to services, and not discriminate on the 

basis of any factor that is related to the 

enrollee’s health status. Regarding 

enforcement and oversight of MA 

organizations, CMS has a wellestablished, robust, and successful 

process for ensuring organizations that 

offer MA plans are complying with our 

regulations and program guidance. As a 

result of CMS’s authority under 42 CFR 

part 422, subparts K and O, CMS may 

conduct program audits and compliance 

activities as well as issue compliance 

and enforcement actions to MA 

organizations who fail to comply with 

our regulations. 

As the health care system evolves and 

utilizes new and emerging AI tools, we 

feel the need to clarify that these tools, 

including but not limited to, machine 

learning, patient care decision support 

tools, and/or other algorithmic tools, 

must not violate CMS rules. If MA 

organizations use these AI tools or 

automated systems in any manner, it is 

their responsibility to ensure that the 

usage of such tools complies with all 

existing Medicare policies, including, 

but not limited to, providing culturally 

competent care to all enrollees in a nondiscriminatory manner. In the event that 

an MA organization licenses an AI or 

automated system, or contracts with a 

third party for services that are 

furnished using one of these tools, the 

MA organization will be held 

responsible in accordance with 

§§ 422.110(a) and 422.504(i)(1), which 

provides that an MA organization is 

ultimately responsible even if it uses an 

First Tier, Downstream, and Related 

Entity (FDR) to fulfill obligations and 

responsibilities under the MA 

regulations and MA contract with CMS. 

We also note that MA organizations are 

responsible for ensuring that usage of AI 

tools complies with internal coverage 

criteria rules. This provision addresses 

the equitable coverage of Medicarecovered benefits and therefore applies 

equally to Cost plans. Because this is a 

clarification of existing policy, we do 

not anticipate any new burden 

associated with this proposal. Further, 

at this time, this proposal is specific to 

MA plans. We note that CMS’s 

formulary review process of Medicare 

Part D plans includes a comprehensive 

check to ensure enrollees are not facing 

discrimination or bias or both. 

We recognize that technology in this 

space is quickly evolving. As such, we 

want to ensure that these proposed 


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91The current MA and Section 1876 Cost Plan 

Provider Directory Model and Instructions 

document is located at: https://www.cms.gov/ 

medicare/health-drug-plans/managed-caremarketing/models-standard-documentseducational-materials. 

revisions and clarifications take into 

consideration the fast-paced nature of 

this industry and the evolving 

application of these tools within the 

health care industry. As such, we have 

provided examples for how MA 

organizations could ensure they remain 

in compliance with this proposal. MA 

organizations could maintain 

compliance by: (1) ensuring that they 

understand, recognize, and limit the 

impact of biased data inputs within any 

AI and/or automated system they 

utilize; (2) that they create and follow a 

process to regularly review any 

automated system they utilize to ensure 

that the use of the automated system is 

non-discriminatory; and (3) that outputs 

with a known discriminatory bias (such 

as expected utilization or predictability 

of payment or both) are not used within 

a MA organization’s automated system 

in a manner that discriminates in the 

delivery of services in violation of 

section 1852(b) of the Act or 

§ 422.110(a). 

3. Definitions 

For purposes of this policy, we 

propose to adopt the following 

definition of ‘‘automated system’’ in 

§ 422.2 based on the Blueprint for an AI 

Bill of Rights. We propose to define 

‘‘automated system’’ as ‘‘any system, 

software, or process that uses 

computation as whole or part of a 

system to determine outcomes, make or 

aid decisions, inform policy 

implementation, collect data or 

observations, or otherwise interact with 

individuals or communities or both. 

Automated systems include, but are not 

limited to, systems derived from 

machine learning, statistics, or other 

data processing or artificial intelligence 

techniques, and exclude passive 

computing infrastructure. ‘Passive 

computing infrastructure’ is any 

intermediary technology that does not 

influence or determine the outcome of 

decision, make or aid in decisions, 

inform policy implementation, or 

collect data or observations, including 

web hosting, domain registration, 

networking, caching, data storage, or 

cybersecurity. As used in this part, 

automated systems that are within the 

scope of this definition are only those 

that have the potential to meaningfully 

impact individuals’ or communities’ 

rights, opportunities, or access.’’ 90

We also propose to define ‘‘Patient 

care decision support tool,’’ consistent 

with the definition at 45 CFR 92.4, as 

any automated or non-automated tool, 

mechanism, method, technology, or 

combination thereof used by an MA 

organization to support clinical 

decision-making in its health programs 

or activities. We recognize that this 

industry is fast-evolving and everchanging, and therefore the following 

uses are examples, but not an 

exhaustive list. Patient care decision 

support tools are tools used to guide 

health care decision-making and can 

range in form from flowcharts and 

clinical guidelines to complex computer 

algorithms, decision support 

interventions, and models. MA 

organizations may use these systems to 

assist with decision-making for various 

purposes. Patient care decision support 

tools are used for screening, risk 

prediction, diagnosis, prognosis, clinical 

decision-making, treatment planning, 

health care operations, and allocation of 

resources, all of which affect the care 

that individuals receive. Patient care 

decision support tools may create or 

contribute to discrimination and their 

use may lead to poorer health outcomes 

among members of historically 

marginalized communities. 

We reiterate that ‘‘artificial 

intelligence’’ or ‘‘AI’’ is defined in 15 

U.S.C. 9401(3) as ‘‘a machine-based 

system that can, for a given set of 

human-defined objectives, make 

predictions, recommendations or 

decisions influencing real or virtual 

environments. Artificial intelligence 

systems use machine and human-based 

inputs to—(A) perceive real and virtual 

environments; (B) abstract such 

perceptions into models through 

analysis in an automated manner; and 

(C) use model inference to formulate 

options for information or action.’’ 

We seek comment on this proposal 

and may consider finalizing revisions 

based on the comments received. 

K. Promoting Community-Based 

Services and Enhancing Transparency 

of In-Home Service Contractors (§ 422.2, 

422.111) 

Section 1852(c)(1) of the Act requires 

an MA organization to disclose, among 

other things, the number, mix, and 

distribution of plan providers in a clear, 

accurate, and standardized form to each 

enrollee in an MA plan offered by the 

MA organization at the time of 

enrollment and at least annually 

thereafter. CMS implemented this 

requirement in a regulation at 

§ 422.111(a) and (b)(3)(i), requiring that 

an MA organization must disclose the 

number, mix, and distribution 

(addresses) of providers from whom 

enrollees may reasonably be expected to 

obtain services, in the manner specified 

by CMS, to each enrollee electing an 

MA plan it offers; in a clear, accurate, 

and standardized form; and at the time 

of enrollment and at least annually 

thereafter, by the first day of the annual 

coordinated election period. In addition, 

under § 417.427, the MA disclosure 

requirements at § 422.111 also apply to 

section 1876 cost plans. The regulatory 

proposals herein apply to all 

organizations offering network-based 

plans as defined at § 422.2, including 

MA plans and section 1876 cost plans. 

We refer to these entities generally as 

‘‘plans’’ throughout this proposal. 

CMS has historically interpreted the 

disclosure requirement at 

§ 422.111(b)(3)(i)—‘‘the number, mix, 

and distribution (addresses) of providers 

from whom enrollees may reasonably be 

expected to obtain services’’—as 

referring to the provider directory. CMS 

developed the MA and Section 1876 

Cost Plan Provider Directory Model and 

Instructions document,91 a model 

material created as an example of how 

to convey the required information to 

enrollees. In accordance with 

§ 422.2267(c), when drafting their 

provider directories based on CMS’s 

model, plans must accurately convey 

the vital information in the required 

material and follow the order of content 

when specified by CMS. 

The current provider directory model 

contains an array of specific required 

information based on § 422.111(b)(3)(i) 

but also provides some flexibility to 

plans. For example, plans that offer 

supplemental benefits must furnish a 

provider directory for those benefits, but 

plans may choose to include these 

network providers that offer 

supplemental benefits in a directory 

combined with health care providers or 

in an entirely separate provider 

directory. The provider directory model 

also requires that plans include in the 

directory any providers or entities 

providing covered benefits or services, 

which may be reasonably contacted by 

an enrollee for the purposes of making 

an appointment (for example, dentist 

appointment). However, this means that 

some entities which provide covered 

benefits to enrollees may be currently 

excluded from the directory as they do 

not have a phone number for 

appointments, or because they take 

appointments by booking through a 

third party. Due to these and other 

possible scenarios, CMS has become 

aware that some entities that provide 

covered benefits, especially those that 

provide covered supplemental benefits, 


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2https://www.bloomberg.com/news/features/ 

2023-05-30/papa-eldercare-startup-faces-abuseclaims-by-seniors-caregivers?embeddedcheckout=true&leadSource=uverify%20wall. 

including non-primarily health related 

benefits, may not be included in the 

provider directory (such as, but not 

limited to, adult day care entities, 

transportation services, pest control 

services, contractors or other building 

services which construct ramps for 

homes, etc.). While our intent was to 

require plans to include all entities that 

furnish covered benefits to enrollees, 

CMS has become aware that some plans 

do not include all such entities (while 

still complying with regulations and 

acting consistent with current 

guidance). 

We therefore propose to add at § 422.2 

a definition for a ‘‘direct furnishing 

entity’’ which means any individual or 

entity that delivers or furnishes covered 

benefits to the enrollee. This includes 

Medicare Part A and B covered benefits, 

as well as all types of supplemental 

benefits. A direct furnishing entity may 

include entities like transportation 

services or adult day care facilities. We 

also note that direct furnishing entities 

may include first tier, downstream, or 

related entities (FDRs), but we wish to 

define a new term to clarify that with 

this definition, we mean entities from 

whom enrollees may expect to receive 

directly furnished services, regardless of 

their status as an FDR. We further note 

the distinction between services 

administered to enrollees and plancovered services. Agents and brokers, 

for example, fall under the definition of 

an FDR, but would not meet the 

proposed definitions of a direct 

furnishing entity as they do not cover, 

furnish or directly provide Medicare 

Part A or B benefits or services, nor any 

supplemental benefits. 

We solicit feedback on the proposed 

definition for a direct furnishing entity. 

Specifically, we are interested in: (1) 

whether this definition is sufficient to 

encompass individuals or entities who 

may reasonably provide covered 

supplemental benefits to the enrollee 

and should therefore be included in the 

provider directory, or (2) whether the 

definition should be further refined to 

include a more tailored subset of 

individuals or entities. We may consider 

finalizing changes to this definition 

based on comments received. 

Our intent in requiring a provider 

directory and further specifying 

parameters for required provider 

directory data elements was to include 

entities that meet the above proposed 

definition of a direct furnishing entity in 

the provider directory under 

§ 422.111(b)(3)(i) because enrollees may 

reasonably be expected to obtain 

services from them. However, as we 

noted previously, it is possible that in 

certain instances, a plan may have 

contracted with a direct furnishing 

entity to provide some covered benefits, 

but reasonably believed that 

§ 422.111(b)(3)(i) did not require that 

particular direct furnishing entity to be 

included in the provider directory 

because there is no phone number the 

enrollee can call to request an 

appointment with that entity at a 

specific address (as required per the 

current provider directory model). 

CMS has also been alerted to concerns 

related to the possible exclusion of these 

direct furnishing entities from provider 

directories. These concerns relate to 

safety and a lack of transparency 

regarding supplemental benefit service 

providers and their access to an 

enrollee’s home. Since many 

supplemental benefits include 

interaction with an enrollee at the 

enrollee’s home (for example, in-home 

support services, meal delivery, home 

modifications, individuals providing 

adult day care services), a greater safety 

risk exists for enrollees who use these 

services. This is particularly of concern 

when the enrollee may not have 

information about who may have access 

to their home, personally identifiable 

information (PII), or protected health 

information (PHI). In 2023, CMS became 

aware of news reports that an FDR 

contracted with several MA 

organizations to provide in-home 

support services had over 1,200 

complaint reports logged against the 

FDR’s employees, including several 

allegations of sexual harassment and 

assault that occurred in the enrollees’ 

home that were referred to law 

enforcement for further investigation.2 It 

has been further reported that other 

FDRs that furnished covered benefits in 

an enrollee’s home may have 

jeopardized enrollees’ safety and caused 

harm. In these instances, enrollees and 

their caregivers may have benefited 

from increased transparency from the 

MA plan regarding the specific FDRs 

that the MA organization utilizes to 

furnish services, including those that 

may likely enter the enrollee’s home to 

furnish covered items and services. 

CMS also strongly encourages plans to 

do business with organizations deeply 

rooted within the community they serve 

and may be best suited to serve. As 

explained in the Calendar Year 2023 

Physician Fee Schedule proposed rule 

(87 FR 46102), community-based 

organizations (CBOs) are defined as 

public or private not-for-profit entities 

that provide specific services to the 

community, or targeted populations in 

the community, to address the health 

and social needs of those populations. 

They may include community-action 

agencies, housing agencies, area 

agencies on aging, centers for 

independent living, aging and disability 

resource centers, or other non-profits 

that apply for grants to perform social 

services. While we currently require at 

§ 422.112(b)(3) that coordinated care 

plans’ arrangements with contracted 

providers include programs for the 

coordination of plan services with 

community and social services generally 

available in the area served by the MA 

plan, we note that there is currently no 

way for enrollees to determine through 

the provider directory, or other means 

set forth in regulation, which contracted 

providers are CBOs located in or near 

the community in which the enrollee 

lives. 

In an effort to allow enrollees more 

access to information regarding their 

service providers, and further encourage 

MA plans’ use of community-based 

providers, CMS is proposing to codify 

new requirements in the regulation. We 

propose to add new language to clarify 

that plans must include in their 

provider directory all direct furnishing 

entities. We propose to clarify our 

policy by amending § 422.111(b)(3) to 

explicitly state the requirement to 

include direct furnishing entities. We 

propose that § 422.111(b)(3)(i)(A) and 

(B) would be revised to specify the 

following: 

• All direct furnishing entities as 

defined in § 422.2, from whom enrollees 

may reasonably be expected to obtain 

services. 

• Each provider’s cultural and 

linguistic capabilities, including 

languages (including American Sign 

Language) offered by the provider or a 

skilled medical interpreter at the 

provider’s office. 

Section 422.111(b)(3)(i)(C) and (D) are 

described later in this section. Section 

422.111(b)(3)(i)(E) and (F) would be 

revised to specify the following: 

• Any out-of-network coverage; any 

point-of-service option, including the 

supplemental premium for that option. 

• How the MA organization meets the 

requirements of §§ 422.112 and 422.114 

for access to services offered under the 

plan. 

While it has been CMS’s expectation 

that plans include the information at 

proposed § 422.111(b)(3)(i)(A) already in 

their provider directories (to the extent 

that there is a reasonable expectation 

that enrollees may obtain services from 

these direct furnishing entities), we 

believe that adjusting our regulation text 

to codify this policy explicitly will 


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prevent any confusion or 

misunderstanding regarding CMS’s MA 

provider directory requirements. 

Further, we propose that plans must 

clearly identify all direct furnishing 

entities that provide in-home or at-home 

supplemental benefits or services, or a 

hybrid of these benefits or services (both 

in-home or at-home, and in-office 

benefits or services) at 

§ 422.111(b)(3)(i)(D). We propose that 

§ 422.111(b)(3)(i)(D) would require 

easily identifiable notations, filters, or 

other distinguishing features to indicate 

in-home or at-home supplemental 

benefit providers (as defined in § 422.2). 

For the purposes of this requirement, we 

are proposing to define an in-home or 

at-home supplemental benefit provider 

as any direct furnishing entity in which 

the direct furnishing entity or an 

employee of the direct furnishing entity 

is given an enrollee’s physical address 

in order to provide in-person 

supplemental benefits or SSBCI items or 

services to that enrollee. We also 

propose that this definition state that an 

in-home or at-home supplemental 

benefit provider may include direct 

furnishing entities who offer both inoffice as well as in-home or at-home 

supplemental benefits. We propose that 

this definition be added to the 

regulation at § 422.2. We solicit 

comment on this definition and whether 

it should be expanded to include any 

entity that may enter an individual’s 

home for purposes beyond providing 

supplemental benefits, items, or services 

to enrollees. We are particularly 

interested in whether additional 

transparency and further safety 

assurances are necessary for individuals 

who may receive covered benefits 

including Medicare Parts A and B 

benefits at their physical address. We 

may consider finalizing changes to this 

definition based on the comments 

received. 

We also seek comment on the manner 

plans would be required to identify 

these in-home or at-home supplemental 

benefit providers. We note that 

currently the provider directory model 

requires plans to include a notation next 

to any provider listings where the 

providers only offer home visits and do 

not see patients at a physical office 

location. Because the provider directory 

model currently requires that 

supplemental benefit providers only 

offering in-home or at-home services be 

easily identified, it excludes providers 

and suppliers who may provide inhome or at-home services in addition to 

in-office services. Therefore, any 

enrollees wishing to find in-home or athome supplemental benefit providers 

may refer to this notation in the 

provider directory but may not be aware 

of other providers and suppliers that 

provide a hybrid of services (both inhome or at-home, and in-office 

services). Additionally, we note that 

some provider directories may include a 

large volume of providers, both PCPs as 

well as supplemental benefit providers, 

making some lists prohibitively large. 

We propose that plans would be 

required to create a subset of the 

provider directory through which plans 

identify in-home or at-home 

supplemental benefit service providers, 

including those that may provide a 

hybrid of services (both in-home or athome, and in-office services). An 

example of how a plan may identify this 

subset list is a designated section for 

these types of providers under section 2 

(List of Network Providers) of their 

provider directory, as shown in the 

model document, alongside the plan’s 

other listed provider types (for example, 

PCPs, specialists, hospitals, etc.). 

Another example specific to a plan’s 

online provider directory is a filter 

function for this provider type, which 

would result in a filtered list of the inhome or at-home supplemental benefit 

providers. Such a subset list of in-home 

or at-home service providers, including 

those that may provide a hybrid of 

services (both in-home or at-home, and 

in-office supplemental benefit services), 

would allow the enrollee to clearly 

identify and differentiate which direct 

furnishing entities may be entering their 

home. We propose that, by including 

such a list, plans must continue to 

adhere to the current provider directory 

requirements set forth at 

§§ 422.111(a)(2), 422.111(b)(3)(i), 

422.111(h)(2)(i) and (ii), 422.120, 

422.2262, 422.2265(b)(3) and (4), 

422.2265(c)(1)(iv), 422.2267(a), 

422.2267(c), 422.2267(d), and 

422.2267(e)(11) regarding what 

information must be included, and all 

other relevant provider directory 

requirements. We seek comment on this 

proposed requirement and may consider 

revisions to a final policy based on the 

comments received. 

As an alternative to this subset list, 

which would be found within the 

provider directory, we propose and seek 

comment on requiring plans to create a 

list that is entirely separate from the 

currently required provider directory 

that identifies the in-home or at-home 

supplemental benefit providers 

including those that may provide a 

hybrid of services (both in-home or athome, and in-office services) under the 

plan. This alternative proposal may 

reduce enrollee burden in identifying 

such providers and increase 

transparency for the enrollee, as they 

would not have to filter a provider 

directory or scroll through a potentially 

large directory to locate a specific 

designation for these types of providers 

in order to find the relevant 

information. We similarly propose, as 

an alternative, that the list required by 

this alternative would have to be easily 

available through the plan’s publicfacing website, and plans must continue 

to adhere to the current provider 

directory requirements set forth at 

§§ 422.111(a)(2), 422.111(b)(3)(i), 

422.120, 422.2262, and 422.2267(e)(11) 

regarding what information must be 

included, and other relevant provider 

directory requirements. We seek 

comment on this alternative and may 

consider finalizing it or making 

revisions based on comments received. 

We further propose to define 

community-based organizations (CBOs) 

in regulation, as there currently exists 

no definition in MA regulations. We 

propose to add this definition to § 422.2. 

This definition would provide clarity to 

plans when adding the new proposed 

CBO notation to their provider 

directories regarding which direct 

furnishing entities are CBOs. This 

proposed definition is taken from the 

Calendar Year 2023 Medicare Physician 

Fee Schedule proposed rule (87 FR 

46102) cited previously. We propose to 

define CBOs as ‘‘public or private notfor-profit entities that provide specific 

services to the community or targeted 

populations in the community to 

address the health and social needs of 

those populations.’’ We noted in the 

Calendar Year 2023 Medicare Physician 

Fee Schedule proposed rule that these 

CBOs may include community-action 

agencies, housing agencies, area 

agencies on aging, centers for 

independent living, aging and disability 

resource centers or other non-profits 

that apply for grants or contract with 

health care entities to perform social 

services. They may receive grants from 

other agencies in the U.S. Department of 

Health and Human Services, including 

Federal grants administered by the 

Administration for Children and 

Families (ACF), Administration for 

Community Living (ACL), the Centers 

for Disease Control and Prevention 

(CDC), the Substance Abuse and Mental 

Health Services Administration 

(SAMHSA), or state-funded grants to 

provide social services. We solicit 

comment on this proposed definition, 

and whether this definition would be 

sufficiently broad enough to include all 

locally based organizations with whom 

an enrollee may wish to engage. We may 

consider finalizing revisions to this 


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92McCarthy, D., Lewis, C., Horstman, C., Bryan, 

A., & Shah, T. (2022). ‘‘Guide to Evidence for 

Health-Related Social Needs Interventions: 2022 

Update’’ [ROI Calculator for Partnerships to 

Address the Social Determinants of Health]. The 

Commonwealth Fund. https://

www.commonwealthfund.org/sites/default/files/ 

202209/ROI_calculator_evidence_review_2022_

update_Sept_2022.pdf. 

93McGinty, Beth. ‘‘Medicare’s Mental Health 

Coverage: What’s Included, What’s Changed, and 

What Gaps Remain,’’ Commonwealth Fund, Mar. 2, 

2023. Retrieved from: https://

www.commonwealthfund.org/publications/ 

explainer/2023/mar/medicare-mental-healthcoverage-included-changed-gaps-remain. 

94For example, MA plans are not required to 

provide hospice services—a service covered in 

Traditional Medicare. 

95CMS’s behavioral health strategy is available at: 

https://www.cms.gov/cms-behavioral-healthstrategy. 

96Fleet, Alexa. Improving Behavioral Health Care 

For Older Americans: If Not Now, When? June 

2022. Retrieved from: https://

www.healthaffairs.org/content/forefront/improvingbehavioral-health-care-older-americans-if-not-now. 

definition based on the comments 

received. 

We also propose to include new 

regulation text at § 422.111(b)(3)(i)(C) 

requiring plans to include in their 

provider directory easily identifiable 

notations indicating direct furnishing 

entities that are CBOs. We propose to 

codify this requirement in 

§ 422.111(b)(3)(i)(C) that plans must 

include in their provider directories 

easily identifiable notations, filters, or 

other distinguishing features to indicate 

providers and direct furnishing entities 

that are community-based organizations 

(CBOs) (as defined in § 422.2). 

We are interested in encouraging 

more engagement from both plans and 

enrollees with organizations invested in 

the community and local economy and 

wish to provide enrollees the ability to 

more easily identify and engage with 

CBOs. We also wish to encourage plans, 

to the extent possible, to engage with 

local businesses and vendors when 

determining which entities to contract 

with. As we noted in the Calendar Year 

2025 Medicare Physician Fee Schedule 

proposed rule (89 FR 61875), local 

businesses and CBOs, ‘‘know the 

populations they serve and their 

communities and may have the 

infrastructure or systems in place to 

help coordinate supportive services that 

address social determinants of health or 

serve as a source from which ACOs can 

receive information regarding 

community needs.’’ While CMS is 

prohibited from requiring plans to 

contract with specific providers under 

section 1854(a)(6)(B)(iii) of the Act and 

§ 422.256(a)(2)(i), we strongly encourage 

plans to engage with CBOs given 

evidence indicating that providers who 

coordinate care with CBOs to address 

health related social needs (HRSNs) (for 

example, housing, transportation, care 

management, etc.) can positively 

influence health outcomes.92 Therefore, 

we wish to strongly encourage 

collaboration of this kind. We further 

note that this complies with our 

regulation at § 422.112(b)(3) requiring 

coordinated care plans to coordinate 

MA plan services with community and 

social services generally available in the 

area served by the MA plan. Plans may 

contract with CBOs to provide 

benefits—including supplemental 

benefits—that are compliant with the 

statutory and regulatory requirements. 

For example, a plan could elect to offer 

a meal or food and produce 

supplemental benefit (so long as the 

benefit meets the requirements of 

§ 422.100(c)(2) and other requirements 

for supplemental benefits) and pay a 

CBO for furnishing the covered benefit. 

We understand that in some areas there 

may be a limited number of CBO 

providers, and so we encourage plans to 

continue engaging with CBOs. Plans 

including a notation within the provider 

directory identifying an entity that is a 

CBO would increase enrollee awareness 

of these types of entities. This could 

lead to more enrollees choosing to 

receive items and services from CBOs 

that are more familiar with their 

community, can better coordinate 

supportive services, and can further 

address their community needs. 

We believe the burden associated 

with these proposed requirements 

would be minimal. First, the proposed 

addition of the CBO notation in the 

provider directory would likely involve 

minimal burden given that plans must 

also include a notation or filter for other 

types of entities. With our proposed 

CBO definition, it should take little time 

for plans to identify their contracted 

CBOs and websites to add a notation to 

the listings for these entities in their 

provider directory. The proposed 

addition of direct furnishing entity 

listings should also create minimal 

burden since this is a clarification of 

existing policy and plans may already 

include all direct furnishing entities in 

their provider directories currently. 

There should therefore be few plans that 

need to make adjustments to their 

current provider directory due to the 

new proposed regulation text clarifying 

this requirement. We also expect if 

commenters believe that a subset list of 

in-home or at-home supplemental 

benefit providers is a satisfactory 

method to identify these providers, then 

there would be minimal burden 

associated as plans already must 

maintain an updated provider list as 

required by regulation. However, should 

commenters believe that the creation of 

a separate list for in-home and at-home 

supplemental benefit providers be 

prudent, we would likewise expect a 

low associated burden. As discussed, 

this list would be a subgroup of the 

current provider directory and include 

only in-home or at-home supplemental 

benefit providers, and, as previously 

noted, plans should already have 

information regarding which 

organizations fall under the proposed 

definition for an in-home or at-home 

supplemental benefit provider. 

In summary, we propose to: (1) codify 

definitions of CBOs and in-home or athome supplemental benefit providers 

and direct furnishing entities; (2) 

require plans to identify, within the 

provider directory, which providers and 

direct furnishing entities meet the 

proposed definition of a CBO; (3) 

require plans to identify in-home or athome supplemental benefit providers 

and direct furnishing entities, including 

those that provide a hybrid of services 

(both in-home or at-home, and in-office 

services), either through a subset list 

within the provider directory or through 

a separate list comprising in-home or athome supplemental benefit providers 

and direct furnishing entities; and (4) 

clarify existing policy by stating that all 

direct furnishing entities must be 

included within the provider directory. 

We solicit comment on these 

proposals and may consider finalizing 

revisions based on the comments 

received. 

L. Ensuring Equitable Access to 

Behavioral Health Benefits Through 

Section 1876 Cost Plan and MA Cost 

Sharing Limits (§§ 417.454 and 422.100) 

Traditional Medicare benefits (that is, 

Medicare Parts A and B) include a wide 

range of mental health and substance 

use disorder services (collectively called 

‘‘behavioral health services’’).93 Per 

section 1876(c)(2)(A) of the Act and 

§§ 417.416 and 417.440(b)(1) and 

section 1852(a)(1) of the Act and 

§§ 422.100 and 422.101, respectively, 

Section 1876 Cost Plans (Cost Plans) 

and Medicare Advantage (MA) plans 

(including employer group waiver plans 

(EGWPs)) must cover these Medicare 

Parts A and B services, subject to 

limited exclusions.94 As part of CMS’s 

behavioral health strategy, we aim to 

ensure equitable access to behavioral 

health services across all of Medicare, 

including for MA and Cost Plan 

enrollees, and to effectively expand 

access to these services in both 

programs.95 96 We believe improving 


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97American Counseling Association. More Than 

30 Years of Mental Health Care Inequity: Restricted 

Access to Providers for Medicare Beneficiaries. 

August 2021. Retrieved from: https://

www.counseling.org/docs/default-source/ 

government-affairs/medicare-issue-brief.pdf. 

98Carter, Julie; Medicare Rights Center. 

‘‘Coverage Gaps Keep Medicare Beneficiaries from 

Needed Care.’’ June 2024. Retrieved from: https:// 

www.medicarerights.org/medicare-watch/2024/06/ 

13/coverage-gaps-keep-medicare-beneficiariesfrom-needed-care. 

99This is based on March 1, 2024, contract year 

2024 plan data (excludes employer, D–SNPs, and 

MSAs) of the plan’s maximum cost sharing 

(including no cost sharing) and reflects plans with 

coinsurance and copayment amounts. 

100 Kaiser Family Foundation: Wyatt Koma et. al. 

One in Four Older Adults Report Anxiety or 

Depression Amid the COVID–19 Pandemic. October 

2020. Retrieved from: https://www.kff.org/mentalhealth/issue-brief/one-in-four-older-adults-reportanxiety-or-depression-amid-the-covid-19- 

pandemic/. 101McGinty, Beth. ‘‘Medicare’s Mental Health 

Coverage: What’s Included, What’s Changed, and 

What Gaps Remain,’’ Commonwealth Fund, Mar. 2, 

2023. As of February 5, 2024: https://

www.commonwealthfund.org/publications/ 

explainer/2023/mar/medicare-mental-healthcoverage-included-changed-gaps-remain. 

102 Kaiser Family Foundation: Freed, Meredith; 

Sroczynski, Nolan; and Neuman, Tricia. Mental 

Health and Substance Use Disorder Coverage in 

Medicare Advantage Plans. April 2023. Retrieved 

from: https://www.kff.org/mental-health/issue-brief/ 

mental-health-and-substance-use-disordercoverage-in-medicare-advantage-plans/. 

103American Counseling Association. More Than 

30 Years of Mental Health Care Inequity: Restricted 

Access to Providers for Medicare Beneficiaries. 

August 2021. Retrieved from: https://

www.counseling.org/docs/default-source/ 

government-affairs/medicare-issue-brief.pdf. 

104Milliman. Potential economic impact of 

integrated medical-behavioral healthcare: Updated 

projections for 2017. February 2018. Retrieved from: 

https://www.milliman.com/en/insight/potentialeconomic-impact-of-integrated-medical-behavioralhealthcare-updated-projections. 

105CMS. Contract Summary 2024. Data as of July 

2024. Retrieved from: https://www.cms.gov/ 

research-statistics-data-and-systems/statisticstrends-and-reports/mcradvpartdenroldata/monthly/ 

contract-summary-2024-07. 

106This is based on March 1, 2024, contract year 

2024 plan data of the plan’s maximum cost sharing 

(including no cost sharing) and reflects plans with 

coinsurance and copayment amounts. It does not 

consider inpatient hospital cost sharing as Cost 

Plans are not required to report information for all 

services, including Part A inpatient hospital 

psychiatric services. 

107This proposal would also apply to out-ofnetwork cost sharing standards for D–SNP PPOs per 

§ 422.100(o). 

108 In this proposal behavioral health services are 

generally considered to be any service furnished for 

the diagnosis, evaluation, or treatment of a mental 

health disorder, including substance use disorders. 

equitable access to behavioral health 

services is especially crucial for MA 

enrollees because: (1) beneficiaries in 

Traditional Medicare pay 20 percent 

coinsurance (with zero cost sharing for 

opioid treatment program services) 

while MA enrollees may be charged up 

to 50 percent coinsurance (or actuarially 

equivalent copayment) for the same 

behavioral health services, (2) lowerincome beneÉciaries are more likely to 

be diagnosed with mental health 

conditions and may not receive the 

behavioral health services they need, 

suggesting potential affordability 

concerns,97 98 and (3) based on contract 

year 2024 plan data: 99

• Between 23 percent and 25 percent 

of all MA plans charge in-network costsharing amounts that are greater than 

cost sharing in Traditional Medicare for: 

mental health specialty services, 

psychiatric services, and partial 

hospitalization (as shown in table 8). 

• Between 42 percent and 71 percent 

of all MA plans charge in-network costsharing amounts that are greater than 

cost sharing in Traditional Medicare for: 

outpatient substance use disorder 

services and opioid treatment program 

services (as shown in table 8). 

• MA enrollees in plans charging 

cost-sharing amounts greater than cost 

sharing in Traditional Medicare can 

expect to pay between $7 and $21 more 

on average in cost sharing per visit for 

those services received in-network for: 

mental health specialty services, 

psychiatric services, and partial 

hospitalization in comparison to 

beneficiaries in Traditional Medicare (as 

shown in table 10). 

• MA enrollees in plans charging 

cost-sharing amounts greater than cost 

sharing in Traditional Medicare can 

expect to pay between $30 and $47 

more on average in cost sharing per visit 

for those services received in-network 

for: mental health specialty services, 

psychiatric services, and partial 

hospitalization in comparison to 

beneficiaries in Traditional Medicare (as 

shown in table 10). 

Improving equitable access to 

behavioral health services by providing 

in-network cost sharing for MA and Cost 

Plan enrollees that is in line with 

Traditional Medicare cost sharing for 

these services would positively impact 

a significant proportion of Medicareeligible beneficiaries. We believe this 

would have this positive impact 

because: (1) about 25 percent of 

Medicare beneficiaries live with a 

mental illness and roughly half of 

Medicare beneficiaries are enrolled in 

an MA plan; 100 101 (2) the number of MA 

enrollees with a need for behavioral 

health services will likely continue to 

grow alongside increasing Medicare 

enrollment trends; 102 and (3) improved 

access to and compliance with 

behavioral health treatment may 

improve beneficiaries’ overall cost of 

care over time.103 104 While enrollment 

in Cost Plans represents a small 

proportion of all Medicare-eligible 

beneficiaries (approximately 169,000 as 

of July 2024,) 105 we believe extending 

this proposal to Cost Plan enrollees is 

appropriate because (1) CMS wants to 

improve equitable access to behavioral 

health services across all Medicare 

program choices; and (2) we expect the 

positive effects from improved access to 

behavioral health services for MA 

enrollees will extend to Cost Plan 

enrollees as current in-network cost 

sharing for these services may be as high 

as 50 percent coinsurance in these 

plans. Based on contract year 2024 Cost 

Plan data: 106

• Between 5 percent and 50 percent 

of all Cost Plans charge in-network cost 

sharing amounts that are greater than 

cost sharing in Traditional Medicare for 

one or more professional behavioral 

health service categories (as shown in 

table 9). 

• Cost Plan enrollees in those plans 

can expect to pay between $5 and $20 

more on average in cost sharing per visit 

for those services received in-network 

(depending on the service category) in 

comparison to beneficiaries in 

Traditional Medicare (as shown in table 

11). 

We propose, beginning in contract 

year 2026, to require that in-network 107

cost sharing for behavioral health 

service categories be no greater than that 

of Traditional Medicare for MA and 

Cost Plans (including EGWPs). The 

authorities for this proposal are 

discussed in detail in the following 

section of this proposed rule. 

Specifically, CMS proposes to amend 

the existing requirements at 

§§ 417.454(e) and 422.100(j) (that cost 

sharing for certain benefits not exceed 

cost sharing in Original Medicare) to 

add the behavioral health service 

categories: mental health specialty 

services, psychiatric services, partial 

hospitalization, intensive outpatient 

services, inpatient hospital psychiatric 

services (all length of stay scenarios), 

outpatient substance use disorder 

services, and opioid treatment program 

services.108 To this end, CMS is 

proposing behavioral health costsharing standards in MA and Cost Plans 

that strike a balance between: (1) 

improving the affordability of 

behavioral health services for enrollees 

in a timely manner and (2) minimizing 

disruption to MA enrollees access to 

care and coverage options. 

As discussed in sections III.L.X.e.(4). 

and VII.E.3. of this proposed rule, we 

solicit comment on: (1) whether CMS 

should apply these proposed changes 

beginning in contract year 2026 or 2027, 

(2) whether there should be a transition 

period from the existing contract year 


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Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 99403 

2025 behavioral health cost-sharing 

standards (in current regulations at 

§ 422.100(f)(6)(i), (f)(6)(iii), and (f)(6)(iv)) 

to the proposed cost-sharing standard 

for select behavioral health service 

categories, and (3) how long any 

transition should be. We also solicit 

comment regarding this proposal’s 

potential impact on the ability of MA 

plans to satisfy the existing actuarial 

equivalence requirements for the entire 

Part A and B benefits package (that is, 

the package of basic benefits) at section 

1852(a)(1)(B) of the Act and 

§ 422.100(j)(1) and (2) in section 

III.L.X.e.(4). of this proposed rule. 

Under this proposal, the requirements at 

§ 422.100(f)(7)(iii), requiring CMS to 

communicate and provide a public 

comment period on how we apply the 

proposed cost-sharing standards each 

year prior to bid submission, such as 

through Health Plan Management 

System (HPMS) memoranda prior to bid 

submission, will apply to the proposed 

new behavioral health cost-sharing 

limits. 

a. Legal Authority 

Section 1852 of the Act imposes 

requirements that apply to the cost 

sharing and benefit design of MA plans. 

Section 1852(a)(1)(B)(iv)(VIII) of the Act 

explicitly authorizes the Secretary to 

identify services that the Secretary 

determines appropriate (including 

services that the Secretary determines 

require a high level of predictability and 

transparency for beneficiaries) to be 

subject to a cost-sharing limit that is tied 

to the cost sharing imposed for those 

services under original Medicare. 

Section 1852(b) of the Act also prohibits 

MA plan designs that have the effect of 

discriminating against or discouraging 

enrollment by beneficiaries based on 

their health needs. Sections 1856(b) and 

1857(e) of the Act authorize CMS to set 

implementing standards for Part C and 

adopt additional requirements as 

necessary, appropriate and not 

inconsistent with Part C. Under this 

authority, we propose to revise 

§ 422.100(j)(1)(i) and add new 

paragraphs (j)(1)(i)(G) and (j)(1)(i)(H) to 

limit MA plan in-network cost sharing 

for the following service categories as 

defined in the plan benefit package: 

intensive outpatient services, mental 

health specialty services, outpatient 

substance use disorder services, partial 

hospitalization, psychiatric services, 

and inpatient hospital psychiatric 

services (all length of stay scenarios 

currently specified in paragraph 

(f)(6)(iv)) to that charged under 

Traditional Medicare. This necessarily 

includes revising § 422.100(f)(6)(iii), 

(f)(6)(iv), and (j)(1)(i). First, at 

§ 422.100(f)(6)(iii)(A) we propose to 

replace the reference to partial 

hospitalization with rehabilitation 

services to serve as an example of a 

category subject to the range of costsharing standards in paragraph (f)(6)(iii). 

Second, at § 422.100(f)(6)(iv) we 

propose to: (1) add a reference to 

§ 422.100(j)(1)(i)(H) in paragraph 

(f)(6)(iv)(A) to reflect the proposed costsharing standard for inpatient hospital 

psychiatric services and (2) revise 

paragraphs (f)(6)(iv)(B) and (f)(6)(iv)(D) 

to remove references to inpatient 

hospital psychiatric services because 

cost sharing for inpatient hospital 

psychiatric services will be addressed as 

specified in proposed new paragraph 

(j)(1)(i)(H). Third, at § 422.100(j)(1)(i) we 

propose to clarify that the proposed 

behavioral health cost-sharing standards 

would not apply until contract year 

2026. 

Similarly, we propose to add new 

paragraphs § 417.454(e)(5) and (e)(6) to 

limit in-network behavioral health cost 

sharing of Cost Plans in the same 

manner as for MA plans. This 

necessarily includes clarifying at 

§ 417.454(e): (1) when the proposed cost 

sharing limit (that cost sharing may not 

be greater than cost sharing in 

Traditional Medicare (original 

Medicare) for that benefit) will apply for 

the additional categories of services and 

(2) the methods Cost Plan organizations 

may use for coinsurance or copayment 

structures to abide by the proposed 

behavioral health cost-sharing 

requirements for these basic benefits. 

We also make a technical change to 

§ 417.454(e) to clarify that the cost 

sharing limits apply to all Cost Plans by 

adding references to Competitive 

Medical Plans (CMPs). These proposals 

reflect CMS’s authority to interpret and 

implement the requirement, at section 

1876(c)(2) of the Act, that Cost Plans 

cover Part A and B benefits and, at 

section 1876(i)(3)(D) of the Act, to add 

new contract terms and conditions for 

Cost Plans that are not inconsistent with 

section 1876 as the Secretary may find 

necessary and appropriate. 

In addition, in proposing to apply 

Traditional Medicare cost-sharing 

amounts to opioid treatment program 

services or any other service with zero 

cost sharing, we rely on our authority in 

section 1856(b)(1) and 1857(e)(1) of the 

Act. Section 1856(b)(1) of the Act 

provides CMS authority to establish MA 

standards by regulation and section 

1857(e)(1) of the Act provides authority 

to impose additional ‘‘terms and 

conditions’’ found ‘‘necessary and 

appropriate.’’ Under these authorities, 

we propose to add opioid treatment 

program services in proposed new 

§§ 417.454(e)(5) and 422.100(j)(1)(i)(G) 

to limit MA and Cost Plan cost sharing 

for these services to that charged under 

Traditional Medicare, meaning that no 

cost sharing could be imposed for these 

services. 

We also propose the following 

revisions to the cost-sharing regulations 

at §§ 417.454 and 422.100(f) and (j): (1) 

revise language at § 417.454(e)(1) to 

match terminology of chemotherapy 

administration services with language at 

§ 422.100(j)(1)(i)(A), (2) remove 

language at § 422.100(f)(6)(iv)(D) that 

the total inpatient benefit cost sharing 

must not exceed the MA plan’s MOOP 

amount to reflect how CMS has not 

applied this requirement, (3) remove 

paragraphs (j)(1)(i)(C)(1) and 

(j)(1)(i)(C)(2) to consolidate the skilled 

nursing facility cost-sharing standard 

information at § 422.100(j)(1)(i)(C), and 

(4) clarify that the skilled nursing 

facility per-day cost sharing for days 21 

through 100 must not be greater than 

one-eighth of the projected (or actual) 

Part A deductible amount for the year at 

paragraph (j)(1)(i)(C). As such, this 

proposal codifies our current practice 

with some revisions (such as, annually 

updating the copayment limits for Cost 

Plans to remain actuarially equivalent to 

50 percent coinsurance). Primarily, we 

propose these changes to increase the 

level of transparency for these policies 

and provide more stability and 

predictability for MA and Cost Plan 

organizations. 

At new § 417.454(f), we propose to 

codify the policy of a 50 percent 

coinsurance (or actuarially equivalent 

copayment) limit on in-network basic 

benefits as applicable to Cost Plans as 

we believe payment of less than 50 

percent of total Cost Plan financial 

liability discriminates against enrollees 

who need those services. For example, 

setting limits on cost sharing for covered 

services and ensuring Cost Plan 

organizations comply with these limits 

are important ways to ensure that the 

cost sharing aspect of a plan design does 

not discriminate against or discourage 

enrollment in a Cost Plan by 

beneficiaries who have high health care 

needs. In addition, this 50 percent 

coinsurance (or actuarially equivalent 

copayment) limit on in-network basic 

benefits is necessary and appropriate to 

apply to Cost Plans pursuant to how 

these plans must, under section 

1876(c)(2) of the Act, furnish Part A and 

Part B services (with limited exceptions 

such as for the hospice benefit) to their 

enrollees. 

In making these revisions to clarify 

how the actuarially equivalent 

copayment limits will be set for basic 

benefits, we expect Cost Plan 


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99404 Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 

109 Kaiser Family Foundation: Lopes, Lunna et al. 

KFF/CNN Mental Health In America Survey. 

October 2022. Retrieved from: https://www.kff.org/ 

report-section/kff-cnn-mental-health-in-americasurvey-findings/. 

110Busch AB, Huskamp HA, Raja P, Rose S, 

Mehrotra A. Disruptions in Care for Medicare 

Beneficiaries With Severe Mental Illness During the 

COVID–19 Pandemic. JAMA Netw Open. 2022 Jan 

4;5(1):e2145677. doi: 10.1001/ 

jamanetworkopen.2021.45677. PMID: 35089352; 

PMCID: PMC8800078. Retrieved from: https://

www.ncbi.nlm.nih.gov/pmc/articles/PMC8800078/. 

111 Garnett MF, Spencer MR, Weeks JD. Suicide 

Among Adults Age 55 and Older, 2021. NCHS Data 

Brief. 2023 Nov;(483):1–8. PMID: 38051033. 

Retrieved from: https://www.cdc.gov/nchs//data/

databriefs/db483.pdf. 

112Friedman C. The mental health of Medicare 

beneficiaries with disabilities during the COVID–19 

pandemic. Rehabil Psychol. 2022 Feb;67(1):20–27. 

doi: 10.1037/rep0000427. Epub 2021 Nov 8. PMID: 

34748364. Retrieved from: https://psycnet.apa.org/ 

record/2022-02246-001. 

113American Counseling Association. More Than 

30 Years of Mental Health Care Inequity: Restricted 

Access to Providers for Medicare Beneficiaries. 

August 2021. Retrieved from: https://

www.counseling.org/docs/default-source/

government-affairs/medicare-issue-brief.pdf. 

114 Kaiser Family Foundation: Wyatt Koma et. al. 

One in Four Older Adults Report Anxiety or 

Depression Amid the COVID–19 Pandemic. October 

2020. Retrieved from: https://www.kff.org/mentalhealth/issue-brief/one-in-four-older-adults-reportanxiety-or-depression-amid-the-covid-19-

pandemic/. 

115Fleet, Alexa. Improving Behavioral Health 

Care For Older Americans: If Not Now, When? June 

2022. Retrieved from: https:// 

www.healthaffairs.org/content/forefront/improvingbehavioral-health-care-older-americans-if-not-now. 

116 HHS Office of Inspector General. ‘‘A Lack of 

Behavioral Health Providers in Medicare and 

Medicaid Impedes Enrollees’ Access to Care’’ April 

2024. Retrieved from: https://oig.hhs.gov/reportsand-publications/all-reports-and-publications/alack-of-behavioral-health-providers-in-medicareand-medicaid-impedes-enrollees-access-to-care/. 

117McGinty, Beth. Medicare’s Mental Health 

Coverage: What’s Included, What’s Changed, and 

What Gaps Remain. March 2023. Retrieved from: 

https://www.commonwealthfund.org/publications/ 

explainer/2023/mar/medicare-mental-healthcoverage-included-changed-gaps-remain#:∼:text=

How%20prevalent%20are%20mental

%20health,to%2050%20percent%20receive

%20treatment. 

118HHS Office of Inspector General. ‘‘A Lack of 

Behavioral Health Providers in Medicare and 

Medicaid Impedes Enrollees’ Access to Care’’ April 

2024. Retrieved from: https://oig.hhs.gov/reportsand-publications/all-reports-and-publications/alack-of-behavioral-health-providers-in-medicareand-medicaid-impedes-enrollees-access-to-care/. 

119Pelech, Daria and Hayford, Tamara. Health 

Affairs. Medicare Advantage and Commercial Prices 

for Mental Health Services. February 2019. DOI: 

10.1377/hlthaff.2018.05226. Retrieved from: https:// 

www.healthaffairs.org/doi/10.1377/hlthaff.

2018.05226?url_ver=Z39.88-2003&rfr_

id=ori:rid:crossref.org&rfr_dat=cr_pub%20%

200pubmed. 

120Fusco N, Sils B, Graff JS, Kistler K, Ruiz K. 

Cost-sharing and adherence, clinical outcomes, 

health care utilization, and costs: A systematic 

literature review. J Manag Care Spec Pharm. 2023 

Jan;29(1):4–16. doi: 10.18553/jmcp.2022.21270. 

Epub 2022 Apr 7. PMID: 35389285; PMCID: 

PMC10394195. Retrieved from: https:// 

www.ncbi.nlm.nih.gov/pmc/articles/ 

PMC10394195/. 

121Health Affairs: Shivani, A. et. al. Fine-Tuning 

Cost Sharing As Part Of Health Reform December 

3, 2021. DOI: 10.1377/hblog20211130.358084. 

Retrieved from: https://www.healthaffairs.org/ 

content/forefront/fine-tuning-cost-sharing-parthealth-reform. 

122Parish WJ, Mark TL, Weber EM, Steinberg DG. 

Substance Use Disorders Among Medicare 

Beneficiaries: Prevalence, Mental and Physical 

Comorbidities, and Treatment Barriers. Am J Prev 

Med. 2022 Aug;63(2):225–232. doi: 10.1016/ 

j.amepre.2022.01.021. Epub 2022 Mar 21. PMID: 

35331570. Retrieved from: https://

www.sciencedirect.com/science/article/pii/

S0749379722001040?via%3Dihub. 

123Nelson, Hannah. Cost-Sharing Burden Limits 

Access to Care for Medicare Members. April 2021. 

Retrieved from: https://healthpayerintelligence.

com/news/cost-sharing-burden-limits-access-tocare-for-medicare-members. 

124Office of the Assistant Secretary for Planning 

and Evaluation (ASPE). Issue Brief: HHS Roadmap 

for Behavioral Health Integration. September 2022. 

Retrieved from: https://aspe.hhs.gov/sites/default/ 

files/documents/4e2fff45d3f5706d

35326b320ed842b3/roadmap-behavioral-healthintegration.pdf. 

125CMS. CMS Action Plan to Enhance Prevention 

and Treatment for Opioid Use Disorder. June 2021. 

Retrieved from: https:/;www.cms.gov/files/ 

document/action-plan-behavioral-healthstrategy.pdf. 

126 Kaiser Family Foundation: Meredith Freed, 

Juliette Cubanski, and Tricia Neuman. FAQs on 

Mental Health and Substance Use Disorder 

Coverage in Medicare. January 2023. Retrieved 

from: https://www.kff.org/mental-health/issue-brief/ 

faqs-on-mental-health-and-substance-use-disordercoverage-in-medicare/. 

127CMS’s behavioral health strategy is available 

at: https://www.cms.gov/cms-behavioral-healthstrategy. 

128 ‘‘Medicare and Medicaid Programs; CY 2023 

Payment Policies Under the Physician Fee Schedule 

and Other Changes to Part B Payment and Coverage 

Policies; Medicare Shared Savings Program 

Requirements; Implementing Requirements for 

Manufacturers of Certain Single-dose Container or 

organizations should have: (1) greater 

knowledge about how cost-sharing 

limits are set; and (2) a better ability to 

anticipate where the copayment limits 

will be in future years. These additional 

proposals reflect CMS’s authority under 

sections 1856(b), 1857(e), 1876(c)(2), 

and 1876(i)(3)(D) of the Act. 

b. Behavioral Health Crisis 

A Kaiser Family Foundation (KFF)/ 

CNN Mental Health in America survey 

found that 90 percent of Americans 

believe our nation is experiencing a 

mental health crisis.109 This crisis grew 

more challenging because of the 

COVID–19 pandemic. For example, 

beneficiaries with severe mental illness 

experienced substantial disruptions in 

care during the COVID–19 pandemic 

and these disruptions were greater 

among certain populations, including 

historically underserved racial and 

ethnic groups and low-income 

populations.110

Poor behavioral health outcomes are 

especially detrimental to older adults. 

Addressing the behavioral health needs 

of beneficiaries during this crisis is a 

key priority for CMS as illustrated by 

study findings that: 

• Older adults have higher rates of 

suicide compared to those under 55 

years old and, between 2001 and 2021, 

suicide rates significantly increased for 

men ages 55–74 (25 percent increase, 

from 21.2 to 26.6 per 100,000 

population) and women ages 55–84 (44 

percent increase, from 3.9 to 5.6 per 

100,000 population).111

• Lower income Medicare 

beneficiaries (with household incomes 

under $25,000) are more likely to have 

mental health conditions than those 

with higher household incomes.112 113 114

• Older adults face significant 

barriers to access behavioral health 

services including workforce shortages, 

issues of affordability, and a shortage of 

services in the home and community 

settings.115 116

In addition, studies on behavioral 

health needs of MA enrollees find: 

• About 13 percent to 28 percent of 

MA enrollees live with mental 

illness.117

• On average, only 3 percent of MA 

enrollees received treatment from a 

behavioral health provider in 2023.118

• MA enrollees paid about $9 more 

on average for in-network mental health 

services than for comparable physicalhealth services.119

• MA enrollees who receive 

behavioral health services typically see 

their provider five times a year while 

beneficiaries in Traditional Medicare 

saw their behavioral health provider 

eight times a year. 

Other research emphasizes the 

negative impact high-cost sharing can 

have on beneficiary utilization of highvalue health services, clinical outcomes, 

and total costs of care.120 121 122 These 

findings are more striking for 

beneficiaries with disabilities or those 

with an income just above the threshold 

Medicaid uses to determine eligibility 

for additional coverage.123

Considering these findings, HHS and 

CMS are pursuing policies that can 

address barriers individuals may face in 

accessing mental health and substance 

use disorder care.124 125 126 Some of the 

policies CMS is pursuing to address 

these behavioral health access concerns 

are summarized in the following 

section. 

c. CMS’s Behavioral Health Strategy 

CMS’s vision is that beneficiaries and 

consumers with behavioral health needs 

have access to person-centered, timely, 

affordable care that enables optimal 

health and wellness.127 For example, in 

the Calendar Year 2023 Physician Fee 

Schedule (87 FR 69404) 128 and the 


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Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 99405 

Single-use Package Drugs To Provide Refunds With 

Respect to Discarded Amounts; and COVID–19 

Interim Final Rules.’’ Available at: https:// 

www.federalregister.gov/documents/2022/11/18/ 

2022-23873/medicare-and-medicaid-programs-cy2023-payment-policies-under-the-physician-feeschedule-and-other. 

129 ‘‘Medicare Program: Hospital Outpatient 

Prospective Payment and Ambulatory Surgical 

Center Payment Systems; Quality Reporting 

Programs; Payment for Intensive Outpatient 

Services in Hospital Outpatient Departments, 

Community Mental Health Centers, Rural Health 

Clinics, Federally Qualified Health Centers, and 

Opioid Treatment Programs; Hospital Price 

Transparency; Changes to Community Mental 

Health Centers Conditions of Participation, Changes 

to the Inpatient Prospective Payment System 

Medicare Code Editor; Rural Emergency Hospital 

Conditions of Participation Technical Correction’’ 

final rule with comment period. Available at: 

https://www.federalregister.gov/documents/2023/ 

11/22/2023-24293/medicare-program-hospitaloutpatient-prospective-payment-and-ambulatorysurgical-center-payment. 

130The November 2022 final rule is available at: 

https://www.federalregister.gov/documents/2022/ 

11/18/2022-23873/medicare-and-medicaidprograms-cy-2023-payment-policies-under-thephysician-fee-schedule-and-other. 

131The November 2022 final rule is available at: 

https://www.federalregister.gov/documents/2022/ 

11/18/2022-23873/medicare-and-medicaidprograms-cy-2023-payment-policies-under-thephysician-fee-schedule-and-other. 

132The November 2023 final rule is available at: 

https://www.federalregister.gov/documents/2023/ 

11/22/2023-24293/medicare-program-hospitaloutpatient-prospective-payment-and-ambulatorysurgical-center-payment. 

133 ‘‘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. Available at: https:// 

www.federalregister.gov/public-inspection/2024- 

07105/medicare-program-medicare-advantage-andthe-medicare-prescription-drug-benefit-programfor-contract. 

134Centers for Medicare & Medicaid Services, 

2024. ‘‘CMS Announces New Model to Advance 

Integration in Behavioral Health.’’ Available at: 

https://www.cms.gov/newsroom/press-releases/ 

cms-announces-new-model-advance-integrationbehavioral-health. 

135 ‘‘Contract Year (CY) 2023 Medicare Advantage 

(MA) Maximum Out-of-Pocket (MOOP) Limits and 

Service Category Cost Sharing Standards Final Rule 

with Comment Period.’’ Available at: https:// 

www.federalregister.gov/documents/2022/04/14/

2022-07642/medicare-program-maximum-out-ofpocket-moop-limits-and-service-category-costsharing-standards. 

Calendar Year 2024 Physician Fee 

Schedule (88 FR 81540),129 CMS 

finalized provisions effectively 

expanding access to the following 

behavioral health services in Traditional 

Medicare: 

• Counseling and cognitive 

behavioral therapy—this was done by 

codifying new benefit categories for 

mental health counselors, marriage and 

family therapists.130

• Buprenorphine treatment for 

beneficiaries with opioid use disorder 

(OUD)—this was done by permitting the 

use of audio-only communication 

technology to initiate treatment in cases 

where audio-video technology is not 

available to the beneficiary, and all 

other applicable requirements are 

met.131

• Behavioral health care—this was 

done by paying for an ‘‘Intensive 

Outpatient Program’’ (IOP), which can 

be performed by hospital outpatient 

departments, community mental health 

clinics, Federally Qualified Health 

Centers (FQHCs), Opioid Treatment 

Providers (OTPs), or Rural Health 

Clinics (RHCs).132

In addition, in the April 2024 final 

rule,133 CMS finalized expanding 

beneficiaries’ access to additional 

behavioral health providers in MA by 

requiring Marriage and Family 

Therapists (MFTs), Mental Health 

Counselors (MHCs), Opioid Treatment 

Program (OTP) providers, Community 

Mental Health Centers or other 

behavioral health and addiction 

medicine specialists and facilities to 

meet MA network adequacy standards 

under a new facility-specialty type, 

‘‘Outpatient Behavioral Health.’’ We 

also recently announced the Innovation 

in Behavioral Health Model to improve 

quality of care for Medicare and 

Medicaid enrollees with mental health 

and substance use disorders.134 Through 

this model, CMS will support 

innovative approaches to connect 

people with the physical, behavioral, 

and social supports needed to manage 

these conditions. 

This proposal continues to advance 

CMS’s behavioral health strategy 

through changes to our MA and Cost 

Plan cost-sharing standards that we 

believe would improve enrollee access 

to behavioral health services. A brief 

history of the MA behavioral health 

cost-sharing standards follows. 

d. Regulatory History of Behavioral 

Health Cost-Sharing Standards 

Section 422.100(f)(6) provides that 

cost sharing for basic benefits offered 

through a MA plan must not exceed 

levels annually determined by CMS to 

be discriminatory for such services, 

which CMS determines using specific 

standards adopted through previous 

rulemakings. (All MA organizations and 

Cost Plan organizations must also 

comply with applicable Federal civil 

rights laws that prohibit discrimination, 

including those that prohibit 

discrimination on the basis of race, 

color, national origin, sex, age, and 

disability, such as section 1557 of the 

Affordable Care Act, Title VI of the Civil 

Rights Act of 1964, section 504 of the 

Rehabilitation Act of 1973, and the Age 

Discrimination Act of 1975.) 

CMS imposes cost-sharing limits to 

ensure that the cost sharing aspect of a 

plan’s design does not discriminate 

against or discourage enrollment of 

beneficiaries who have high health care 

needs and who need specific services. 

CMS issued cost-sharing limits for 

covered services and guidance 

addressing discriminatory cost sharing, 

as applied to specific benefits and to 

categories of benefits, in the annual Call 

Letter (prior to 2020) and in annual 

bidding instructions. Prior to contract 

year 2023, the behavioral health service 

category cost-sharing limits CMS set for 

MA plans were based on the following 

limits: 

• Opioid treatment program services, 

outpatient substance use disorder 

services, mental health specialty 

services, psychiatric services, and 

partial hospitalization: 50 percent 

coinsurance for all plans. 

• Inpatient hospital psychiatric 

services: 100 percent of Medicare FFS 

cost sharing for plans with a mandatory 

MOOP type and 125 percent of 

Medicare FFS cost sharing for plans 

with a lower (voluntary) MOOP type. 

For contract year 2025 and prior 

years, CMS typically utilized behavioral 

health professional and inpatient 

hospital cost-sharing data validations of 

50 percent coinsurance to guard against 

potentially discriminatory benefit 

designs for Cost Plans. 

CMS also set professional behavioral 

health service category copayment 

limits that were in place without change 

for many years for MA plans until 

contract year 2022. These copayment 

limits were originally set to strike a 

balance between limiting beneficiary 

out-of-pocket costs and the potential 

impact to plan design and costs. The 

overarching goal of these copayment 

limits was to ensure beneficiary access 

to affordable and sustainable benefit 

packages rather than to be precisely tied 

to actuarially equivalent values to the 

coinsurance limit each year. For MA 

plans, CMS began to annually update 

these behavioral health cost-sharing 

limits for contract year 2023 through 

contract year 2025 using the 

methodology in § 422.100(f)(6) through 

(f)(8) that was established in the April 

2022 final rule. We also solicited 

comment on potential future rulemaking 

to further limit MA behavioral health 

service category cost-sharing standards 

in that final rule.135


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136The April 2022 final rule did not change Cost 

Plan cost-sharing standards. 

137 If the inpatient hospital psychiatric services 

dollar limit for particular length of stay scenario(s) 

is set at the MOOP limit for the other MOOP type(s), 

the percentage of estimated Medicare FFS cost 

sharing that approximately represents the dollar 

limit for the intermediate MOOP type in that length 

of stay scenario may be less than 112.5%. This is 

because the dollar limit for the intermediate MOOP 

type reflects the numeric midpoint of the actual 

cost-sharing limits applied to the other MOOP types 

(before rounding rules are applied). 

138Public comments for this solicitation that were 

received before the close of the comment period are 

posted at: https://www.regulations.gov/document/ 

CMS-2020-0010-0667. 

(1) April 2022 Final Rule 

The April 2022 final rule amended 

§§ 422.100 and 422.113 to establish the 

methodologies CMS uses to set annual 

cost-sharing limits for MA plans 136 for 

contract year 2023 and future years. As 

a general matter, these MA cost sharing 

limitations do not apply to Cost Plans. 

In the April 2022 final rule, CMS 

finalized a four-year transition for 

professional service category MA costsharing limits, beginning in contract 

year 2023, from 50 percent coinsurance 

to a range of cost-sharing limits (30 to 

50 percent coinsurance and actuarially 

equivalent copayment amounts) based 

on MOOP type. This requirement 

provides lower MOOP types the most 

cost sharing flexibility to incentivize 

MA plans to establish lower MOOP 

amounts. The range of MA cost-sharing 

limits established by the April 2022 

final rule (30 to 50 percent coinsurance 

and actuarially equivalent copayments 

for contract year 2026 and future years) 

apply to the following professional 

behavioral health service categories: 

mental health specialty services, 

psychiatric services, partial 

hospitalization, and intensive outpatient 

program services. The April 2022 final 

rule also codified MA cost-sharing 

limits for contract year 2023 and future 

years generally based on the following 

for the other behavioral health service 

categories: 

• 50 percent coinsurance and 

actuarially equivalent copayment 

amounts for the opioid treatment 

program services and outpatient 

substance use disorder services 

categories. 

• 100 percent of Medicare FFS cost 

sharing and actuarially equivalent 

copayment amounts for plans with a 

mandatory MOOP type and 125 percent 

of Medicare FFS cost sharing and 

actuarially equivalent copayment 

amounts up to the MOOP limit for plans 

with a lower (voluntary) MOOP type for 

inpatient hospital psychiatric services. 

In addition, the April 2022 final rule 

finalized the addition of a third, 

intermediate MOOP type and MA costsharing standards specific to this MOOP 

type. The MA cost-sharing standards for 

the intermediate MOOP type are, in 

most cases, primarily based on the 

numeric midpoint between the costsharing limits CMS sets for the 

mandatory and lower MOOP types. 

Specifically, the behavioral health 

service category contract year 2026 MA 

cost-sharing limits at § 422.100(f)(6)(i), 

(iii), and (iv) for the intermediate MOOP 

type are as follows: 

• 40 percent coinsurance or an 

actuarially equivalent copayment for 

mental health specialty services, 

psychiatric services, partial 

hospitalization, and intensive outpatient 

program services. 

• 50 percent coinsurance or an 

actuarially equivalent copayment for the 

opioid treatment program services and 

outpatient substance use disorder 

services categories. 

• A dollar value that reflects 

approximately 112.5 percent of 

estimated Medicare FFS cost sharing for 

inpatient hospital psychiatric 

services.137

Per § 422.100(f)(6)(ii), CMS also 

applies specific rounding rules in 

calculating MA behavioral health 

service category copayment limits for all 

MOOP types. 

In the April 2022 final rule, we noted 

that CMS may pursue future rulemaking 

to alter the methodology for calculating 

the MA MOOP and cost-sharing limits 

finalized in that rule if: (1) there are 

significant unforeseen impacts or 

negative consequences that need to be 

addressed; or (2) additional changes 

outweigh the interests of maintaining a 

settled methodology and sufficiently 

protect enrollees from changes in cost 

sharing and benefits from one year to 

the next. Related to this, CMS included 

a comment solicitation in the April 2022 

final rule that is discussed in the 

following section. 

(2) Behavioral Health Cost-Sharing 

Limits Comment Solicitation 

CMS included a comment solicitation 

in the April 2022 final rule to do all of 

the following: 

• Highlight the importance of innetwork behavioral health cost sharing. 

• Inform stakeholders that CMS may 

pursue future rulemaking to further 

limit MA behavioral health service 

category cost-sharing standards 

(compared to the standards set through 

the April 2022 final rule). 

• Receive feedback to consider before 

pursuing potential future rulemaking on 

this topic. 

We shared that CMS was considering 

whether MA cost-sharing limits for 

mental health care (such as mental 

health specialty services, psychiatric 

services, partial hospitalization, opioid 

treatment program services, and 

treatment for substance use disorders) 

should be subject to additional costsharing limits, such as a requirement 

that cost sharing for those services not 

exceed cost sharing in Traditional 

Medicare. In response to the April 2022 

final rule comment solicitation on this 

topic, CMS received a few timely 

comments.138

A couple of commenters were 

supportive of lowering MA cost-sharing 

limits for mental health services and 

treatment for substance use disorders or 

setting limits that had parity with the 

cost sharing for medical services. These 

commenters stated that changing the 

cost-sharing limits for these services 

would: (1) prevent MA organizations 

from discriminating against 

beneficiaries that use these services; (2) 

improve health care treatment by 

making the mental health treatment 

affordable for beneficiaries; and (3) align 

with the President’s FY 2023 Budget 

and Unity Agenda that direct more 

resources to improving access to mental 

health and substance use disorder 

treatment. 

A commenter stated that CMS should 

ensure MA beneficiary cost sharing for 

mental health and substance use 

disorder treatments are not subject to 

additional non-quantitative treatment 

limits (NQTLs) (like prior authorization 

and step therapy) in comparison to 

medical services. This commenter also 

requested CMS: 

• Remove or reduce cost sharing for 

primary care services overall and 

specifically for behavioral health 

services that are provided in a primary 

care physician (PCP) setting to defined 

patient populations (such as those living 

in mental health professional shortage 

areas and underserved Black and 

Hispanic individuals); and 

• Ensure MA plans provide coverage 

and adequate payment for integrated 

behavioral health services by PCPs and 

other licensed behavioral health 

professionals in PCP settings. 

This commenter stated these requests 

would: (1) provide cost savings to 

patients and payers; (2) improve access 

to care and health equity; (3) align with 

CMS’ goal to have 100 percent of 

Medicare beneficiaries in an 

accountable relationship by 2030; (4) 

increase utilization of preventive 

services; and (5) improve beneficiary 

health outcomes. 

A couple of commenters were 

opposed to lowering MA cost-sharing 


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139 ‘‘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)’’ published in the Federal Register April 23, 

2024; Available at: https://www.federalregister.gov/ 

documents/2024/08/06/2024-17024/medicareprogram-changes-to-the-medicare-advantage-andthe-medicare-prescription-drug-benefit. 

140See table 9 and 10 on page 25850 and 25851 

from, ‘‘Patient Protection and Affordable Care Act, 

HHS Notice of Benefit and Payment Parameters for 

2024’’ final rule published April 27, 2023. Retrieved 

from: https://www.federalregister.gov/documents/ 

2023/04/27/2023-08368/patient-protection-andaffordable-care-act-hhs-notice-of-benefit-andpayment-parameters-for-2024. 

limits generally or specifically for 

mental health services. A commenter 

stated that current anti-discriminatory 

measures (including the nondiscriminatory limits set by the April 

2022 final rule, CMS’s discrimination 

reviews of each plan’s benefit design, 

and the risk adjustment aspect of the 

MA program designed to protect against 

discrimination) are sufficient and 

mentioned MA plans produce better 

beneficiary outcomes than Medicare 

FFS. 

CMS considered these comments 

when developing this proposal and we 

thank the commenters for their 

feedback. 

e. Proposed Behavioral Health CostSharing Standard: Cost Sharing No 

Greater Than Original Medicare 

(§ 422.100(j)(1)) 

After considering: (1) the comments 

received on the April 2022 final rule 

comment solicitation related to 

behavioral health cost-sharing limits; 

and (2) behavioral health-related 

research conducted since the April 2022 

final rule publication (discussed in 

section III.L.b. of this proposed rule), 

CMS developed and considered changes 

to in-network cost-sharing standards to 

propose for behavioral health services 

(versus the standards for contract year 

2026 and future years in existing 

regulations). Our goal in choosing 

between these different standards was to 

strike a balance between: (1) improving 

the affordability of behavioral health 

services for enrollees in a timely 

manner; and (2) minimizing disruption 

to enrollees’ access to care and coverage 

options. These different behavioral 

health cost-sharing standards are 

described and evaluated in detail in 

section VII.E.3. of this proposed rule. In 

brief, for MA plans, CMS evaluated each 

approach through analyses primarily 

focused on the following: 

• Calculating the difference between 

the proposed and existing MA 

behavioral health service category costsharing standards for contract year 2026 

and future years using illustrative 

actuarially equivalent dollar values 

based on contract year 2025 Medicare 

FFS data projections. 

• Estimating: (1) the number of MA 

plans that may reduce their behavioral 

health service category cost sharing to 

comply with the standard posed by the 

alternative; and (2) how much MA plan 

cost sharing may be lowered for each 

service category on a weighted average 

basis based on contract year 2024 MA 

plans with cost-sharing amounts above 

the limits posed by each alternative. 

Similar analyses were completed for 

cost plans. 

Based on the analyses summarized in 

section VII.E.3. of this proposed rule, 

CMS has determined that applying cost 

sharing no greater than Traditional 

Medicare to the behavioral health 

service categories (identified in the 

introduction of this section) beginning 

in contract year 2026 would strike an 

appropriate balance between beneficiary 

affordability and minimizing disruption 

to enrollees’ access to care and coverage 

options. As a result, CMS is proposing 

here to set the professional MA 

behavioral health service category costsharing limits beginning contract year 

2026 (as discussed in the April 2022 

final rule, contract year 2026 is the last 

year of the range of cost-sharing limits 

transition at § 422.100(f)(6)(iii) and (f)(8) 

for MA) because this proposal’s 

intended outcome aligns with our 

behavioral health strategy and 

outweighs the potential benefits of 

maintaining the current, settled 

methodology. 

We note this proposal would affect D– 

SNP PPOs because § 422.100(o)(1) 

requires that, starting in 2026, an MA 

organization offering a local PPO plan or 

regional PPO plan that is a D–SNP limit 

cost sharing for out-of-network services 

to the cost-sharing limits applicable to 

specific in-network services for all MA 

plans, as described in § 422.100(f)(6). 

Section 422.100(o)(2) also limits D–SNP 

PPO out-of-network cost sharing to the 

cost-sharing limits for such services 

established at § 422.100(j)(1) when such 

services are delivered in-network. These 

requirements were finalized in the April 

2024 final rule.139 We propose to revise 

the last phrase of § 422.100(o)(2) 

regarding regional PPO D–SNPs to align 

the cross-references with the language 

that we have proposed to update in this 

rulemaking. Specifically, we are 

proposing to update the cross-reference 

in § 422.100(o)(2) from ‘‘excluding 

paragraph (j)(1)(i)(C)(2)’’ to ‘‘excluding 

the last sentence of paragraph 

(j)(1)(i)(C).’’ 

We propose to update the cost sharing 

standards for several categories of 

benefits, including behavioral health 

and non-behavioral health related 

benefit categories, for Cost Plans to 

match the standards for MA plans. The 

following sections describe the: (1) 

proposed in-network behavioral health 

service category cost-sharing limits and 

(2) potential impacts this proposal may 

have on contract year 2026 plan costsharing amounts by service category. If 

this proposal is finalized, CMS will 

continue to examine the affordability 

and availability of behavioral health 

services for MA enrollees. This may 

include monitoring the utilization of 

behavioral health services by MA 

enrollees through encounter data (as 

discussed in section III.L.e.(4). of this 

proposed rule) which may inform 

CMS’s understanding of the utilization 

of certain categories of services and 

future rulemaking. 

(1) Proposed In-Network Service 

Category Cost-Sharing Limits 

Table 3 (MA plans) and table 4 (Cost 

Plans) compare existing and proposed 

behavioral health in-network service 

category cost-sharing standards for 

contract year 2026 and future years. In 

effect, these tables summarize this 

proposal’s impact to behavioral health 

service category cost-sharing limits if 

finalized (based on contract year 2025 

Medicare FFS data projections, the most 

recent data available at the time of 

developing this proposal). Specifically, 

table 3 reflects this proposal’s impact to 

MA coinsurance limits and its potential 

impact to the dollar limits (based on 

actuarially equivalent values to the 

specified coinsurance limits or 

percentages of estimated Traditional 

Medicare FFS cost sharing for inpatient 

hospital psychiatric services). We note 

the illustrative dollar limits for the 

behavioral health service categories in 

table 3 are similar to cost sharing for 

these services in qualified health plans 

(QHPs) in the marketplace. For example, 

QHPs are required to offer standardized 

options for 2024 with set copayments 

for mental health and substance use 

disorder outpatient office visits that 

range between $0 and $50 based on the 

plan level (for example, bronze or 

silver).140 In comparison, based on the 

information in table 3, the partial 

hospitalization copayment limit for an 

MA plan with a lower MOOP type in 

contract year 2026 could decrease from 

50 percent coinsurance or $150 

copayment to 20 percent coinsurance or 

$60 copayment if this proposal is 

finalized (a $90 difference in the 


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141As discussed in more detail subsequently in 

this section of the proposed rule, this annual 

process to update the copayment limits for Cost 

Plans would apply to all basic benefits. 

copayment limit). Similarly, table 4 

reflects this proposal’s impact to Cost 

Plan in-network cost-sharing limits. 

We note that the dollar limits 

included in table 4 under the existing 

cost sharing validations column do not 

reflect actuarially equivalent values to 

the coinsurance percentage listed. This 

is because Cost Plan cost sharing 

validations have been maintained for 

many years at these amounts. As part of 

this proposal, copayment limits 141 for 

Cost Plans would be updated annually 

following the rules at § 422.100(f)(7), 

including the subregulatory process 

specified at § 422.100(f)(7)(iii) to reflect 

actuarially equivalent values to the 

coinsurance limits based on the most 

recent Medicare FFS data projections 

available and application of the 

rounding rules in paragraph (f)(6)(ii). As 

a result, comparing the difference in 

copayment limits between the existing 

and proposed standards in table 4 

reflect the impacts from: (1) using 

updated Medicare FFS data projections 

to set actuarially equivalent copayment 

limits and (2) basing copayment limits 

on revised coinsurance limits specified 

in Medicare FFS for these benefits. For 

example, in comparison to the $150 

actuarially equivalent copayment value 

to 50 percent coinsurance in table 3 for 

partial hospitalization services, table 4 

reflects a $55 copayment limit in the 

existing cost sharing validations column 

for this service category. This illustrates 

how this proposal will have different 

levels of impact for Cost Plans than for 

MA plans in some cases. Specifically for 

this example, based on the information 

in table 4, the partial hospitalization 

copayment limit for a Cost Plan in 

contract year 2026 could change from 50 

percent coinsurance or $55 copayment 

to 20 percent coinsurance or $60 

copayment if this proposal is finalized 

(a $5 increase in the copayment limit). 

We also note that Cost Plan enrollees 

may continue to receive basic benefits at 

cost sharing in Traditional Medicare by 

going out-of-network. Ensuring that Cost 

Plan cost sharing does not exceed 

Traditional Medicare cost sharing for 

these services avoids an incentive for 

Cost Plan enrollees to go out-of-network, 

which might mean foregoing any 

coordination services or efforts by the 

Cost Plan that come with using the Cost 

Plan’s network providers. 

We emphasize that the dollar values 

in table 3 and the proposed dollar limits 

in table 4 are illustrative (based on 

contract year 2025 Medicare FFS data 

projections). As a result, CMS expects 

the proposed copayment and dollar 

limits illustrated in tables 3 and 4 

would be different in contract year 2026 

and future years based on using updated 

data to develop the actuarially 

equivalent values for the coinsurance 

cost sharing limits that we are 

proposing. This may also include, as 

discussed in the April 2022 Final Rule, 

changes to the approach to calculate 

actuarially equivalent copayments in 

future years. For example, CMS may 

change the calculation to consider a 

different list of provider specialties, 

services, or facilities based on generally 

accepted actuarial principles and 

practices outlined in § 422.100(f)(7)(i). 

We would generally describe such 

changes in the annual guidance 

described in § 422.100(f)(7)(iii). 


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142 ‘‘Final Contract Year (CY) 2025 Standards for 

Part C Benefits, Bid Review and Evaluation’’ issued 

May 6, 2024. Available at: https://www.cms.gov/ 

about-cms/information-systems/hpms/hpmsmemos-archive-weekly. 

Under this proposal, the requirement 

that cost-sharing limits applicable for 

any service category cannot exceed the 

associated MOOP limit would continue 

to apply for MA plans, including for the 

inpatient hospital psychiatric length of 

stay scenarios at § 422.100(f)(6)(iv). For 

example, in table 3, the illustrative MA 

inpatient hospital psychiatric services 

dollar limits for each length of stay 

scenario are all less than the contract 

year 2025 MOOP limits (for example, 

the contract year 2025 lower MOOP 

limit is $4,150).142 However, if 100 

percent of estimated Medicare FFS cost 

sharing for an inpatient hospital 

psychiatric length of stay scenario 

resulted in a dollar limit that exceeded 

the MOOP limit, CMS would set the MA 

dollar limit for that scenario and MOOP 

type at the MOOP limit for that contract 

year under this proposal. In essence, our 

proposal could result in MA inpatient 

hospital psychiatric dollar limits that 

vary by MOOP type if dollar limit 

calculations result in values that exceed 

MOOP limit(s). 

In conjunction with proposing these 

behavioral health cost-sharing 

standards, we propose to: (1) revise 

§ 417.454(e) to apply a limit for cost 

sharing for certain benefit categories, 

similar to the MA cost sharing 

standards, of cost sharing no greater 

than Traditional Medicare, to Cost 

Plans; and (2) add new § 417.454(f) to 

codify and clarify our longstanding 

policy for Cost Plans that in-network 

cost sharing be no greater than the 50 

percent coinsurance (or actuarially 

equivalent copayment) standard at 

§ 422.100(f)(6)(i) for which Cost Plans 

have historically been subject as part of 

our PBP data validations. We believe 

that these proposals will protect 

enrollees of Cost Plans and create 

consistent flexibility in cost sharing 

standards between MA and Cost Plans 

for the following non-behavioral service 

categories: inpatient hospital acute 

services, home health, certain categories 

of DME, and Part B drugs other than 

chemotherapy drugs. Specifically, at 

§ 417.454(e) we propose to add 

paragraphs (5) through (9) which 

reference those service categories and 

behavioral health service categories. In 

addition, CMS proposes to add new 

paragraph § 417.454(f) which references 

the cost sharing standard at 

§ 422.100(f)(6)(i) (the 50 percent 

coinsurance or actuarially equivalent 

copayment cost sharing standard) as 

applicable as the in-network basic 

benefit cost sharing standard for Cost 

Plans, excluding benefits addressed at 

§ 417.454(e). Under these proposals, the 

Cost Plan must use cost sharing that 

does not exceed specific coinsurance 

thresholds. This may be achieved by the 

Cost Plan using coinsurance that does 

not exceed the coinsurance limit or 

copayments that do not exceed dollar 

values that are actuarially equivalent to 

the coinsurance limit. 

Under these proposals, CMS may 

annually update the copayment limits 

for service categories subject to 

§ 417.454(e) or (f) to retain actuarially 

equivalent values to the applicable 

coinsurance standard for each service 

category. In annually setting these 

copayment limits, we intend to not 

disincentivize Cost Plans from using 

copayments in their plan designs. 

Specifically, CMS proposes to revise 

§ 417.454(e) to specify that when Cost 


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Plans use: (1) coinsurance, the 

coinsurance must not exceed the 

coinsurance charged in original 

Medicare; or (2) copayments, the 

copayment must not exceed the 

actuarially equivalent value calculated 

for that benefit using the Medicare 

Advantage rules at § 422.100(j)(1)(ii) and 

Medicare FFS data projections as 

defined in § 422.100(f)(4)(i). Per 

§ 422.100(j)(1)(ii), CMS calculates 

copayment limits using the rules 

specified in § 422.100(f)(7) and (f)(8). If 

CMS does not calculate a specific 

copayment limit, the plan would have 

to establish a copayment that does not 

exceed an actuarially equivalent value 

to the coinsurance required under 

original Medicare; such actuarially 

equivalent value must be established in 

accordance with § 422.100(f)(7)(i) 

(which requires compliance with 

generally accepted actuarial principles 

and practices) and based on the average 

Medicare FFS allowed amount in the 

plan’s service area or the estimated total 

MA plan financial liability for that 

benefit for that contract year. Under this 

proposal, the Cost Plan would have to 

comply with the MA requirements 

specified in the cross-referenced 

regulations. Cross-referencing the MA 

regulations would ensure consistency 

across the programs for Medicare 

beneficiaries that elect Part A and B 

coverage through one of these Medicare 

health plans and avoid repetitive and 

lengthy regulation text being added to 

§ 417.454(e). This proposal would 

therefore result in consistently updated 

actuarially equivalent copayment limits 

for the applicable service categories 

across the MA and Cost Plan programs. 

The subregulatory process for how the 

actuarially equivalent copayment limits 

are calculated and established is 

addressed at § 422.100(f)(7) and would 

utilize the most recent Medicare FFS 

data projections available (as defined in 

§ 422.100(f)(4)(i)) and application of the 

rounding rules in paragraph (f)(6)(ii). 

This includes the subregulatory notice 

and comment process outlined in 

§ 422.100(f)(7)(iii). Section 

422.100(j)(1)(ii) also requires 

compliance with paragraph (f)(8), the 

requirements for copayment limits 

during the actuarially equivalent 

copayment transition from 2023 through 

2025. However, as the actuarially 

equivalent copayment transition 

concludes before this proposal would be 

applicable, paragraph (f)(8) is not 

relevant for Cost Plans. Table 5 shows 

the potential impact of these proposals 

for Cost Plans based on the most recent 

Medicare FFS data projections available 

for non-behavioral health related service 

categories. 


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(2) Potential Impacts To Plan Behavioral 

Health Cost Sharing Amounts 

CMS considered the potential impact 

this proposal, if finalized, may have on 

plans and enrollees related to their 

behavioral health service category costsharing amounts. Tables 6 through 11 

use contract year 2024 MA and Cost 

Plan data and contract year 2025 

Medicare FFS data projections to 

roughly estimate these potential plan 

and enrollee impacts. We excluded D– 

SNPs from this data as states cover 

Medicare cost sharing for many dually 

eligible enrollees. However, we believe 

our proposal will have a beneficial 

effect on access to care for dually 

eligible individuals by increasing 

revenue for behavioral health providers 

in any instances in which states do not 

cover the full cost sharing amounts on 

their behalf. There could be state 

savings directly attributable to 

behavioral health benefits as well if 

utilization remains stable, which we 

expect given state coverage of dually 

eligible beneficiary cost sharing. 

Organizations establish plan 

copayment amounts based on many 

variables that may change annually 

(including provider contracting 

arrangements, managed care practices, 

and scope of supplemental benefit 

offerings). As a result, CMS expects the 

values in tables 6 through 11 would be 

different in future years based on 

updated data (for example, contract year 

2025 MA plan data). In addition, CMS 

cannot fully predict plan behavior and 

the MA organizations’ reactions to the 

new behavioral health cost sharing 

limits. Due to these inherent 

uncertainties, we emphasize the 

potential plan and enrollee impacts 

discussed in this section are rough 

estimates and solicit comment on the 

scope of changes MA plans may make 

in response to this proposal if finalized. 

Table 6 identifies the average MA 

plan cost sharing (weighted by 

enrollment) by behavioral health service 

category of all contract year 2024 plans. 

CMS considered the difference between 

the MA plan cost sharing values in table 

6 and the proposed cost-sharing 

standards in table 3 as an initial 

estimate of how likely this proposal 

would be to require significant cost 

sharing changes by most MA plans for 

each category. For example, all of the 

weighted average MA plan cost sharing 

amounts for the three length-of-stay 

scenarios for the inpatient hospital 

psychiatric service category are less 

than the proposed and illustrative dollar 

limits in table 3. In contrast, as shown 

in table 6, the weighted average MA 

plan cost-sharing amount (25 percent 

coinsurance or $36 copayment) for the 

‘‘outpatient substance use disorder 

services’’ service category exceeds the 

proposed 20 percent coinsurance or $30 

copayment limit in table 3. As a result, 

we consider these comparisons as 

supportive evidence that this proposal 

would directly result in most MA plans: 

(1) lowering their cost sharing for the 

‘‘outpatient substance use disorder 

services’’ category; and (2) making 

nominal or no changes to their cost 

sharing for inpatient hospital 

psychiatric services. We make 

additional comparisons and 

interpretations based on contract year 

2024 MA plan cost sharing values in 

tables 8 and 10 to better understand the 

scope of changes certain MA plans may 

make in response to this proposal for 

each category. 


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143Cost Plans are not required to report 

information for all Medicare and non-Medicare 

services, including Part A inpatient hospital 

psychiatric services. Due to this lack of data, in 

comparing the information in tables 4 and 7 we are 

only able to evaluate potential professional 

behavioral health service category cost sharing 

impacts for Cost Plans. 

Table 7 provides the same 

information as table 6 but for Cost Plans. 

CMS considered the difference between 

the Cost Plan cost sharing values in 

table 7 and the proposed cost-sharing 

standards in table 4 as an initial 

estimate of the likelihood this proposal 

would require significant cost sharing 

changes by most Cost Plans for each 

applicable category.143 For example, as 

shown in table 7, the weighted average 

Cost Plan cost sharing amount for the 

‘‘opioid treatment program services’’ 

service category exceeds the proposed 

zero cost sharing standard in table 4. In 

contrast, as shown in table 7, the 

weighted average Cost Plan cost sharing 

amount for the ‘‘mental health specialty 

services’’ service category is lower than 

the proposed cost-sharing standard in 

table 4. As a result, we consider these 

comparisons as supportive evidence 

that this proposal would directly result 

in most Cost Plans: (1) lowering their 

cost sharing for the ‘‘opioid treatment 

program services’’ category; and (2) 

making nominal or no changes to their 

cost sharing for mental health specialty 

services. We make additional 

comparisons and interpretations based 

on contract year 2024 Cost Plan cost 

sharing values in tables 9 and 11 to 

better understand the scope of changes 

certain Cost Plans may make in 

response to this proposal for each 

applicable category. 


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Table 8 identifies the number and 

percent of contract year 2024 MA plans 

and enrollees with cost sharing greater 

than the proposal by behavioral health 

service category. As shown in table 8, 

the behavioral health service category 

with the most contract year 2024 MA 

plans that have cost sharing greater than 

cost sharing in Traditional Medicare is 

opioid treatment program services. CMS 

considers the information in table 8 to 

be a rough estimate of the proportion of 

continuing MA plans and enrollees that 

may experience lower behavioral health 

cost sharing (by service category) if this 

proposal is finalized. For example, 

based on information in table 8, we 

estimate that about 42 percent of MA 

plans (and 41 percent of MA enrollees) 

may experience lower cost sharing for 

outpatient substance use disorder 

services in contract year 2026 if this 

proposal is finalized. In contrast, we 

expect a greater proportion of MA plans 

and enrollees would experience lower 

professional behavioral health cost 

sharing if this proposal is finalized. For 

example, based on table 8, we estimate 

that about 42 percent of MA plans (and 

41 percent of MA enrollees) may 

experience lower cost sharing for 

outpatient substance use disorder 

services in contract year 2026 if this 

proposal is finalized. The information in 

table 8 aligns with our general 

expectation that the greater the decrease 

to existing cost-sharing standards from 

this proposal, the more plans, enrollees, 

and provider contracts that will be 

directly affected. The prior examples fit 

with this expectation as this proposal 

would lower MA cost-sharing standards 

for— 

• Inpatient hospital psychiatric 

services from 125 percent to 100 percent 

of estimated Medicare FFS cost sharing 

(only for MA plans with the lower 

MOOP type); and 

• Outpatient substance use disorder 

services from 50 percent coinsurance to 

20 percent coinsurance (or an 

actuarially equivalent copayment) for all 

MA plans (regardless of MOOP type). 

Table 9 provides the same 

information as table 8 but for Cost Plans. 

In comparison to the findings from table 

8, table 9 shows that substantially fewer 

Cost Plans and enrollees would be 

impacted by this proposal. For example, 

based on information in table 9, we 

estimate that 5 percent of Cost Plans 

(and about 1 percent of their enrollees) 

may experience lower outpatient 

substance use disorder services cost 

sharing in contract year 2026 (compared 

to the cost sharing they experience in 

contract year 2024) if this proposal is 

finalized. In contrast, this is 


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substantially less than the 42 percent of 

MA plans that may lower cost sharing 

for this service category (as shown in 

table 8). As a result, based on the 

findings in table 9, we believe Cost 

Plans would not be substantially 

incentivized to leave the market if this 

proposal is finalized given the likely 

limited breadth of impact. 

Column D in table 10 reflects the 

difference between: (1) the weighted 

average MA plan cost sharing by 

behavioral health service category of the 

plans identified in table 8; and (2) the 

proposed cost-sharing limit for each 

category. Table 11 shows the same 

information as table 10 but for Cost 

Plans. If this proposal is finalized, CMS 

considers the values in Column D of 

tables 10 and 11 as a rough estimate of 

how much, on a weighted average basis, 

enrollee cost sharing may decrease for 

each behavioral health service category 

in continuing plans that did not 

previously establish cost sharing 

amounts equal to or less than 

Traditional Medicare. For example, as 

shown in table 10, $30.38 is the 

estimated average difference in cost 

sharing for the ‘‘outpatient substance 

use disorder services’’ service category 

between: (1) the $60.38 weighted 

average cost sharing for this service 

category of contract year 2024 MA plans 

with cost sharing amounts greater than 

the proposed standard; and (2) this 

proposal’s $30 illustrative copayment 

limit for that category (which reflects 

the actuarially equivalent copayment 

value to the 20 percent coinsurance 

standard in Traditional Medicare for 

this benefit, based on contract year 2025 

Medicare FFS data projections). In 

comparison for this same service 

category, table 11 reflects a $10.00 

difference in cost sharing between Cost 

Plan cost sharing amounts (those above 

the proposed limit identified in table 9) 

and the $30 illustrative copayment limit 

for the ‘‘outpatient substance use 

disorder services’’ service category 

(based on contract year 2025 Medicare 

FFS data projections). Comparing tables 

10 and 11 in this manner supports our 

belief that Cost Plans will be less 

impacted by this proposal if finalized 

compared to MA plans. 

BILLING CODE 4120–01–P 


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BILLING CODE 4120–01–C Based on tables 6, 8, and 10, CMS 

expects this proposal (if finalized) may 

result in a large proportion of 

continuing MA plans making significant 


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144 Kelly JF, Greene MC, Bergman BG, White WL, 

Hoeppner BB. How Many Recovery Attempts Does 

it Take to Successfully Resolve an Alcohol or Drug 

Problem? Estimates and Correlates From a National 

Study of Recovering U.S. Adults. Alcohol Clin Exp 

Res. 2019 Jul;43(7):1533–1544. doi: 10.1111/ 

acer.14067. Epub 2019 May 15. PMID: 31090945; 

PMCID: PMC6602820. 

145 Substance Abuse and Mental Health Services 

Administration (US); Office of the Surgeon General 

(US). Facing Addiction in America: The Surgeon 

General’s Report on Alcohol, Drugs, and Health 

[internet]. Washington (DC): US Department of 

Health and Human Services; 2016 Nov. CHAPTER 

7, VISION FOR THE FUTURE: A PUBLIC HEALTH 

APPROACH. Available from: https://www.ncbi.nlm.

nih.gov/books/NBK424861/. 

146 Chatterjee, Rhitu. ‘‘Mental health care is hard 

to find, especially for people with Medicare or 

Medicaid.’’ April 2024. Retrieved from: https:// 

www.npr.org/sections/health-shots/2024/04/03/ 

1242383051/mental-health-care-shortage-medicaremedicaid-hhs-inspector-general. 

147 HHS Office of Inspector General. ‘‘A Lack of 

Behavioral Health Providers in Medicare and 

Medicaid Impedes Enrollees’ Access to Care’’ April 

2024. Retrieved from: https://oig.hhs.gov/reportsand-publications/all-reports-and-publications/alack-of-behavioral-health-providers-in-medicareand-medicaid-impedes-enrollees-access-to-care/. 

changes to their cost sharing for the 

‘‘opioid treatment program services’’ 

service category in comparison to the 

other behavioral health service 

categories (on average). This is because, 

as shown in tables 6, 8, and 10, the 

‘‘opioid treatment program services’’ 

service category has the: 

• Highest percent of contract year 

2024 MA plans and enrollees with cost 

sharing above the proposed standard 

(coinsurance percentage and illustrative 

actuarially equivalent copayment or 

dollar limit). 

• Of the professional behavioral 

health service categories, largest cost 

sharing difference between the weighted 

average MA plan cost sharing and the 

proposed limit for that category for: (1) 

all MA plans; and (2) MA plans with 

cost sharing above the proposed costsharing standard. 

Similar findings may be made for this 

service category for Cost Plans based on 

the information in tables 7, 9, and 11. 

As a result, this proposal (if finalized) 

has the potential to meaningfully 

improve access to opioid treatment 

programs as a significant proportion of 

MA and Cost Plan enrollees would 

likely experience substantively lower 

cost sharing for these services. While a 

decrease of $47 on average may be 

substantial for some MA plans (or $20 

on average for Cost Plans), research 

finds that patients with severe alcohol 

and other drug problems report 

completing only two serious recovery 

attempts (median) before remission.144

As a result, we expect lower cost 

sharing will increase utilization of 

opioid treatment program services and 

thus provide more beneficiaries with the 

services they need to achieve remission. 

In addition, a study shows that every 

dollar spent on substance use disorder 

treatment saves $4 in health care 

costs.145 Finally, we note that over the 

past two decades, the number of 

overdose deaths in the older adult 

population has quadrupled.146 As a 

result, applying the Traditional 

Medicare limit of zero cost sharing 

could have a significant positive impact 

on enrollees’ ability to access those 

services and address the opioid use 

disorder crisis. We acknowledge this 

proposal of zero cost sharing also 

increases the cost liability for MA and 

Cost Plan organizations to cover opioid 

treatment program services. However, 

we believe this increase in cost liability 

is not as much of a concern as it 

otherwise would be for a highly utilized 

service (such as physical therapy). In 

other words, we find the increase in cost 

liability for MA and Cost Plan 

organizations to cover opioid treatment 

program services as outweighed by the 

potential positive enrollee outcomes 

described previously in this section. 

Given the expected positive impacts of 

applying the Traditional Medicare limit 

of zero cost sharing to opioid treatment 

program services, this proposed limit 

reflects an additional term or condition 

necessary and appropriate for the MA 

program, and not inconsistent with the 

Part C statute, which CMS has the 

authority to impose under section 

1857(e)(1) of the Act. 

We also believe tables 6 through 11 

support the proposed MA and Cost Plan 

cost-sharing standard changes for the 

other behavioral health service 

categories. For instance, the MA data 

suggests that this proposal would result 

in either: (1) somewhat nominal 

reductions to plan cost sharing amounts 

for several behavioral health service 

categories across a substantive 

proportion of plans and enrollees or (2) 

substantive reductions to plan cost 

sharing amounts for certain inpatient 

hospital psychiatric length of stay 

scenarios for a small proportion of plans 

and enrollees. Similarly, for Cost Plans, 

we find that the data in tables 7, 9, and 

11 suggest that this proposal would 

result in either: (1) moderate reductions 

to plan cost sharing amounts for opioid 

treatment program services across a 

substantive proportion of plans and 

enrollees or (2) nominal reductions to 

plan cost-sharing amounts for most of 

the other behavioral health service 

categories for a small proportion of 

plans and enrollees. For example, based 

on tables 8 and 10, approximately 24 

percent of MA plans (or 4.5 million or 

21 percent of MA enrollees) could have 

a reduction in cost sharing by about $7 

per visit on average for mental health 

specialty services based on this proposal 

and contract year 2024 plan data. In 

comparison, based on tables 9 and 11, 

approximately 8 percent of Cost Plans 

(or 5,070 or 3 percent of Cost Plan 

enrollees) could have a reduction in cost 

sharing by about $5 per visit on average 

for this service category. CMS finds 

either of these consequences for mental 

health specialty services plan cost 

sharing amounts would further our 

progress towards improving access to 

behavioral health services across MA 

and Cost Plans. As a result, we find the 

burdens or costs that this proposal 

would impose on MA and Cost Plans 

are outweighed by the potential positive 

beneficiary outcomes. 

By reducing costs for mental health 

specialty services by nominal amounts 

for each visit, we expect an increase in 

utilization of these services. This service 

category includes costs from social 

workers and psychologists, which are 

the behavioral health providers most 

utilized by enrollees in 2023.147

Considering the combined effects of 

lower MA and Cost Plan cost sharing 

amounts across the behavioral health 

service categories, we also expect 

positive health outcome effects and 

improved enrollee access to these 

services. 

We reiterate that the information in 

tables 6 through 11 reflects an estimate 

of this proposal’s potential impact to 

MA and Cost Plans and enrollees in 

contract year 2026 based on the most 

recent data available at the time of 

developing this proposal. If this 

proposal is finalized, plans may make 

changes to their plan designs within the 

limits of applicable statutes and 

regulatory requirements discussed in 

the following section. 

(3) Statutory and Regulatory Limitations 

on Benefit Design Changes 

In the annual MA bids or for a new 

contract year for Cost Plans, plan benefit 

design changes may be made in 

response to multiple factors, including 

new cost-sharing requirements. If this 

proposal is finalized, MA and Cost Plan 

organizations have the flexibility to 

offset any potential cost changes related 

to providing behavioral health services 

(if they were not already establishing 

cost-sharing amounts at or below cost 

sharing in Traditional Medicare). For 

example, MA and Cost Plan 

organizations may choose to change 

aspects of their benefit designs in a 

manner that would distribute the impact 

across all enrollees such as changing 


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premium, supplemental benefits, and 

MOOP amount, as applicable, or make 

cost-sharing changes to other service 

categories. However, it is also possible 

that market forces will play a role in the 

organization deciding among potential 

plan benefit design changes. In addition, 

these organizations may choose to 

adjust profit margins rather than change 

benefits and/or premiums. 

MA organizations may make changes 

to their plan benefit design that comply 

with existing statutory and regulatory 

requirements. This includes sections 

1852(a)(1)(B)(i) and 1852(b)(1) of the 

Act. Section 1852(a)(1)(B)(i) of the Act 

provides that the MA organization must 

cover, subject to limited exclusions, the 

benefits under Parts A and B (that is, 

basic benefits as defined at § 422.100(c)) 

with cost sharing that does not exceed 

or is at least actuarially equivalent to 

cost sharing in original Medicare in the 

aggregate; this is repeated in a bid 

requirement under section 1854(e)(4) of 

the Act. We have addressed and 

implemented this requirement in 

several regulations, including 

§§ 422.100(j)(2), 422.102(a)(4), and 

422.254(b)(4). 

Section 1852(b)(1) of the Act prohibits 

discrimination by MA organizations on 

the basis of health status-related factors 

and directs that CMS may not approve 

an MA plan if CMS determines that the 

design of the plan and its benefits are 

likely to substantially discourage 

enrollment by certain MA eligible 

individuals. We have relied on this to 

establish certain minimum standards for 

MA plans, including cost sharing 

standards, designed to ensure that MA 

cost sharing designs and structures are 

not established in a way that 

discourages enrollment by Medicare 

beneficiaries with high health needs 

(whether overall or for specific 

categories of covered benefits). 

In addition, section 1854(a)(5) and (6) 

of the Act provide that CMS is not 

obligated to accept every bid submitted 

and may negotiate with MA 

organizations regarding the bid, 

including benefits. Under section 

1854(a)(5)(C)(ii) of the Act, CMS is also 

authorized to deny a plan bid if the bid 

proposes too significant an increase in 

enrollee costs or a decrease in benefits 

from one plan year to the next. While 

this proposal does not limit our 

negotiation authority with respect to 

MA organizations’ bid submissions 

(§ 422.256), it would provide costsharing standards for an acceptable 

benefit design for CMS to apply in 

reviewing and evaluating bids. 

MA and Cost Plan organizations must 

also comply with applicable Federal 

civil rights laws that prohibit 

discrimination, including those that 

prohibit discrimination on the basis of 

race, color, national origin, sex, age, and 

disability, such as section 1557 of the 

Affordable Care Act, Title VI of the Civil 

Rights Act of 1964, section 504 of the 

Rehabilitation Act of 1973, and the Age 

Discrimination Act of 1975. 

None of the proposals in this 

proposed rule limit application of such 

anti-discrimination requirements. As a 

result, CMS believes these existing 

statutory antidiscrimination 

requirements, regulatory actuarial 

equivalence requirements for MA plans, 

and the competitive nature of the MA 

and Cost Plan programs will prevent 

potentially concerning changes 

organizations could otherwise make in 

response if this proposal is finalized. 

However, as discussed in the following 

section, we solicit comment on whether 

implementing this proposal beginning 

in contract year 2026 would sufficiently 

protect enrollees from potentially 

disruptive changes in access to care 

(including cost sharing and benefits) 

and coverage options from one year to 

the next. 

(4) Comment Solicitations 

As discussed in sections III.L.e.(2). 

and (3). and VII.E.3. of this proposed 

rule, CMS believes applying cost 

sharing no greater than Traditional 

Medicare as the cost-sharing standard 

for the behavioral health service 

categories will not result in significant 

negative disruption to many enrollees or 

MA and Cost Plan organizations. This is 

in part because as shown in: 

• Table 6: The weighted average 

behavioral health cost sharing—of all 

contract year 2024 MA plans—reflects 

amounts that are less than the proposed 

standards for the behavioral health 

service categories, with two exceptions 

for the ‘‘opioid treatment program 

services’’ and ‘‘outpatient substance use 

disorder services’’ service categories. 

• Table 7: The weighted average 

behavioral health cost sharing—of all 

contract year 2024 Cost Plans—reflects 

amounts that are less than the proposed 

standards for the behavioral health 

service categories, with one exception 

for ‘‘opioid treatment program services’’ 

service category. 

• Table 10: The weighted average 

behavioral health cost sharing of 

contract year 2024 MA plans for only 

plans with cost sharing above the 

proposed standard is not significantly 

greater than our proposal for most of the 

professional service categories. 

• Table 11: The weighted average 

behavioral health cost sharing of 

contract year 2024 Cost Plans for only 

plans with cost sharing above the 

proposed standard is not significantly 

greater than our proposal for most of the 

professional service categories. 

As shown in table 6, the weighted 

average contract year 2024 MA plan cost 

sharing is about 9.5 percent coinsurance 

or $29 copayment for the ‘‘opioid 

treatment program services’’ and about 

25 percent coinsurance or $36 

copayment for ‘‘outpatient substance 

use disorder services’’ service 

categories. In comparison, as shown in 

table 10, the proposed behavioral health 

cost-sharing standards for these 

categories would eliminate cost sharing 

for ‘‘opioid treatment program services’’ 

and establish 20 percent coinsurance or 

a $35 copayment limit (illustrative 

dollar value that is actuarially 

equivalent to 20 percent coinsurance 

based on contract year 2025 Medicare 

FFS data projections) for the ‘‘outpatient 

substance use disorder services’’ 

categories. As a result, if the proposed 

behavioral health cost-sharing standards 

are finalized, we expect most continuing 

MA plans will not have to significantly 

adjust their benefit designs to come into 

compliance. In addition, based on our 

findings from tables 7 and 11 we also 

expect most continuing Cost Plans will 

not be significantly impacted by this 

proposal as most plans are currently in 

compliance with the proposed 

requirements. 

Conversely, there are a subset of plans 

that established cost sharing amounts 

significantly above the weighted average 

values in table 6. Specifically, 3 percent 

of MA plans (impacting 3 percent of 

enrollees) established cost sharing 

greater than 30 percent coinsurance (or 

approximately $92 copayment) for 

partial hospitalization. In these cases, 

this proposal may have a more 

significant impact by lowering the cost 

sharing limit for this service category to 

20 percent coinsurance or $60 

copayment. Given the potential for this 

proposal to impact some MA and Cost 

Plans more significantly, we considered 

whether CMS should apply— 

• These proposed changes beginning 

in contract year 2026 or 2027; or 

• A transition period from the 

existing contract year 2025 behavioral 

health cost-sharing limits to the 

proposed cost-sharing standard for 

select behavioral health service 

categories, and if so, how long the 

transition should be. 

For example, CMS considered 

whether a potential transition period is 

warranted for service categories with 

substantial changes to the cost sharing 

standard so MA and Cost Plans have 

sufficient time to address potential 

changes in bidding that stem from this 

proposal (if finalized) and other, 


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unrelated policy changes occurring at 

the same time (such as, new changes 

stemming from IRA Part D requirements 

and CMS’s annual updates to the risk 

adjustment model and plan payments). 

In making this consideration, CMS 

evaluated MA encounter data to 

determine the potential impact this 

proposal may have on enrollee 

utilization of these behavioral health 

services. This data was not available for 

Cost Plans. Specifically, we compared 

the average length of stay and the 

percent of enrollees with any utilization 

of the various behavioral health service 

categories based on whether the MA 

enrollee’s plan had cost sharing 

amounts for those services equal to, or 

less than, cost sharing in Traditional 

Medicare. The results of this analysis 

are provided in tables 12 and 13 for the 

most recent year of MA encounter data 

available at the time of developing this 

proposal, contract year 2023. 

Based on the information in tables 12 

and 13, CMS finds that the data suggests 

that this proposal may result in small 

increases to per-enrollee utilization of 

certain behavioral health services but 

could also decrease the average duration 

or length of stay of these services. For 

example, table 12 shows that the 

percent of MA enrollees with any 

utilization of mental health specialty 

services, psychiatric services, and 

outpatient substance abuse services 

increased nominally if the enrollee was 

in a plan with cost sharing equal to or 

less than Traditional Medicare in 

comparison to plans with cost sharing 

greater than Traditional Medicare. For 

these same service categories, table 13 

shows that enrollees in plans with cost 

sharing equal to or less than Traditional 

Medicare had shorter average length of 

stays or number of visits in comparison 

to enrollees in plans with cost sharing 

greater than Traditional Medicare for 

these services. As a result, we believe 

this proposal will not produce an 

immediate drastic change in utilization 

of the behavioral health service 

categories to the extent that a transition 

period is warranted. However, we solicit 

comment on this assumption. 

f. Proposed Regulation Changes 

Thus, we propose the following 

changes to §§ 417.454 and 422.100: 

• Revise language at § 417.454(e) to 

clarify: (1) when the proposed new cost 

sharing limits—that is, the additional 

categories of basic benefits for which 

cost sharing may not be greater than cost 

sharing in original Medicare for that 

benefit—would apply and (2) the 

methods by which Cost Plan 

organizations (HMO or CMP) may abide 

by the requirements in this paragraph 

when they use coinsurance or 

copayment structures for these basic 

benefits. 


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148https://www.federalregister.gov/documents/ 

2021/01/25/2021-01753/advancing-racial-equityand-support-for-underserved-communities-throughthe-federal-government. 

149https://www.federalregister.gov/d/2022-26956/ 

p-228. 

150https://www.cms.gov/pillar/health-equity. 

151https://www.federalregister.gov/documents/ 

2024/04/23/2024-07105/medicare-programchanges-to-the-medicare-advantage-and-themedicare-prescription-drug-benefit. 

152https://www.hmpgloballearningnetwork.com/ 

site/frmc/commentary/addressing-healthinequities-prior-authorization; and https:// 

www.ncbi.nlm.nih.gov/pmc/articles/ 

PMC10024078/. 

153https://www.federalregister.gov/d/2023-24118/ 

p-600. 

154Sections 1852(c)(1)(G) and (c)(2)(B) of the 

Social Security Act, and the MA regulations at 42 

CFR 422.4(a)(1)(ii) and 422.138, expressly reference 

a MA plan’s application of utilization management 

tools, like prior authorization and other 

‘‘procedures used by the organization to control 

utilization of services and expenditures.’’ MA plans 

may require prior authorization on medical items 

and services, except for certain services, including 

emergency services, urgent care, and stabilization 

services. For preferred provider organization (PPO) 

plans, prior authorization is prohibited on plancovered services from out-of-network providers (see 

§ 422.4(a)(1)(v)(D)). 

• Revise language at § 417.454(e)(1) to 

match terminology of chemotherapy 

administration services with language at 

§ 422.100(j)(1)(i)(A) applying the same 

cost sharing limit to MA plans. 

• Add § 417.454(e)(5) to reflect 

proposed cost-sharing standard that 

Cost Plans may not establish cost 

sharing that exceeds cost sharing in 

Traditional Medicare for the following 

behavioral health service categories: 

intensive outpatient services, mental 

health specialty services, opioid 

treatment program services, outpatient 

substance use disorder services, partial 

hospitalization, and psychiatric 

services. 

• Add § 417.454(e)(6) to reflect 

proposed cost-sharing standard that 

Cost Plans may not establish cost 

sharing for inpatient hospital acute and 

psychiatric services (all length of stay 

scenarios) that exceeds cost sharing for 

these services in Traditional Medicare. 

• Add § 417.454(e)(7) through (e)(9) 

to reflect proposed cost-sharing 

standard that Cost Plans may not 

establish cost sharing for home health 

services, certain categories of DME, and 

drugs covered under Part B other than 

chemotherapy drugs that exceeds cost 

sharing for these services in Traditional 

Medicare. 

• Add § 417.454(f) to codify and 

clarify our longstanding policy for Cost 

Plans that in-network cost sharing be no 

greater than the 50 percent coinsurance 

(or actuarially equivalent copayment) 

standard applied to MA plans for basic 

benefits without otherwise specified 

cost-sharing standards. 

• Replace the partial hospitalization 

example with occupational therapy at 

§ 422.100(f)(6)(iii)(A) to reflect the 

proposed cost-sharing standard of cost 

sharing no greater than original 

Medicare for the partial hospitalization 

service category. 

• Add a regulation reference to 

paragraph (j)(1)(i)(H) at 

§ 422.100(f)(6)(iv)(A) to reflect the 

proposed new paragraph which would 

apply cost sharing no greater than 

original Medicare to inpatient hospital 

psychiatric services. 

• Remove language specific to 

inpatient hospital psychiatric services 

and associated lengths of stay scenarios 

at § 422.100(f)(6)(iv)(B) and (D) to reflect 

the proposed cost-sharing standard. 

• Remove language at 

§ 422.100(f)(6)(iv)(D) that the total 

inpatient benefit cost sharing must not 

exceed the MA plan’s MOOP amount for 

clarity. 

• Add language to § 422.100(j)(1)(i) 

that the requirement for cost sharing to 

not exceed cost sharing under original 

Medicare applies on different dates for 

different benefits categories as proposed 

in paragraphs under paragraph (j)(1)(i). 

• Add language to § 422.100(j)(1)(i)(C) 

that the Part A deductible amount 

referred to is for the year. 

• Remove § 422.100(j)(1)(i)(C)(2) and 

move language from paragraph 

(j)(1)(i)(C)(1) to paragraph (j)(1)(i)(C) to 

consolidate skilled nursing facility costsharing standard information. 

• Add § 422.100(j)(1)(i)(G) to reflect 

proposed cost-sharing standard of cost 

sharing no greater than original 

Medicare for the following behavioral 

health service categories: intensive 

outpatient services, mental health 

specialty services, opioid treatment 

program services, outpatient substance 

use disorder services, partial 

hospitalization, and psychiatric services 

for contract year 2026 and subsequent 

years. 

• Add § 422.100(j)(1)(i)(H) to reflect 

proposed cost-sharing standard of cost 

sharing no greater than original 

Medicare for inpatient hospital 

psychiatric services (all length of stay 

scenarios) for contract year 2026 and 

subsequent years. 

• Revise language at § 422.100(o)(2) 

that references paragraph (j)(1)(i)(C)(2) 

to reference paragraph (j)(1)(i)(C) in 

relation to regional PPO dual eligible 

special needs plans. 

We solicit comment on these 

proposals. 

M. Ensuring Equitable Access— 

Enhancing Health Equity Analyses: 

Annual Health Equity Analysis of 

Utilization Management Policies and 

Procedures (§ 422.137) 

On January 20, 2021, President Biden 

issued Executive Order 13985: 

‘‘Advancing Racial Equity and Support 

for Underserved Communities Through 

the Federal Government,’’ (E.O. 

13985).148 E.O. 13985 describes the 

Administration’s policy goals to 

advance equity across Federal programs 

and directs Federal agencies to pursue 

a comprehensive approach to advancing 

equity for all, including those who have 

been historically underserved, 

marginalized, and adversely affected by 

persistent poverty and inequality. 

Consistent with this Executive Order, in 

2022, CMS announced ‘‘Advance 

Equity’’ as the first pillar of its Strategic 

Plan.149 This pillar emphasizes the 

importance of advancing health equity 

by addressing the health disparities that 

impact our health care system. CMS 

defines health equity as ‘‘the attainment 

of the highest level of health for all 

people, where everyone has a fair and 

just opportunity to attain their optimal 

health regardless of race, ethnicity, 

disability, sexual orientation, gender 

identity, socioeconomic status, 

geography, preferred language, or other 

factors that affect access to care and 

health outcomes.’’ 150

In April 2024, CMS published 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)’’ 151 final rule (89 FR 

30448) (hereinafter referred to as the 

April 2024 final rule). In the April 2024 

final rule, CMS explained that we have 

received feedback from interested 

parties, including people with 

Medicare, patient groups, consumer 

advocates, and providers that utilization 

management (UM) practices in Medicare 

Advantage (MA), including the use of 

prior authorization, can sometimes 

create a barrier for patients in accessing 

medically necessary care. Further, as 

explained in detail in the April 2024 

final rule, some research indicated that 

the use of prior authorization may 

disproportionately impact individuals 

who have been historically underserved, 

marginalized, and adversely affected by 

persistent poverty and inequality (89 FR 

30566).152 153

Under section 1852 of the Act, MA 

organizations are generally allowed to 

use utilization management tools, such 

as prior authorization.154 Authority for 


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155Section 422.137(d)(6)(ii): (1) receipt of the 

low-income subsidy or being dually eligible for 

Medicare and Medicaid (LIS/DE); or (2) having a 

disability. 

156https://www.federalregister.gov/d/2024-07105/ 

p-1232. 

MA organizations to use utilization 

management policies and procedures 

regarding basic benefits is subject to the 

mandate in section 1852(a)(1) of the Act 

that MA plans cover Medicare Part A 

and Part B benefits (subject to specific, 

limited statutory exclusions) and, thus, 

to CMS’s authority under section 

1856(b) of the Act to adopt standards to 

carry out the MA statutory provisions. 

In addition, the MA statute and MA 

contracts cover both the basic and 

supplemental benefits covered under 

MA plans, so additional contract terms 

added by CMS pursuant to section 

1857(e)(1) of the Act may also address 

supplemental benefits. Additionally, per 

section 1852(b) of the Act and 

§ 422.100(f)(2), plan designs and 

benefits may not discriminate against 

beneficiaries, promote discrimination, 

discourage enrollment, encourage 

disenrollment, steer subsets of Medicare 

beneficiaries to particular MA plans, or 

inhibit access to services. These 

requirements apply to both basic and 

supplemental benefits. We consider 

utilization management policies and 

procedures to be part of the plan benefit 

design, and therefore they cannot be 

used to discriminate or direct enrollees 

away from certain types of services. 

In the April 2024 final rule, CMS 

added two health equity related 

requirements to § 422.137. First, at 

§ 422.137(c)(5), to require that 

beginning January 1, 2025, the UM 

committee must include at least one 

member with expertise in health equity. 

Second, at § 422.137(d)(6), we finalized 

that the UM committee must conduct an 

annual health equity analysis of the use 

of prior authorization. The analysis 

must examine the impact of prior 

authorization at the plan level, on 

enrollees with one or more of the 

specified social risk factors (SRF).155

The analysis must compare metrics 

related to the use of prior authorization 

for enrollees with the specified SRFs to 

enrollees without the specified SRFs. 

Further, the analysis must use the 

outlined metrics, aggregated for all 

items and services, calculated for 

enrollees with the specified SRFS, and 

for enrollees without the specified SRFs, 

from the prior contract year, to conduct 

the analysis. Finally, by July 1, 2025, 

and annually thereafter, the health 

equity analysis must be posted on the 

plan’s publicly available website in a 

prominent manner and clearly 

identified in the footer of the website. 

During the public comment period, 

CMS received a significant number of 

comments on the requirement that the 

metrics for the health equity analysis be 

aggregated for all items and services (89 

FR 30569). Some commenters expressed 

concern that because the proposed 

analysis would consist of prior 

authorization metrics aggregated for all 

items and services, it would not provide 

enough detail for true accountability 

and could allow plans to hide 

disparities. For that reason, commenters 

recommended that CMS require a 

further level of granularity to ensure 

that potential disparities could be 

identified. Specifically, commenters 

suggested that CMS require 

disaggregation by item and service to 

ensure that CMS can identify specific 

services that may be disproportionately 

denied. At the time, we believed that 

there was significant value in 

establishing baseline data because we 

recognized that there was little publicly 

available information regarding the use 

of prior authorization and its potential 

impact on specific populations. 

In the April 2024 final rule, we 

signaled our intent to propose reporting 

and posting of disaggregated (that is, 

more granular) data on these topics in 

the future. Furthermore, we stated that 

we agree that disaggregation of the 

reported metrics for all items and 

services could assist in increasing 

transparency and ensuring the most 

accurate data regarding prior 

authorization is available.156 By 

proposing to require the data to be 

disaggregated, CMS and MA 

organizations may more readily identify 

trends related to the use of prior 

authorization and, therefore, be able to 

more fully identify and address the 

impact of prior authorization on 

enrollees with the specified SRFs. This 

disaggregated data also will help inform 

future policymaking. 

For these reasons, we propose at 

§ 422.137(d)(6)(iii)(A) through (H) to 

revise the required metrics for the 

annual health equity analysis of the use 

of prior authorization to require the 

following: 

• The percentage of standard prior 

authorization requests that were 

approved, reported by each covered 

item and service. 

• The percentage of standard prior 

authorization requests that were denied, 

reported by each covered item and 

service. 

• The percentage of standard prior 

authorization requests that were 

approved after appeal, reported by each 

covered item and service. 

• The percentage of prior 

authorization requests for which the 

timeframe for review was extended, and 

the request was approved, reported by 

each covered item and service. 

• The percentage of expedited prior 

authorization requests that were 

approved, reported by each covered 

item and service. 

• The percentage of expedited prior 

authorization requests that were denied, 

reported by each covered item and 

service. 

• The average and median time that 

elapsed between the submission of a 

request and a determination by the MA 

plan, for standard prior authorizations, 

reported by each covered item and 

service. 

• The average and median time that 

elapsed between the submission of a 

request and a decision by the MA plan 

for expedited prior authorizations, 

reported by each covered item and 

service. 

We also seek comment on alternative 

ways to group items and services for the 

purpose of reporting on these metrics, 

while still allowing for meaningful 

disaggregation to increase transparency, 

identify trends, and address the impact 

of prior authorization on enrollees with 

the specified SRFs. 

Because the required metrics are to be 

reported based on percentage of prior 

authorization requests, and average and 

median time elapsed, CMS does not 

believe the health equity analysis and 

accompanying report will result in 

potential enrollee privacy issues. 

However, out of an abundance of 

caution, CMS is considering whether to 

include a provision to allow 

suppression of certain data points 

should disaggregation present an issue 

regarding enrollee privacy. For example, 

if reporting by each covered item and 

service would result in such a small 

data set that it could put enrollee 

privacy at risk, an MA plan would be 

permitted to suppress that data set. CMS 

solicits feedback on whether cell 

suppression is necessary in order to 

ensure that enrollee privacy is protected 

and on how to ensure that this 

suppression would be done in a uniform 

manner. Based on feedback received 

during the public comment period, we 

may consider revising any potential 

final policy to account for these 

potential privacy concerns. 

We also received comments on the 

April 2024 final rule stating concerns 

that the analysis would be challenging 

for enrollees and the public to navigate 

and understand. At the time, we 

determined that this would not present 


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157https://www.cms.gov/files/document/ 

medicare-advantage-and-section-1876-cost-plannetwork-adequacy-guidance12-12-2023.pdf. 

a significant issue because the data was 

required to be aggregated for all items 

and services. However, because we are 

now proposing that MA organizations 

report the metrics by each covered item 

and service, we believe an executive 

summary of the results of the analysis 

is necessary to ensure that the public 

and plan enrollees can navigate and 

understand the data more fully. 

Therefore, we propose at 

§ 422.137(d)(7)(v) that the results of the 

health equity analysis include an 

executive summary. The executive 

summary must include the following 

elements: additional context that may be 

necessary or helpful for understanding 

the results of the analysis; clarifying 

information that is relevant to the 

results of the analysis, or that could 

help the public understand the analysis 

more fully; and an overview of the 

information produced by the analysis, 

including key statistics and results. We 

propose that MA plans must also ensure 

that accompanying language is not 

misleading or misrepresentative of the 

findings of the analysis. We solicit 

comment on additional requirements to 

be included in the executive summary, 

including, but not limited to, how this 

information could be formatted and 

presented in a uniform manner across 

all MA plans, adherence to plain 

language principals and accessibility 

standards, and consumer centered 

design standards. We also solicit 

comment on how the data produced by 

the analysis could be formatted to 

ensure consistency and uniformity 

across MA plans, and to ensure usability 

by enrollees and the public. 

CMS is considering adding ‘‘having a 

mental health or substance use disorder 

diagnosis’’ to the list of social risk 

factors that MA plans must use to 

conduct the annual health equity 

analysis. We solicit comment on this 

addition and whether this appropriately 

addresses a gap in the existing social 

risk factors. We also solicit comment on 

whether this is something that MA 

plans would be able to operationalize, 

any potential barriers or challenges CMS 

should consider in policy development 

and reporting, and how MA plans might 

overcome these barriers. 

We welcome comment on the 

proposal and may revise the final policy 

based on comments received. 

N. Medicare Advantage Network 

Adequacy (§ 422.116) 

Section 1852(d)(1)(A) of the Social 

Security Act allows MA organizations to 

select the providers from which an 

enrollee may receive covered benefits, 

provided that the MA organization, in 

addition to meeting other requirements, 

makes such benefits available and 

accessible in the service area with 

promptness and in a manner that 

assures continuity in the provision of 

benefits. 1852(d)(1)(D) of the Act 

requires MA organizations to provide 

access to appropriate providers for 

medically necessary treatment and 

services. In § 422.116, CMS codified a 

means of compliance with these 

statutory requirements by requiring 

network-based MA plans to demonstrate 

that they have an adequate contracted 

provider network that is sufficient to 

provide access to covered services in 

accordance with access standards 

described in 1852(d)(1) and in 

§§ 422.112(a)(10) and § 422.114 and by 

meeting the network adequacy 

standards at § 422.116(a)(2). MA 

organizations must maintain an 

adequate contracted network of 

providers regardless of whether a 

provider or facility type is included in 

the network adequacy standards at 

§ 422.116. 

1. Defining County 

Network adequacy is assessed at the 

county level, including countyequivalents, across all geographic areas 

in the United States and its territories. 

CMS uses the county level for purposes 

of determining the number and type of 

providers and facilities, based on time 

and distance, that an MA organization 

must contract with to ensure there is 

adequate access to Part A and B services 

for beneficiaries. The minimum number, 

specialty type, and time and distance 

requirements are codified at 

§ 422.116(d) and (e). CMS’s 

longstanding policy and interpretation 

of existing network adequacy 

regulations uses the term ‘‘county’’ to 

mean the areas designated by the 

Census Bureau as the primary political 

and administrative division of States. 

The Census Bureau also considers 

certain geographic areas as countyequivalents. County-equivalents 

include, but are not limited to, 

boroughs, certain designated cities, 

parishes, municipalities and the District 

of Columbia. CMS uses the Census 

Bureau’s designation of counties and 

county-equivalents in establishing 

network adequacy standards to ensure 

consistency in the application of CMS’ 

network adequacy requirements across 

the country. 

For purposes of network adequacy, 

CMS is proposing to codify its 

longstanding policy of treating county 

equivalents the same as counties for 

network adequacy purposes by defining 

‘‘county’’ in § 422.116. In § 422.116, we 

propose to create a new (a)(1) and 

redesignate the current (a)(1) through 

(a)(4) as (a)(2) through (a)(5). We further 

propose to define ‘‘county’’ in new (a)(1) 

as ‘‘the primary political and 

administrative division of most States 

and includes functionally equivalent 

divisions called ‘‘county equivalents’’ as 

recognized by the United States Census 

Bureau (for economic census 

purposes)’’. Note that we have also 

proposed to modify the definition of 

service area in § 422.2 in C–E of this 

section to incorporate the proposed 

definition of ‘‘county’’ in 

§ 422.116(a)(1). 

2. Limiting Exception Request 

Rationales 

Under its authority to set standards to 

implement and carry out the MA statute 

(in section 1856(b)(1) of the Act), CMS 

codified network adequacy standards at 

§ 422.116 under the final rule, 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 (85 FR 33796), hereinafter 

referred to as the June 2020 final rule. 

CMS has also adopted specific access 

requirements in §§ 422.100(b), 422.112, 

422.113 and 422.114 to ensure that MA 

enrollees in various types of MA plans 

have access to covered services. 

In the June 2020 final rule, we 

codified regulations allowing MA 

organizations to submit exceptions to 

the network adequacy standards in 

§ 422.116, including, the circumstances 

under which an MA organization may 

request an exception (§ 422.116(f)(1)) 

and the factors that CMS considers 

when evaluating an MA organization’s 

request for an exception 

(§ 422.116(f)(2)), including examples of 

how it would be applied. We indicated 

that we would interpret the regulation 

such that the MA plan would have to 

contract with telehealth providers, 

mobile providers, or providers outside 

the time and distance standards, but 

accessible to most enrollees (or 

consistent with the local pattern of 

care), in order for the MA plan to 

request an exception by CMS (85 FR 

33858). 

Currently, subregulatory guidance, the 

Medicare Advantage and Section 1876 

Cost Plan Network Adequacy 

Guidance,157 indicates that 

organizations may request exceptions 

utilizing the following valid rationales: 

• Provider is no longer practicing (for 

example, deceased, retired). 


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• Provider does not provide services 

at the office/facility address listed in the 

supply file. 

• Provider does not provide services 

in the specialty type listed in the supply 

file, and for which this exception is 

being requested. 

• Provider has opted out of Medicare. 

• Provider does not contract with any 

organizations or contracts exclusively 

with another organization. 

• Sanctioned provider on List of 

Excluded Individuals and Entities. 

• Provider is at capacity and is not 

accepting new patients. 

• Other: Use of Original Medicare 

telehealth providers, mobile providers, 

specific patterns of care in a community 

We have explained in our Medicare 

Advantage and Section 1876 Cost Plan 

Network Adequacy Guidance, that 

while the time and distance standards 

vary by county and specialty type, and 

are generally attainable across the 

country, there are unique instances 

where a given county’s supply of 

providers/facilities is such that an 

organization would not be able to meet 

the network adequacy criteria. The 

exceptions process allows MA 

organizations to provide evidence to 

CMS when the health care market 

landscape has changed or is not 

reflected in the current CMS network 

adequacy criteria. The organization 

must include conclusive evidence in its 

exception request that the CMS network 

adequacy criteria cannot be met because 

of changes to the availability of 

providers/facilities, resulting in 

insufficient supply. 

Per § 422.116(f)(1)(i), an MA plan may 

request an exception to network 

adequacy criteria when both of the 

following occur: (A) certain providers or 

facilities listed in the Provider Supply 

file are not available for the MA plan to 

meet the network adequacy criteria for 

a given county and specialty type; and 

(B) the MA plan has contracted with 

other providers and facilities who are 

located beyond the limits in the time 

and distance criteria, but are available 

and accessible to most enrollees, 

consistent with the local pattern of care. 

As part of CMS’s evaluation of MA 

networks using § 422.116, MA 

organizations must first submit their 

Health Service Delivery (HSD) tables, 

containing all their network providers, 

to CMS. CMS processes and reviews the 

network submissions against our 

established regulatory standards 

through use of an automated system 

located in the Health Plan Management 

Systems (HPMS) network management 

module. This automated module within 

HPMS evaluates the networks based on 

CMS’ current network time and distance 

standards. Once the evaluation is 

complete, CMS, through HPMS, 

provides MA organizations with an 

Automated Criteria Check (ACC) report. 

The ACC report contains CMS’s 

determination of whether the standards 

in § 422.116 have been met or not met, 

and the report displays where the MA 

organization’s specific county/specialty 

combinations, within the given service 

area, are passing and failing those 

standards. MA organizations may 

decide to submit an exception request 

for those parts of their network 

submission that were found to be failing 

our standards by using the exception 

request template found in the HPMS in 

accordance with CMS procedural 

instructions. 

After submission, CMS evaluates 

exception requests based on the criteria 

noted in § 422.116(f)(2), including 

whether the current access to providers 

and facilities is different than that in the 

HSD reference and provider supply files 

for the year (see § 422.116(a)(4)(ii)), 

whether the organization demonstrates 

that the network access is consistent 

with or better than the original Medicare 

pattern of care, and whether approval is 

in the best interest of the beneficiaries. 

The exception request is then either 

approved or denied. Once the CMS 

exception request review is complete, 

the results of CMS’s determination are 

uploaded into HPMS with an approval 

or denial status for MA organizations to 

view. If an exception request is denied, 

CMS will provide feedback with the 

exception disposition, including, as 

applicable, a sampling of the providers 

that CMS lists in the Provider Supply 

File that are available for the MA 

organization to contract with that would 

allow the organization to meet the time 

and distance standards for the specific 

county/specialty type. MA organizations 

must resubmit all previously approved 

exception requests whenever CMS 

requests an organization to upload its 

HSD tables to review an MA 

organization’s network(s). 

To continue to strengthen our 

network adequacy process and the rules 

related to exception requests to our 

network adequacy standards, CMS is 

proposing to codify our long-standing 

network adequacy exception request 

rationales, with one change. We propose 

to eliminate the rationale that the 

‘‘provider does not contract with any 

organization or contracts exclusively 

with another organization’’ (meaning 

MA organization) as a basis for an 

exception. It is important for CMS to 

ensure consistent and equitable access 

to healthcare services for all Medicare 

Advantage enrollees. In removing this 

rationale, CMS aims to limit the reasons 

that an organization could be able to bypass the established network adequacy 

criteria for a given specialty/county and 

provide greater incentives for MA 

organizations to establish contracts with 

providers that are located within our 

established time and distance standards. 

Therefore, CMS is proposing to codify 

the following as valid rationales when 

an MA plan submits substantial and 

credible evidence, in the form and 

manner requested by CMS, to 

demonstrate that an exception request 

under § 422.116(f)(1)(i) should be 

considered: 

• Provider is no longer practicing (for 

example, deceased, retired). 

• Provider does not provide services 

at the office or facility address listed in 

the Provider Supply file in paragraph 

(a)(4)(ii) of this section. 

• Provider does not provide services 

for the specialty type listed in the 

Provider Supply file in paragraph 

(a)(4)(ii) of this section. 

• Provider has opted out of Medicare 

(in compliance with § 422.204(b)(4)). 

• Provider is a sanctioned provider 

on the List of Excluded Individuals and 

Entities (in compliance with § 422.204); 

or provider is on the CMS preclusion 

list (in compliance with § 422.222); 

• Provider is at capacity and is not 

accepting new patients. 

One of the listed rationales may be 

used to explain the reason that an MA 

plan has failed to demonstrate that its 

network meets the minimum 

requirements of § 422.116(a) through (e) 

but MA organizations should provide 

CMS with as fulsome of an explanation 

as possible, including supporting 

documentation, regarding why an 

exception should be granted under the 

standards in § 422.116(f). 

Our current subregulatory guidance 

states that CMS considers certain 

exception rationales under an ‘‘other’’ 

category. Currently, the ‘‘other’’ category 

permits organizations to request an 

exception for ‘‘provider does not 

contract with any organization’’, ‘‘the 

provider has the potential to cause 

beneficiary harm’’, and ‘‘the provider is 

inappropriately credentialed.’’ CMS is 

proposing to eliminate the ‘‘other’’ 

category and eliminate the exception 

rationale of ‘‘provider does not contract 

with any organization,’’ as described 

above. CMS is also eliminating 

‘‘provider has the potential to cause 

beneficiary harm’’ because this 

exception rationale is already covered 

under CMS’ evaluation of any 

exception, which includes ensuring the 

exception is in the best interest of the 

beneficiary as noted in 

§ 422.116(f)(2)(iii). Finally, CMS is 

retaining the last exception currently 


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under ‘‘other’’ in guidance. This 

exception ‘‘the provider is not properly 

credentialed’’ is being incorporated 

under the proposed exception rationale 

of provider does not provide services for 

the specialty type listed in the Provider 

Supply file. 

Our current subregulatory guidance 

also describes as exception rationales 

factors such as use of Original Medicare 

telehealth providers, mobile providers, 

and specific patterns of care in a 

community. When CMS evaluates these 

exception rationales, we consider 

whether network access is consistent 

with or better than the Traditional 

Medicare pattern of care and whether 

approval of an exception is in the best 

interest of beneficiaries, under 

§ 422.116(f)(2). These factors may be 

relevant to demonstrate that network 

access is consistent with or better than 

the Traditional Medicare pattern of care 

(§ 422.116(f)(2)(ii)) or that approval of 

the exception is in the best interests of 

beneficiaries (§ 422.116(f)(2)(iii)). Our 

guidance states that for organizations 

using Traditional Medicare telehealth 

providers, services must meet the 

requirements for ‘‘telehealth services’’ 

under section 1834(m) of the Act (for 

example, provider types, eligible 

originating sites, geography, and 

currently approved list of Medicare 

telehealth services), as well as the 

requirements for ‘‘communication 

technology-based services’’ not subject 

to the section 1834(m) limitations (brief 

communication technology-based 

service/virtual check-in, remote 

evaluation of pre-recorded patient 

information, and inter-professional 

internet consultation). The MA 

organization must demonstrate that it 

meets all applicable requirements. Our 

guidance also states that if an MA 

organization uses mobile providers (for 

example, mobile x-ray suppliers, 

orthotics and prosthetics mobile units), 

they must be qualified and furnish 

services through scheduled 

appointments. In addition, 

organizations requesting an exception 

using the ‘‘pattern of care’’ rationale 

described in § 422.116(f)(2)(ii) are 

required to providesubstantial and 

credible evidence that shows that the 

supply of providers/facilities is 

insufficient, as well as the reason that 

the MA organization does not contract 

with the available providers/facilities 

within the time and distance. The MA 

organization must show that the pattern 

of care in the area is unique and can 

demonstrate their contracted network is 

consistent with or better than the 

Original Medicare pattern of care. CMS 

will consider an MA organization’s 

reason for not contracting with an 

available provider/facility if such a 

contract is not in the best interest of the 

beneficiaries in the applicable service 

area. 

We note that, as we have indicated in 

our subregulatory guidance, CMS will 

not accept an organization’s assertion 

that it cannot meet current CMS 

network adequacy criteria because of an 

‘‘inability to contract,’’ meaning they 

could not successfully negotiate and 

establish a contract with a provider/ 

facility. The non-interference provision 

at section 1854(a)(6)(B)(iii) of the Act 

states that the Secretary may not require 

any MA organization to contract with a 

particular hospital, physician, or other 

entity or individual to furnish items and 

services or require a particular price 

structure for payment under such a 

contract. As such, we are not assuming 

the role of arbitrator or judge regarding 

the bona fides of contract negotiations 

between an MA organization and 

available providers or facilities. 

CMS notes that with these proposals 

we are codifying long-standing rules 

related to network adequacy exception 

request rationales, with one change to 

eliminate the rationale that a ‘‘provider 

does not contract with any organization 

or contracts exclusively with another 

organization’’; therefore, we do not 

believe there is any additional 

paperwork burden to be considered. We 

welcome comment on these proposals, 

including the exhaustive list of 

exception request rationales proposed 

here, and whether there are additional 

rationales to consider that are in the best 

interest of beneficiaries. In addition, we 

are soliciting comment on potential 

unintended consequences from this 

proposal, including potential changes in 

the provider landscape, that could limit 

plan choice and/or availability in 

certain areas of the country. 

3. Plan Benefit Package Level Reviews 

Finally, CMS is considering whether 

conducting network adequacy reviews 

at the MA plan benefit package level 

would provide greater assurances 

regarding the adequacy of an MA 

organization’s network at the more 

discrete, plan level service area. Our 

current practice is to conduct network 

adequacy reviews of an MA 

organization’s network at the contract 

level, by county type. Reviewing the 

plan-level network may result in a more 

accurate portrayal of an enrollee’s 

experience since, for example, while an 

MA organization’s contract may exceed 

CMS’s minimum provider number 

requirements some providers and 

facilities that participate in a contract’s 

network may not be available to 

enrollees in a particular plan under that 

contract. This situation could therefore 

result in some MA contracts satisfying 

current network adequacy requirements, 

but an individual plan not satisfying 

current network adequacy requirements, 

resulting in a beneficiary having access 

to an inadequate number of providers in 

a given plan. We note that the CMS 

network adequacy time and distance 

standards in § 422.116 would not 

change but would instead be applied at 

the plan benefit package level. 

In the June 2020 final rule, CMS 

indicated in preamble that we conduct 

network adequacy reviews at the 

contract level, meaning we evaluate the 

adequacy of the MA organization’s 

network across all the plan benefit 

packages within the contract for the 

plan types as defined in § 422.2 offered 

for that contract; we do not separately 

or singularly evaluate the network of a 

specific plan benefit package. We 

indicated at the time that conducting 

network reviews at the contract level 

allowed us to consider the broadest 

availability of contracted providers and 

facilities for an MA organization while 

also providing administrative efficiency 

for both MA organizations and CMS. 

While this is still our current practice, 

we are considering whether network 

evaluations at the plan benefit package 

level, for active contracts only, would be 

more appropriate to help CMS ensure 

more consistent and thorough oversight 

of MA provider networks. 

We point out that CMS already has 

the authority to conduct plan benefit 

package level reviews based on our 

current regulatory language. Section 

422.116(a)(1)(i) requires that a networkbased MA plan as described in § 422.2, 

but not including MSA plans, must 

demonstrate that it has an adequate 

contracted provider network that is 

sufficient to provide access to covered 

services in accordance with access 

standards. We solicit comment on this 

potential change in methodology and 

the impact on the counties served by 

MA organizations, including any 

considerations for rural counties, and 

whether there could be additional ways 

for CMS to strengthen our evaluation of 

an adequate network for MA 

organizations, specifically individual 

plans within a contract. We also solicit 

comment on the effort required by MA 

organizations to submit network data at 

the individual plan benefit package 

level. In addition, we solicit comment 

on whether SNP PBPs, as part of 

product offerings within a contract, offer 

limited network options that meet our 

standards or contract with the same 

provider network as non-SNP PBPs 

under the same contract. If CMS chooses 


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158https://www.commonwealthfund.org/ 

publications/2023/feb/challenges-choosingmedicare-coverage-views-insurance-brokers-agents. 

to review active contracts at the plan 

benefit package level, we will indicate 

that change by updating the associated 

Paperwork Reduction Act (PRA) CMS– 

10636 forms, where we can seek public 

comment on proposed collections of 

information. 

O. Promoting Informed Choice—Expand 

Agent and Broker Requirements 

Regarding Medicare Savings Programs, 

Extra Help, and Medigap (§§ 422.2274 

and 423.2274) 

Sections 1852(c) and 1860D–4(a) of 

the Act require MA organizations and 

Part D sponsors to provide certain 

information to current MA and Part D 

plan (PDP) enrollees concerning MA 

plan and PDP benefits, coverage, plan 

rules, and other information that could 

inform potential enrollment changes. 

Additionally, section 1851(h)(4) 

requires MA organizations to conform to 

fair marketing standards in relation to 

marketing activities for MA plans, 

including standards that CMS may 

establish pursuant to section 1856. 

Likewise, section 1860D–1(b)(1)(B)(vi) 

of the Act extends these fair marketing 

standard requirements to Part D 

sponsors. These statutory provisions 

provide CMS the authority to 

implement regulatory requirements on 

MA organizations and Part D sponsors 

to ensure plan benefits and cost sharing 

information are discussed with 

beneficiaries to ensure they have an 

accurate picture of their enrollment 

options and help them make informed 

decisions when considering their health 

care coverage. We note that such 

requirements are also consistent with 

CMS’s own statutory obligation, at 

section 1851(d) of the Act, to 

disseminate information to current and 

prospective Medicare beneficiaries on 

coverage options, including information 

comparing MA plans’ premiums and 

cost sharing, to promote informed 

decision-making. Section 1860D–1(c) of 

the Act specifies corresponding 

dissemination requirements for current 

and prospective Part D eligible 

individuals regarding PDP comparisons. 

As described 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 (88 FR 22120), 

hereinafter referred to as the April 2023 

final rule, CMS listened to a 

considerable number of marketing and 

enrollment audio calls between agents 

and brokers and beneficiaries (both 

current and prospective beneficiaries). 

Many of these calls indicated that agents 

and brokers failed to ask pertinent 

questions to help a beneficiary enroll in 

a plan that best fits their health care 

needs. During our review, we repeatedly 

heard instances in which agents only 

reviewed the beneficiary’s health care 

providers and prescription drugs with 

them, which likely is not sufficient 

information for a beneficiary to consider 

when determining which health care 

option might best fit their needs. Other 

examples we heard included agents 

failing to ask the beneficiary if they had 

a preferred primary care provider or 

specialist, failing to confirm whether or 

not the preferred provider was in the 

plan’s network, failing to discuss what 

pharmacies are in-network, as well as 

failing to ask if the beneficiary preferred 

copays or coinsurance, or preferred 

lower monthly premiums, or slightly 

higher monthly premiums as a trade-off 

for lower out of pocket costs for 

appointments, as an example. Before 

enrolling a beneficiary in an MA, MA– 

PD, or Part D plan, in addition to 

discussing topics like the beneficiary’s 

health care providers, prescription 

drugs, copays, coinsurance, monthly 

premiums, and out of pocket costs prior 

to enrolling a beneficiary in an MA, 

MA–PD, or Part D plan, agents and 

brokers should also discuss costs of 

other healthcare services, plan benefits, 

and the beneficiary’s specific health 

needs. Covering these topics with each 

beneficiary prior to their enrollment in 

a new plan, as discussed in the April 

2023 final rule, helps ensure the 

beneficiary is enrolling into a plan that 

best meets their needs. 

Based on these considerations, CMS 

finalized a new paragraph (c)(12) of 

§§ 422.2274 and 423.2274 in the April 

2023 final rule, which defined a CMSdeveloped list of topics that MA 

organizations and Part D sponsors must 

ensure agents and brokers of first tier, 

downstream, and related entities (FDRs) 

that represent the MA organizations and 

Part D sponsors discuss with 

beneficiaries during the marketing and 

sale of an MA or MA–PD plan or PDP 

and prior to their enrollment in a new 

plan. Since the finalization of 

§§ 422.2274(c)(12) and 423.2274(c)(12), 

as part of our monitoring and oversight 

of the MA program, we have listened to 

and evaluated marketing and enrollment 

audio calls to understand the 

effectiveness of the new rule’s 

implementation. As part of our 

monitoring and review efforts, we 

proactively evaluate the issues we 

uncover and consider appropriate 

revisions to our rules that may help 

improve the beneficiary experience so 

they have a more accurate picture of 

their enrollment options as they pertain 

to making an MA or Part D enrollment 

decision and can make more informed 

health care choices. For instance, after 

reviewing audio calls, we noticed gaps 

in information provided to beneficiaries 

surrounding low-income subsidy (LIS) 

eligibility and Medicare Savings 

Programs (MSPs) that would be 

beneficial to make an informed 

enrollment choice. We have also 

received feedback during meetings with 

State Health Insurance Assistance 

Program (SHIP) counselors who 

expressed concerns with beneficiaries 

not fully understanding how enrollment 

into an MA or MA–PD plan can impact 

future availability of Medicare 

Supplement Insurance (Medigap) 

coverage. In addition, a Commonwealth 

Fund study involving agents and 

brokers found that beneficiaries who 

work with agents and brokers are often 

unaware of their guaranteed issue (GI) 

rights or the rules around underwriting 

with Medigap when switching from an 

MA plan to traditional Medicare, which 

can lead to significant confusion.158 We 

believe expanding upon the CMSdeveloped lists provided at 

§§ 422.2274(c)(12) and 423.2274(c)(12) 

to require this additional information 

will help beneficiaries better understand 

how their health care choice will 

address their individual needs. 

Sections 422.2274(c)(12) and 

423.2274(c)(12) require that MA 

organizations and Part D sponsors, as 

part of their oversight of their FDRs, 

ensure that agents and brokers operating 

on their behalf discuss a specified list of 

questions and topics with a potential 

beneficiary prior to completing an 

enrollment. In the following paragraphs, 

we propose adding three topics, LIS, 

MSP, and Medigap, to that list. In 

addition, we are proposing to update 

§§ 422.2274(c)(12) and 423.2274(c)(12) 

to also provide that agents and brokers 

pause to ask whether a beneficiary has 

any outstanding questions prior to an 

enrollment decision being made. And 

finally, we are proposing corresponding 

technical changes to §§ 422.2274(c)(12) 

and 423.2274(c)(12) to put the newly 

proposed and existing requirements into 

a more organized and reader-friendly 

format. 

1. Low-Income Subsidy (LIS) 

CMS regulations at § 423.773 define 

the requirements for full and partial LIS 

Part D eligible individuals in 

accordance with section 1860D–14 of 

the Act as amended by section 11404 of 


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159https://www.cms.gov/medicare/enrollmentrenewal/part-d-plans/low-income-subsidy/ 

eligibility-low-income-subsidy. 

160See section 1144(c)(3) of the SSA. Under 

Federal law, when an individual applies for LIS 

benefits and consents, their information is 

transmitted to the state to initiate an application of 

the individual for MSP benefits. 

161United States Centers for Medicare & Medicaid 

Services, Medicare Savings Programs, https://

www.medicare.gov/basics/costs/help/medicaresavings-programs. 

162See section 1882(s)(3)(A) of the SSA. 

163The MA ‘‘trial right’’ period and other Federal 

Medigap GI rights are described in CMS’ Choosing 

the Inflation Reduction Act of 2022 

(IRA). This recent statutory change 

provided the full LIS for those who only 

qualified for the partial LIS prior to 

2024, which means an increased 

number of beneficiaries are eligible to 

receive ‘‘Extra Help’’ paying their 

monthly premium, yearly deductible, 

and prescription drug cost sharing. In 

the April 2023 final rule, in accordance 

with the IRA of 2022, CMS amended 

§ 423.773(b)(1) to require that, to be 

eligible for the full LIS for plan years 

beginning on or after January 1, 2024, an 

individual must have an income below 

150 percent of the Federal poverty line 

(FPL). To coordinate with this change, 

CMS also amended § 423.773(d) to 

specify that the requirement that an 

individual have an income below 150 

percent of the FPL to be eligible for the 

partial LIS applies only to plan years 

beginning before January 1, 2024, 

effectively sunsetting the partial LIS 

after 2023 and significantly increasing 

the number of beneficiaries who can get 

full help paying for their prescription 

drugs. 

Since the new requirements at 

§ 423.773 went into effect, as of January 

1, 2024, LIS eligibility criteria have 

increased the number of beneficiaries 

who can get full extra help paying for 

their premium, deductible, and 

prescription drugs costs. We believe that 

agents and brokers have a responsibility 

to inform a beneficiary of the new LIS 

eligibility criteria prior to their 

enrollment in an MA, MA–PD or Part D 

plan because being LIS eligible may 

impact a beneficiary’s premium, 

coinsurance, deductibles, and other 

costs. Therefore, we are proposing to 

modify §§ 422.2274(c)(12) and 

423.2274(c)(12) to include LIS eligibility 

criteria as an additional topic that 

agents and brokers must address before 

enrolling a beneficiary in an MA, MA– 

PD or Part D plan, so that all eligible 

beneficiaries can make fully informed 

enrollment decisions including 

decisions about applying to receive 

extra help in paying for this important 

coverage. Specifically, at 

§ 422.2274(c)(12), we propose to add 

the phrase ‘‘low-income subsidy 

eligibility (that is, at a minimum, 

explaining the eligibility requirements 

as defined at § 423.773 and the effect on 

drug costs if eligible, and identifying 

resources where they can get more 

information on applying)’’ to the 

existing list of required topics, before 

the phrase ‘‘costs of health care 

services.’’ At § 423.2274(c)(12), we 

propose to add the phrase ‘‘low-income 

subsidy eligibility (that is, at a 

minimum, explaining the eligibility as 

defined at § 423.773 and the effect on 

drug costs if eligible, and providing 

resources to the beneficiary about where 

they can go for more information on 

applying)’’ to the existing list of 

required topics, before the term 

‘‘premiums.’’ We believe that agents and 

brokers should provide this additional 

information since it may impact a 

beneficiary’s enrollment decision. As 

part of this proposed requirement, 

agents and brokers would be required to 

identify resources to the beneficiary 

about where the beneficiary can obtain 

more information regarding their 

potential eligibility for LIS or get help 

applying for LIS. For example, agents 

and brokers could offer existing CMS 

links and resources that provide 

guidance on eligibility on LIS and how 

a beneficiary can apply for LIS.159 This 

information may be an essential factor 

in a beneficiary’s decision to enroll in 

an MA, MA–PD or Part D plan, or 

Medicare Savings Programs (MSP). 

We also are proposing to add a 

requirement that agents and brokers 

review, prior to a beneficiary’s 

enrollment in an MA, MA–PD, or Part 

D plan, existing resources for state 

programs, including MSPs, that can 

help with health care costs. MSPs are 

Medicaid eligibility groups through 

which states cover Medicare premiums 

and, in many cases, cost sharing for 

eligible beneficiaries. This proposed 

requirement to discuss resources for 

state programs is a relevant addition 

alongside the proposed LIS eligibility 

requirement because most LIS-eligible 

beneficiaries may find other information 

about additional help with health care 

costs useful for making an informed 

decision about their health care 

coverage and enrollment options. Most 

beneficiaries eligible for LIS are also 

eligible for MSPs. With this new 

requirement, we would not expect 

agents and brokers to provide all 

necessary details for a beneficiary to 

make a final decision about applying for 

help from a state program.160 However, 

we would expect agents and brokers to 

explain that state programs that can 

help with premiums and cost sharing 

costs exist, and additionally expect 

agents and brokers would be equipped 

to offer contact information for the state 

as a resource for a beneficiary to receive 

more information about their options 

and eligibility for those states where the 

agent is licensed and appointed to sell, 

as required under §§ 422.2274(b)(1) and 

423.2274(b)(1). We would encourage 

agents and brokers to use CMSdeveloped materials to communicate 

important information to beneficiaries 

about relevant state programs. For 

instance, the CMS MSP web page 

describes Federal limits for each MSP 

and contains a link to easily contact 

state representatives.161 Specifically, we 

propose to create §§ 422.2274(c)(12)(v) 

and 423.2274(c)(12)(iv) to add the 

phrase ‘‘resources for state programs, 

including Medicare Savings Programs,’’ 

to the existing list of required topics. 

2. Medicare Supplemental Insurance 

(Medigap) 

In addition to LIS eligibility and 

resources for state programs, to further 

promote informed decision-making for 

beneficiaries, we are proposing that 

agents and brokers be required to 

discuss with beneficiaries the potential 

impact enrolling into a MA plan can 

have on Medigap Federal guaranteed 

issue rights. If a beneficiary chooses to 

enroll in Traditional Medicare with a 

Medigap plan during their Medigap 

Open Enrollment Period OEP) or in 

certain limited situations outside of 

their Medigap OEP, they have Medigap 

protections or Medigap Federal GI 

rights. In situations where the Medigap 

Federal GI rights apply, the Medigap 

insurance company must sell the 

beneficiary a Medigap policy, must 

cover all of the beneficiary’s preexisting 

health conditions, and cannot charge 

more for a Medigap policy because of 

the beneficiary’s past or present health 

problems.162

Over the years, CMS has received 

feedback from congressional offices, 

SHIPs and Medicare beneficiary 

advocacy organizations from or on 

behalf of Medicare beneficiaries who 

have enrolled into an MA plan without 

understanding the impact doing so can 

have on selecting a Medigap plan in the 

future. For example, we have heard 

about beneficiaries who, based on 

personal preference, have decided to 

enroll into Traditional Medicare with a 

Medigap plan after having previously 

enrolled in an MA plan, only to find 

that they are unable to do so, or that the 

cost outside of the MA ‘‘trial right’’ 

periods, which are some of the 

situations where the Medigap Federal GI 

rights apply,163 is not affordable. To 


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a Medigap Policy: A Guide to Health Insurance for 

People with Medicare. See section 3 of the Centers 

for Medicare & Medicaid Services, Choosing a 

Medigap Policy: A Guide to Health Insurance for 

People with Medicare, https://www.medicare.gov/

publications/02110-medigap-guide-healthinsurance.pdf. 

164See sections 1882(s)(3)(b)(v) and (vi) of the 

SSA. Under Federal law, this trial right period may 

be extended for up to 2 years in certain 

circumstances involving involuntary termination of 

the beneficiary’s MA plan coverage within the first 

12 months of enrollment. See section 1882(s)(3)(F) 

of the SSA. 

165Centers for Medicare & Medicaid Services and 

National Association of Insurance Commissioners, 

Choosing a Medigap Policy: A Guide to Health 

Insurance for People with Medicare, https://

www.medicare.gov/publications/02110-medigapguide-health-insurance.pdf. 

166United States Senate Committee on Finance, 

Deceptive Marketing Practice Flourish in Medicare 

Advantage, page 9. [https://

www.finance.senate.gov/imo/media/doc/Deceptive

%20Marketing%20Practices%20Flourish%20in

%20Medicare%20Advantage.pdf] (November 2, 

2022). 

167Riaz Ali, Aimee Cicchiello, Morgan Hanger, 

Lesley Hellow, Ken Williams, Gretchen Jacobson, 

How Agents Influence Medicare Beneficiaries’ Plan 

Choices, (Commonwealth Fund, [April 21, 2021]) 

[https://www.commonwealthfund.org/publications/

fund-reports/2021/apr/how-agents-influencemedicare-beneficiaries-plan-choices] (August 21, 

2024). 

better ensure that beneficiaries are 

equipped with pertinent information on 

the impact on their Medigap Federal GI 

rights when making an MA plan 

enrollment decision, at 

§ 422.2274(c)(12)(vi), we are proposing 

to require than an agent or broker 

convey information regarding Medigap 

Federal GI rights to beneficiaries who 

are enrolling into an MA plan when first 

eligible for Medicare, or those who are 

dropping a Medigap plan to enroll into 

an MA plan for the first time. 

Specifically, at 

§ 422.2274(c)(12)(vi)(A)(1), we are 

proposing to require that an agent or 

broker convey that the beneficiary 

generally has a 12-month period under 

Federal law in which they can disenroll 

from the MA plan and switch back to 

Traditional Medicare and purchase a 

Medigap plan with Medigap Federal GI 

rights.164 For purposes of this 

discussion and proposal, we refer to 

both of these situations that trigger 

Medigap Federal GI rights as ‘‘MA ‘trial 

right’ periods.’’ As noted previously, 

when seeking to purchase a Medigap 

plan in a situation where the Medigap 

Federal GI rights apply, the insurance 

company selling it must cover all 

preexisting health conditions and can’t 

charge a beneficiary more for a Medigap 

policy because of past or present health 

problems. It is therefore important that 

beneficiaries have information about the 

impact on their Medigap Federal GI 

rights when making an MA plan 

enrollment decision. 

Under this proposal, at 

§ 422.2274(c)(12)(vi)(A)(2), the agent or 

broker would also be required to explain 

that, in general, if a beneficiary enrolled 

in an MA plan decided to switch back 

to Traditional Medicare outside of their 

MA ‘‘trial right’’ period, they are not 

guaranteed the right under Federal law 

to purchase a Medigap plan and if they 

do, the insurance company can take all 

previous and preexisting health 

conditions into consideration, resulting 

in the beneficiary likely paying more. In 

addition, under this proposal, we would 

encourage agents and brokers to use and 

refer a beneficiary to beneficiaryfocused CMS materials, like the annual 

Choosing a Medigap Policy: A Guide to 

Health Insurance for People with 

Medicare, which includes information 

on MA ‘‘trial right’’ periods and Federal 

Medigap GI rights.165 We note that 

while this proposal focuses on the 

Medigap Federal GI rights for 

beneficiaries in their MA ‘‘trial right’’ 

periods, agents and brokers would be 

encouraged to also provide information 

on state laws regarding Medigap GI 

rights for those states where the agent or 

broker is licensed and appointed to sell, 

as proposed under 

§ 422.2274(c)(12)(vi)(B), as states can, 

and many do, offer additional GI rights. 

We note that, unlike the first two 

proposed topics discussed (LIS and 

MSP), the proposed requirement for 

agents and brokers to discuss the 

Medigap Federal GI rights for 

beneficiaries in their MA ‘‘trial right’’ 

periods would only be applicable to the 

sale an MA or MA–PD plan and would 

not be applicable to PDP sales. 

3. Pausing for Additional Questions 

We are also proposing to add a 

requirement that agents and brokers 

pause to ask the beneficiary, prior to 

finalizing the enrollment, whether the 

beneficiary has any remaining questions 

related to the beneficiary’s enrollment 

in a plan. During our review of audio 

calls between agents and brokers and 

beneficiaries, CMS has learned that 

agents and brokers do not always ask 

beneficiaries if they have any questions 

about the topics discussed or other 

related questions that may not have 

been mentioned. Agents and brokers are 

required to cover a number of different 

topics prior to enrolling a beneficiary 

into an MA, MA–PD or Part D plan. The 

required topics are designed to ensure 

the beneficiary is fully informed about 

the choice they are making. The breadth 

of information that is presented during 

enrollment appointments may be 

intimidating to a beneficiary, and CMS 

has observed indications of this in our 

review of audio calls. We noticed some 

beneficiaries were confused regarding 

whether their current coverage would be 

ending, which was not addressed by the 

agent prior to the enrollment being 

completed. In other calls, some 

beneficiaries appear to be confused 

about plan networks and if their 

provider is part of a plan’s network. We 

observed that a beneficiary may not feel 

comfortable or empowered to ask 

questions of an agent and broker 

unprompted. Additionally, mirroring 

what we heard in our review of audio 

calls, a recent United States Senate 

Committee on Finance report found that 

beneficiaries were sometimes confused 

because they enrolled into a new plan 

but were unaware that their provider 

was not in the plan’s network until they 

started using the new plan.166 In 

addition, a Commonwealth Fund study 

reported that one significant complexity 

for beneficiaries when choosing a plan 

is that they ‘‘make decisions that result 

in trade-offs they are not likely to fully 

understand.’’ 167 Therefore, we believe 

that requiring agents and brokers to 

pause to proactively ask beneficiaries 

about whether they have questions 

about the topics the agent and broker 

has discussed, or other questions related 

to enrollment in an MA, MA–PD or Part 

D plan will further promote informed 

decision-making among beneficiaries. 

We understand that many agents and 

brokers may do this already as a routine 

part of sales calls with beneficiaries. 

However, through our observations, we 

have seen enough instances where this 

does not happen effectively or at all, 

with a detrimental impact to the 

beneficiary who is then enrolled in a 

plan that does not best fit their health 

needs in part because they did not have 

a clear opportunity to ask questions, 

that we believe this proposed regulation 

is appropriate. Specifically, at 

§ 422.2274(c)(12), we propose to delete 

the ‘‘and’’ that comes before ‘‘specific 

health care needs’’ and create 

§ 422.2274(c)(12)(xi) to say, ‘‘conclude 

by pausing to ask if the beneficiary has 

any questions about the topics 

discussed in paragraph (c)(12) of this 

section or others, including those 

related to enrollment.’’ At 

§ 423.2274(c)(12), we propose to delete 

the ‘‘and’’ that comes before ‘‘services 

and incentives’’ and create 

§ 423.2274(c)(12)(vii) to say, ‘‘conclude 

by pausing to ask if the beneficiary has 

any questions about the topics 

discussed in paragraph (c)(12) of this 

section or others, including those 

related to enrollment.’’ Similar to the 

rationale described in the April 2023 


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168MedPAC (2023). ‘‘Report to Congress: 

Medicare and the Health Care Delivery System’’ 

June 2023. 

169Rollins, Eric (2023). ‘‘Standardized benefits in 

Medicare Advantage plans’’ MedPAC presentation, 

September 7, 2023. Downloaded from https://

www.medpac.gov/document/standardized-benefitsin-medicare-advantage-plans/ on September 11, 

2024. 

170Lieberman, Steven M., Loren Adler, Erin 

Trish, Joseph Antos, John Bertko, Paul Ginsburg 

(2018). ‘‘A Proposal to Enhance Competition and 

Reform Bidding in the Medicare Advantage 

Program.’’ 

171Pearson, Joshua and Rayna Stoycheva (2023). 

‘‘Medicare vs. Medicare Advantage: Trends and 

Challenges for Older Adults in Navigating Medicare 

Enrollment Decisions’’ Harkin Institute Report, 

October 2023, Number 23–2. 

172Taylor, Erin Audrey, Katherine Grace Carman, 

Andrea Lopez, Ashley N. Muchow, Parisa Roshan, 

Christine Eibner (2016). ‘‘Consumer 

Decisionmaking in the Health Care Marketplace.’’ 

Rand Research Report. 

173 Johnson. Eric, Ran Hassin, Tom Baker, Allison 

T. Bajger, Galen Treuer (2013). ‘‘Can Consumers 

Make Affordable Care Affordable? The Value of 

Choice Architecture.’’ PLoS ONE 8(12): e81521. 

174Abaluck, Jason and Jonathan Gruber (2011). 

‘‘Choice Inconsistencies among the Elderly: 

Evidence from Plan Choice in the Medicare Part D 

Program.’’ American Economic Review 101 (June 

2011): 1180–1210. 

175 Kling, Jeffrey, Sendhil Mullainathan, Eldar 

Shafir, Lee Vermeulen, Marian Wrobel (2012). 

‘‘Comparison Friction: Experimental Evidence from 

Medicare Drug Plans’’ The Quarterly Journal of 

Economics, Volume 127, Issue 1, February 2012, 

Pages 199–235. 

176Bhargava, S., Loewenstein, G. & Sydnor, J. 

(2017). Choose to lose: Health plan choices from a 

menu with dominated options. Quarterly Journal of 

Economics, 132(3), 1319–1372. 

177Bundorf, M. Kate, and Helena Szrek, ‘‘Choice 

Set Size and Decision Making: The Case of 

Medicare Part D Prescription Drug Plans,’’ Medical 

Decision Making, Vol. 30, No. 5, September– 

October 2010, pp. 582–593. 

178McWilliams JM, Afendulis CC, McGuire TG, 

Landon BE (2011). Complex Medicare advantage 

choices may overwhelm seniors—especially those 

with impaired decision making. Health Affairs 

Sep;30(9):1786–94. 

179Ericson, Keith (2014). ‘‘Consumer Inertia and 

Firm Pricing in the Medicare Part D Prescription 

final rule regarding §§ 422.2274(c)(12) 

and 423.2274(c)(12), if agents and 

brokers are required to cover the topics 

described in this proposal with 

beneficiaries prior to their enrollment, 

we expect that beneficiaries will be 

more knowledgeable about their 

Medicare options as well as the MA, 

MA–PD or Part D plans that are 

available to them together with the 

associated costs, and thus better 

prepared to make an informed choice. 

Agents and brokers are uniquely 

positioned to help beneficiaries select 

and enroll in a Medicare option that 

best fits their health care needs. Given 

the complex nature of Traditional 

Medicare, and the Parts C and D 

programs, we believe our proposed 

additional topics to discuss with a 

beneficiary, together with the proposed 

requirement to pause to ask if the 

beneficiary has any additional questions 

is critical to ensuring beneficiaries make 

fully informed enrollment decisions. 

4. Technical Changes 

We are also proposing technical 

changes to §§ 422.2274(c)(12) and 

423.2274(c)(12) to put the newly 

proposed and existing requirements into 

a more organized and reader-friendly 

format. Specifically, we are proposing to 

create §§ 422.2274(c)(12)(i) through (iii) 

and (vii) through (x) and 

423.2274(c)(12)(i) and (ii) and (vi) and 

(vii) to list the requirements 

individually instead of in paragraph 

form. We are then proposing to include 

those three new topics (LIS, MSP, 

Medigap), as discussed in this proposal, 

to be included as new 

§§ 422.2274(c)(12)(iv) through (vi), 

respectively. The two newly proposed 

topics (LIS, MSP) under 

§ 423.2274(c)(12) will be included as 

new §§ 423.2274(c)(12)(iii) 

and 423.2274(c)(12)(iv), respectively. 

Finally, the newly proposed 

requirement that an agent pause to ask 

the beneficiary if they have any 

questions would be included as new 

paragraphs § 422.2274(c)(12)(xi) and 

423.2274(c)(12)(vii). 

In addition, we are also proposing a 

minor technical correction to 

§ 422.2274(c)(12) to delete the 

redundant word ‘‘regarding’’ before 

‘‘pharmacies.’’ 

We expect these proposed changes to 

impose a negligible amount of 

additional information collection 

requirements (that is, reporting, 

recordkeeping, or third-party disclosure 

requirements) on impacted 

organizations in terms of the updating of 

their existing processes related to their 

oversight of FDRs to ensure agents and 

brokers communicate information about 

LIS, MSPs, and Medigap to beneficiaries 

and discuss the beneficiary’s 

enrollment-related questions before they 

enroll in a new plan. Including these 

proposed requirements under 

§§ 422.2274(c)(12) and 423.2274(c)(12) 

requires four additional items for agents 

and brokers to cover, but they can be 

covered during calls or appointments 

they already have prior to a 

beneficiary’s enrollment in an MA, MA– 

PD or Part D plan. We are not proposing 

that agents and brokers use standardized 

language to review LIS eligibility, 

resources for state programs, or 

Medigap, nor that they must schedule a 

separate appointment to meet this 

requirement. We do not expect these 

proposed requirements to require 

significant additional training for agents 

and brokers or MA organizations. Also, 

adding beneficiary questions as a 

required topic further clarifies the 

purpose of paragraph (c)(12), which is 

that FDRs that represent the MA 

organization must fully discuss a 

beneficiary’s needs in a health plan 

prior to enrollment. 

Furthermore, we believe this burden 

does not need to be submitted to the 

Office of Management and Budget 

(OMB) based on the currently approved 

control number 0938–0753 (CMS–R– 

267), which states the following in 

relation to § 422.2274: ‘‘The time, effort, 

and financial resources necessary to 

comply with the following collection of 

information requirements would be 

incurred by persons during the normal 

course of their activities and, therefore, 

should be considered usual and 

customary business practices. 

Consequently, the information 

collection requirements and burden are 

exempt (5 CFR 1320.3(b)(2)) from the 

requirements of the PRA.’’ 

Consequently, there is no need for 

review by OMB under the authority of 

the PRA of 1995 (44 U.S.C. 3501 et seq.). 

In addition, this provision is not 

expected to have any economic impact 

on the Medicare Trust Fund. 

We welcome comment on our 

proposed amendments to 

§§ 422.2274(c)(12) and 423.2274(c)(12), 

and we thank commenters in advance 

for their feedback. 

P. Format Medicare Advantage (MA) 

Organizations’ Provider Directories for 

Medicare Plan Finder (§§ 422.111 and 

422.2265) 

CMS continues to take steps to 

improve the usability of Medicare Plan 

Finder, strengthen oversight of plan 

marketing materials, and require agents 

and programs share information 

intended to ensure enrollees are able to 

make informed choices about their 

Medicare, Medicare Advantage, and Part 

D coverage. Policymakers, MedPAC, and 

other researchers have raised concerns 

about the increase in the number of 

plans having a detrimental impact on 

choice and competition, leading to 

confusion and difficulty for 

beneficiaries as they compare plans and 

choose an option.168 169 170 171 Plans 

differ on multiple dimensions, 

including covered services, premiums, 

service-specific cost-sharing, and 

provider networks, and evidence shows 

that too much choice complexity, 

particularly on financial dimensions, 

hinders beneficiaries’ ability choose a 

plan that best meets their 

needs.172 173 174 175 176 Moreover, even 

modest increases in the number of 

options can further impair consumer 

choice,177 reduce enrollment,178 and 

can lead to premium increases.179 On 


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Drug Insurance Exchange.’’ American Economic 

Journal: Economic Policy, February 2014, 6(1): 38– 

64. 

180https://www.whitehouse.gov/briefing-room/ 

presidential-actions/2021/07/09/executive-orderon-promoting-competition-in-the-americaneconomy/. 

the other hand, facilitating plan 

comparison shopping through reduced 

complexity can lead to improved plan 

selection and more effective 

competition. CMS continues to consider 

opportunities to support consumer 

choice as part of broader efforts to 

strengthen the MA program. 

To reiterate, it is important that, when 

Medicare beneficiaries are exploring 

their options, they have the information 

they need to make the best choice for 

their needs. When deciding between 

Traditional Medicare and MA, one key 

factor is that CMS requires MA plans to 

have a provider network. Provider 

directories allow beneficiaries and their 

caregivers to weigh Medicare options 

and decide if a certain provider network 

meets their needs, such as to check if 

their existing physicians are in the 

network, what other contracted 

providers are available to deliver other 

medical care, amongst a myriad of other 

factors. As the landscape of MA has 

evolved, CMS has implemented rules, 

and made modifications to those rules, 

to ensure that people with Medicare and 

the trusted individuals they rely on to 

aid in their decision making, have the 

information necessary to make decisions 

about their Medicare options, including 

many of the required materials and 

disclaimers found under § 422.2267(e), 

as well as the requirements under 

§ 422.2265(b) and (c) that certain 

content and materials are made 

available on the MA organization’s 

website. 

We believe that additional regulatory 

changes are now required to allow the 

agency to ensure that CMS is leveraging 

technological methods to streamline the 

beneficiary experience so that 

beneficiaries have the information they 

need to make the best choice for their 

needs, including MA provider 

directories. CMS proposes to make 

changes that will allow MA provider 

directories to be viewable on Medicare 

Plan Finder (MPF) for the 2026 Annual 

Enrollment Period (AEP). In addition, to 

ensure the accuracy of the data being 

submitted, we propose to require MA 

organizations to attest to the accuracy of 

the provider directory data being 

submitted. In total, we believe these 

proposed changes will result in an 

advancement of informed beneficiary 

choice and transparency benefitting 

people with Medicare, while also 

promoting robust competition within 

the Medicare market, aligned with the 

President’s July 2021 Executive Order 

on Promoting Competition in the 

American Economy.180

Section 1851(d)(1) of the Act states 

that the Secretary shall provide for 

activities to broadly disseminate 

information to current and prospective 

Medicare beneficiaries on MA plan 

coverage options to promote an active, 

informed selection among such options. 

Specifically, per section 

1851(d)(2)(A)(ii) of the Act, at least 15 

days before the beginning of each 

annual, coordinated election period, the 

Secretary shall provide MA-eligible 

individuals with a list identifying the 

MA plans that are (or will be) available 

to residents of the areas in which they 

reside, including certain information 

concerning such MA plans, presented in 

a comparative form. This information is 

described in section 1851(d)(4) of the 

Act and includes plan benefits, 

premiums, service area, quality and 

performance indicators, and 

supplemental benefits. Section 

1851(d)(4)(A)(vii) of the Act, also sets 

forth that information comparing MA 

plan options must specifically include 

the extent to which an enrollee may 

select among in-network providers and 

the types of providers participating in 

the plan’s network. In addition, section 

1851(d)(7) of the Act provides that MA 

organizations shall provide CMS with 

such information about the MA 

organization and each MA plan that it 

offers, as may be required for the 

preparation of the information described 

in section 1851(d)(2)(A) of the Act. 

Section 1852(d)(1) of the Act requires 

access to services and states that MA 

organizations offering an MA plan may 

select the providers from whom the 

benefits under the plan are provided if 

the MA organization complies with 

several conditions including access to 

appropriate providers (section 

1852(d)(1)(D) of the Act). Regulations at 

§ 422.116(a)(1) further clarify this 

obligation by providing network 

adequacy access requirements for MA 

plans. Specifically, network-based MA 

plans must demonstrate an adequate 

contracted provider network that is 

sufficient to provide access to covered 

services in accordance with access 

standards at section 1852(d)(1) of the 

Act. Additionally, MA organizations 

must attest that they have an adequate 

network for access and availability of a 

specific provider or facility type that 

CMS does not independently evaluate 

in a given year (§ 422.116(a)(1)(i)). 

Section 1852(c)(1)(C) of the Act 

further requires MA plans to disclose 

the number, mix, and distribution of 

plan providers. Based on this statutory 

requirement, CMS has implemented 

regulations at § 422.111(b)(3)(i) that 

require MA plans disclose the number, 

mix, and distribution (addresses) of 

providers from whom enrollees may 

reasonably be expected to obtain 

services; each provider’s cultural and 

linguistic capabilities, including 

languages (including American Sign 

Language) offered by the provider or a 

skilled medical interpreter at the 

provider’s office. Together, these 

regulations establish the overarching 

requirements for the MA provider 

directory content. 

The Interoperability and Patient 

Access final rule (85 FR 25633) became 

effective on June 30, 2020, and requires 

MA organizations, beginning on January 

1, 2021, to make standardized 

information about their provider 

networks accessible through a Provider 

Directory Application Programming 

Interface (API) that conforms with CMS/ 

HHS technical standards at § 422.119(c). 

The Interoperability and Patient Access 

final rule, also included in § 422.120 

that the Provider Directory API must be 

accessible via a public-facing digital 

endpoint on the MA organization’s 

website to ensure that this information 

is viewable and accessible to 

prospective and current enrollees as 

well as third-party application 

developers, who can create services to 

help patients find providers for care and 

treatment. Requirements at § 422.120 

further specify that the MA plan’s 

directory of contracted providers must 

be complete and accurate and include 

names, addresses, phone number, 

specialties and (as applicable for MA– 

PDs) the number of pharmacies in the 

network and mix of pharmacy types. 

MA organizations must ensure this 

information is updated within 30 

calendar days of receiving provider 

directory information or updates. 

Provider Directory API technical 

standards were also modified for more 

specificity in the Interoperability and 

Patient Access final rule (89 FR 8974) 

which was effective on February 8, 

2024. 

To comply with the previously 

referenced statutory and regulatory 

requirements, CMS has taken a twoprong approach. CMS implemented 

MPF as an online resource where 

current and prospective beneficiaries 

and their caregivers can explore their 

Medicare coverage options. On MPF, 

individuals can look for Medicare 

Advantage and Part D plans and make 

informed choices based on the 


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information provided, such as plan 

benefits, premiums, deductibles, and 

star ratings to name a few. While CMS 

has implemented improvements to MPF 

over the years to incorporate more data, 

MPF does not currently include 

information on MA plans’ contracted 

provider networks, such as the specific 

providers with which a plan contracts 

and from which an enrollee may receive 

health care services. In addition to 

creating MPF, CMS has implemented 

regulations that require each MA 

organization to disclose or otherwise 

make available certain required 

information, including hardcopy and 

electronic provider directory 

requirements under § 422.2267(e)(11), as 

well as a searchable online directory as 

required under § 422.2265(b)(4). 

Through these requirements, the 

provider directory information is made 

available to prospective and existing 

MA plan enrollees so they may view 

MA plans’ in-network providers and 

other relevant information as required 

under § 422.111(b)(3)(i), such as the 

provider’s specialty, location, and 

cultural and linguistic capabilities in 

the MA organization’s online PDF or 

printable version (§ 422.2265(b)(3)). 

While this schema meets the statutory 

requirements using plan websites and 

MPF, in their current form to make 

enrollment decisions, is cumbersome. 

When prospective and current MA plan 

enrollees use provider directories and 

MPF today to help them make 

enrollment decisions, they must toggle 

between different MA plan websites and 

MPF to find and review the plans’ 

provider directories to determine if the 

providers they currently see are in the 

various plans’ networks, as well as 

review the information provided by 

MPF. 

In order to simplify and streamline 

the Medicare beneficiary experience 

when shopping for an MA plan, we are 

proposing to expand on the existing 

requirements applicable to MA 

organizations regarding their provider 

directories at a newly established 

§ 422.111(m) to include a new provision 

to require MA organizations to submit 

or otherwise make available their plan 

provider directory data, that is the 

requirements found under 

§ 422.111(b)(3)(i), available to CMS/HHS 

in a format, manner, and timeframe that 

CMS/HHS determines in order for the 

MA organization’s provider directory 

data to be integrated online by CMS/ 

HHS for display on MPF. In addition, 

we are proposing to include a 

requirement that MA organization 

update the provider directory data that 

is submitted or otherwise make 

available to CMS for this purpose within 

30 days of receiving information from 

providers of a change, which mirrors the 

current standard for updating provider 

directory data found under 

§ 422.2267(e)(11). 

As previously noted, CMS has 

adopted regulations to implement 

requirements applicable to MA 

organizations for publicly accessible, 

accurate, and timely provider directory 

information through the Interoperability 

and Patient Access final rule. The 

provider directory requirements of the 

Interoperability and Patient Access final 

rule aide in establishing the groundwork 

for MA plan provider directory 

information to be readily accessible for 

MA organizations to submit to CMS for 

inclusion on MPF. 

While publishing MA plan provider 

directory information on MPF is an 

important step, doing so in a way that 

ensures that beneficiaries are accessing 

accurate information, is a critical part of 

improving the Medicare beneficiary 

experience while using MPF. In order to 

enhance the accuracy of the information 

that will be published online by CMS/ 

HHS on MPF, we are also proposing to 

add new subparagraph § 422.111(m)(4), 

which would require an MA 

organization attest that the information 

being submitted to CMS/HHS under this 

new requirement is accurate and 

consistent with data submitted to 

comply with CMS’s MA network 

adequacy requirements at 

§ 422.116(a)(1)(i). Given the significance 

of the choice that a beneficiary is 

making based on the information 

provided by the MA organization, it is 

critical to include this attestation 

requirement to ensure that the 

information being submitted by MA 

organizations is accurate and consistent 

with data submitted to comply with 

CMS’s MA network adequacy criteria 

when it is submitted to CMS for the 

purpose of incorporating it into MPF. It 

is imperative that MA organizations’ 

provider directory data remains 

consistent with the contracted provider 

network data submitted to CMS in order 

to provide sufficient access to covered 

services. 

Furthermore, with regard to the 

attestation, because provider directory 

data changes so frequently, we 

understand that it may be impractical to 

require an attestation with each update. 

CMS is considering how to best balance 

the need for accountability of accurate 

data with the burden of the attestation. 

If this proposed rule is finalized, we 

will operationalize it by publishing a 

provider directory data submissions 

guide that would include operational 

guidance, which will explain how the 

attestation process will be implemented. 

We currently envision an attestation 

when the data is first made available to 

CMS, and then a yearly attestation 

thereafter. We ask commenters for 

feedback on the attestation process, 

including the intervals for the 

attestation. 

It is important to highlight that our 

proposals at new proposed § 422.111(m) 

would closely mirror the provider 

directory submission requirements at 45 

CFR 156.230(c) for Qualified Health 

Plan (QHP) issuers on the federally 

facilitated Exchange (FFE). Currently, 45 

CFR 156.230(c) requires issuers seeking 

certification to offer QHPs on the FFE to 

submit provider and formulary 

information in a format and manner and 

at times determined by HHS/CMS to 

HHS/CMS. This information is then 

used to feed HealthCare.gov and its 

Direct Enrollment partner websites to 

allow consumers to filter available 

QHPs based on the providers and drugs 

covered by those QHPs. As discussed 

previously, we are proposing to take a 

substantially similar approach for MA 

organizations. Given that many health 

insurance carriers offer both MA plans 

an QHPs, we believe this is a reasonable 

approach. We note that these proposals 

apply only to MA organizations (not 

Part D sponsors). Additionally, to 

operationalize the proposed Format 

Provider Directories for Medicare Plan 

Finder provision at § 422.111(m), we 

anticipate that 2025 plan year directory 

data will need to be made available 

online for testing purposes in the 

summer of 2025, and 2026 plan year 

data would need to be available online 

on October 1, 2026. We therefore 

propose an applicability date of July 1, 

2025, for this provision. 

Additionally, this proposed rule fits 

within one of the important pillars of 

CMS’s Strategic Plan to ‘‘Advance 

Equity’’ as it will help ensure that 

provider directory information, 

including a provider’s cultural and 

linguistic capabilities (as CMS currently 

requires for MA provider directories), 

which are especially important to 

underserved communities, will be more 

readily available to people with 

Medicare when considering their 

Medicare choices. Ultimately, we 

believe our proposal would streamline 

the MPF online platform and promote 

informed beneficiary choice and market 

competition. 

We welcome comment on our 

proposed creation of § 422.111(m) and 

we thank commenters in advance for 

their feedback. 


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Q. Promoting Informed Choice— 

Enhancing Review of Marketing & 

Communications (§§ 422.2260 and 

423.2260) 

Over the past decade and a half, as the 

MA and Part D marketing and 

communications landscape has changed 

and evolved, CMS has modified our 

regulations, including our marketing 

and communications standards, 

definitions, and submission 

requirements, to strengthen and 

enhance CMS’ ability to monitor and 

oversee MA organizations and Part D 

sponsors, including the different 

modalities and distribution channels 

used by the MA and Part D industry to 

market and communicate information 

about product offerings. However, 

additional regulatory changes are 

required for CMS to keep pace with the 

ever-changing MA and Part D marketing 

and communications landscape. 

Section 1851(h)(1) of the Act prohibits 

MA organizations from distributing 

marketing materials and application 

forms to (or for the use of) MA eligible 

individuals unless the document has 

been submitted to the Secretary at least 

45 days (10 days for certain materials) 

prior to use and the document has not 

been disapproved. Additionally, section 

1851(h)(4) requires MA organizations to 

conform to fair marketing standards in 

relation to marketing activities for MA 

plans, including standards that CMS 

may establish pursuant to section 1856. 

While the Act requires the submission 

and review of the marketing materials 

and applications, it does not provide a 

definition of what materials fall under 

the term marketing. Section 1856(b)(1) 

of the Act authorizes CMS to adopt, 

through rulemaking, standards that are 

consistent with, implement and carry 

out the Medicare Advantage statutory 

provisions. 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) for 

approval of marketing material and 

application forms for Part D plan 

sponsors. Section 1860D–4(l) of the Act 

applies certain prohibitions under 

section 1851(h) to Part D sponsors in the 

same manner as such provisions apply 

to MA organizations. 

With regard to 1876 cost plans, 

similar to section 1851(h) of the Act, 

section 1876(c)(3)(C) of the Act focuses 

on CMS’s review and approval process 

for marketing materials rather than 

providing an exhaustive list of the types 

of materials that are considered 

marketing or promotional information 

and materials. Specifically, section 

1876(c)(3)(C) of the Act states that no 

brochures, application forms, or other 

promotional or informational material 

may be distributed by cost plans to (or 

for the use of) individuals eligible to 

enroll with the organization under this 

section unless (i) at least 45 days before 

its distribution, the organization has 

submitted the material to the Secretary 

for review; and (ii) the Secretary has not 

disapproved the distribution of the 

material. Consistent with these statutory 

requirements, CMS reviews all such 

materials submitted by section 1876 cost 

plans and disapproves such materials 

upon determination that the material is 

materially inaccurate or misleading or 

otherwise makes a material 

misrepresentation. As part of the 

implementation of section 1876(c)(3)(C) 

of the Act, the regulation governing 

marketing activities for cost plans at 42 

CFR 417.428(a) refers to the MA 

marketing procedures and requirements 

set forth in 42 CFR part 422, subpart V. 

Consequently, pursuant to CMS’s 

authority in section 1876(c)(3)(C) to 

regulate section 1876 cost plan 

marketing, as well as the authority in 

section 1876(i)(3)(D) to specify new 

section 1876 contract terms, and as 

established in § 417.428, the proposed 

changes regarding MA and Part D 

marketing discussed in this section 

would also apply to section 1876 cost 

plans. 

Under current regulations at 

§§ 422.2260 and 423.2260, 

communications ‘‘means activities and 

use of materials created or administered 

by the MA Organization or Part D 

sponsor or any downstream entity to 

provide information to current and 

prospective enrollees. Marketing is a 

subset of communications.’’ In 

regulations at §§ 422.2260 and 423.2260, 

marketing ‘‘means communications 

materials and activities that meet both 

the following standards for intent and 

content.’’ The intent standard, as 

defined under §§ 422.2260(1)(i) and 

423.2260(1)(i), are communications 

materials and activities that intend, ‘‘as 

determined under paragraph (1)(ii) of 

this definition, to do any of the 

following’’ to ‘‘(A) draw a beneficiary’s 

attention to a MA or Part D plan or 

plans, (B) influence a beneficiary’s 

decision-making process when making a 

MA or Part D plan selection, (C) 

influence a beneficiary’s decision to stay 

enrolled in a plan (that is, retentionbased marketing).’’ In addition, 

§§ 422.2260(1)(ii) and 423.2260(1)(ii) 

state that, ‘‘In evaluating the intent of an 

activity or material, CMS will consider 

objective information including, but not 

limited to, the audience of the activity 

or material, other information 

communicated by the activity or 

material, timing, and other context of 

the activity or material and is not 

limited to the MA organization’s or Part 

D sponsor’s stated intent.’’ 

The current content standards, as 

defined under §§ 422.2260(2) and 

423.2260(2), provide that to meet the 

regulatory definition of marketing, 

communications materials and activities 

must also include or address content 

regarding (i) the plan’s benefits, benefits 

structure, premiums or cost sharing, (ii) 

measuring or ranking standards (for 

example, Star Ratings or plan 

comparisons), or (iii), for MA plans 

only, rewards and incentives as defined 

under § 422.134(a). Communications 

that do not meet both of these regulatory 

intent and content standards do not fall 

within the current regulatory definition 

of marketing, and as a result, such 

materials are not subject to the specific 

submission, review, and distribution 

requirements for marketing materials 

provided in §§ 422.2261(b) and 

423.2261(b). 

Prior to 2018, for over two decades, 

CMS had a broad regulatory definition 

of marketing at §§ 422.2260 and 

423.2260 which stated that marketing 

materials include any informational 

materials targeted to Medicare 

beneficiaries which: promote the MA 

organization or Part D plan, or any MA 

plan offered by the MA organization, 

inform Medicare beneficiaries that they 

may enroll, or remain enrolled in, an 

MA or Part D plan offered by the MA 

or Part D organization, explain the 

benefits of enrollment in an MA or Part 

D plan, or rules that apply to enrollees, 

explain how Medicare services are 

covered under an MA or Part D plan, 

including conditions that apply to such 

coverage and may include, but are not 

limited to a broad list of materials 

defined in the regulation (from general 

audience materials such as general 

circulation brochures, newspapers, 

magazines, television, radio, billboards, 

yellow pages, or the internet to letters to 

members about contractual changes; 

changes in providers, premiums, 

benefits, plan procedures etc.). The 

marketing materials definition excluded 

certain ad hoc enrollee communications 

materials that were targeted to current 

enrollees, were customized or limited to 

a subset of enrollees or apply to a 

specific situation, did not include 

information about the plan’s benefit 

structure; and applied to a specific 

situation or cover claims processing or 

other operational issues. This broad 

definition of marketing meant that MA 

organizations and Part D sponsors 

prospectively submitted to CMS for 

review the majority of beneficiary-facing 

materials they used. 


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181 83 FR 16627. 

182 83 FR 16626. 

183 83 FR 16626–83 FR 16627. 

184 83 FR 16626. 

185 83 FR 16626. 

186 83 FR 16627. 

187 83 FR 16627. 

188 https://www.cms.gov/Medicare/Health-Plans/ 

ManagedCareMarketing/Downloads/CY2019- 

Medicare-Communications-and-MarketingGuidelines_Updated-090518.pdf. 

189 88 FR 22240. 

190 88 FR 22253. 

In the ‘‘Medicare Program; Contract 

Year 2019 Policy and Technical 

Changes to the Medicare Advantage, 

Medicare Cost Plan, Medicare Fee-forService, the Medicare Prescription Drug 

Benefit Programs, and the PACE 

Program’’ final rule, published in the 

Federal Register on April 16, 2018, (83 

FR 16440), hereinafter referred to as the 

‘‘April 2018 final rule,’’ CMS included 

and defined ‘‘communication 

requirements’’ in the scope of part 422, 

subpart V, and part 423, subpart V, and 

amended §§ 422.2260 and 423.2260 to 

add a new definition of ‘‘marketing’’ 

alongside the original definition of 

‘‘marketing materials.’’ With this 

change, marketing became a subset of 

communications and was defined as 

‘‘activities and use of materials that 

meet the following: conducted by the 

MA organization or downstream 

entities, intended to draw a 

beneficiary’s attention to a MA plan or 

plans, intended to influence a 

beneficiary’s decision-making process 

when selecting a MA plan for 

enrollment or deciding to stay enrolled 

in a plan (that is, retention-based 

marketing).’’ CMS also revised the list of 

marketing materials excluded from 

submission to CMS and subject to 

review, to encompass all materials that 

‘‘do not include information about the 

plan’s benefit structure or cost sharing 

or do not include information about 

measuring or ranking standards (for 

example, star ratings).’’ 181 In creating 

this delineation, only those 

communications that met the new 

definition of marketing and marketing 

materials were subject to more stringent 

requirements, including the need for 

submission to and review by CMS. 

To better focus CMS’s review of such 

marketing materials, the April 2018 

final rule aimed to narrow the scope of 

materials that fell under the marketing 

definition to those that had the highest 

likelihood of misleading or confusing 

beneficiaries into making an adverse 

enrollment decision. Such materials 

were subject to the more stringent 

marketing requirements, including 

submission requirements, hence 

allowing CMS the ability to focus on 

materials most likely to negatively 

impact a beneficiary’s enrollment 

experience. In this April 2018 final rule, 

CMS reasoned that certain materials in 

existence at the time, that fell within the 

definition of marketing materials, 

‘‘pose[d] little to no threat of a 

detrimental enrollment decision,’’ 182

and would be unlikely to lead a 

beneficiary to request additional 

information or make an enrollment 

decision, such as those that did not 

mention certain types of content such as 

benefit structure, cost sharing, 

measuring or ranking standards.183

Thus, CMS excluded from the new 

definition of marketing materials those 

materials that did not contain such 

information and aimed to focus the 

material submission requirements ‘‘on 

materials and activities that aim to 

influence enrollment decisions’’ 184 and 

‘‘that present the greatest likelihood for 

a negative beneficiary experience.’’ 185

In addition, the April 2018 final rule 

said that materials that included certain 

content tied to the updated definition of 

marketing, such as information about 

the plan’s benefit structure or cost 

sharing or information about measuring 

or ranking standards (for example, star 

ratings), but did not otherwise meet the 

marketing definition, would not be 

considered marketing.186 As the final 

rule explained, ‘‘the goal of this 

proposal is to exclude member 

communications that convey important 

factual information that is not intended 

to influence the enrollee’s decision to 

make a plan selection or to stay enrolled 

in their current plan.’’ 187 An example of 

this in practice would be a postcard 

mailed to current enrollees letting them 

know that they can obtain a flu shot at 

zero cost sharing, which prior to the 

April 2018 final rule, would have been 

considered a marketing material and 

submitted to CMS for review even 

though it was likely to have had little 

impact on an enrollment decision. 

In September 2018, CMS further 

clarified these definitions, in section 

20.1 of the Medicare Communications & 

Marketing Guidelines (MCMG). The 

MCMG provided examples to 

distinguish between marketing and 

communications and explained that 

CMS would evaluate the intent and 

content of all marketing activities and 

materials to ensure they met the 

definition of marketing. The MCMG 

clarified that marketing activities and 

materials are distinguished from 

communications activities and materials 

based on these standards.188 These 

standards were subsequently codified 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, 

published in the Federal Register on 

January 19, 2021 (86 FR 5864), 

hereinafter known as the ‘‘January 2021 

final rule.’’ In addition to codifying the 

guidance from the MCMG, CMS further 

revised and streamlined the 

communications and marketing 

definitions and the intent and content 

standards. At that time, our objective in 

updating the intent and content 

standards of the marketing definition, 

and the stricter submission and review 

requirements associated with these new, 

revised standards, was to enable CMS to 

more effectively focus CMS’s review on 

the materials that were most likely to 

impact a beneficiary’s enrollment 

decision. 

In 2023, CMS continued to pursue 

rulemaking to further strengthen 

beneficiary protections to address the 

growth of misleading advertising 

practices, including by those entities 

that circumvent our rules by carefully 

crafting advertisements with messaging 

that by design, allowed these entities to 

avoid our requirements for submission 

to and approval by CMS prior to their 

use in the marketplace. 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), hereinafter referred to as 

the ‘‘April 2023 final rule,’’ CMS 

codified provisions that prohibit 

marketing ads from including the 

mention of benefits not available in a 

service area 189 and requiring third-party 

marketing organizations (TPMOs) to 

state the number of organizations and 

plans they represent in the service area 

in which they are marketing.190

Yet, even with these changes, CMS 

continues to see, through CMS 

monitoring efforts, marketing 

misrepresentation complaints from 

beneficiaries and outreach from 

stakeholders that we consider to be 

related to advertisements on television, 

mail, and the internet. For example, 

CMS has observed television ads that 

instill a sense of urgency combined with 

a narrative that leads the beneficiary to 

believe they are not receiving important 

benefits they are entitled to by touting 

the availability of information about 

Medicare options if the viewer calls a 


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Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 99435 

191 Complaints Tracking Module (CTM) 

Marketing Misrepresentation Reports from 2018 to 

2024. 

phone number. Yet, the information 

about Medicare options in such 

advertisements is described in such a 

broad, generic and non-specific manner 

that these advertisements are arguably 

considered communications rather than 

marketing under our current rules. 

These broad, generic and non-specific 

advertisements can potentially mislead 

and confuse beneficiaries. For example, 

advertisements positioned as an 

opportunity to review a beneficiary’s 

options, or their current plan benefits or 

possible changes to their current plan, 

may pull potential enrollees into the 

‘‘chain of enrollment,’’ even though the 

materials or the language used in the 

television advertisement are not 

considered to be marketing under our 

rules. Because these advertisements are 

so general and do not meet our current 

marketing definition, these are able to 

effectively circumvent CMS’s more 

stringent marketing requirements under 

which the materials would be subject to 

CMS’s review and approval prior to 

their use, or in the case of File and Use, 

as defined under §§ 422.2261(b)(3) and 

423.2261(b)(3), not be used until 5 days 

following their submission. 

As stated above, CMS is concerned 

that the current narrow definition of 

marketing has created a loophole that 

has been used by MA organizations, Part 

D sponsors and their downstream 

entities and resulted in the proliferation 

of misleading and confusing marketing 

practices that currently fall outside our 

scope of review. Specifically, since the 

time these rules that narrowed the 

definition of marketing were finalized, 

CMS has observed a shifting landscape 

of misleading marketing practices in 

MA and Part D, including television, 

web-based and direct mail 

advertisements that clearly attempt to 

draw a beneficiary’s attention to a plan 

or plans, or influence a beneficiary’s 

enrollment decisions, such as by 

alluding to potential plan or benefit 

changes, or touting ‘‘new’’ benefits or 

non-specific ‘‘Medicare options.’’ A 

common factor for such ads is that they 

encourage a beneficiary to call a 1–800 

number. As noted earlier, these ads, that 

do not mention or address any of the 

subjects listed in the content standard 

within CMS’s marketing regulations in 

§§ 422.2260 and 423.2260, such as plan 

benefits or ranking standards, do not 

technically meet the definition of 

marketing because these advertising 

practices use generic messaging that do 

not mention specific benefits and 

therefore do not require submission to 

CMS. However, such materials still 

include a call to attention, as described 

in the ‘‘Advertisement (Ad)’’ definition 

at §§ 422.2260 and 423.2260, like calling 

a 1–800 number for more information. 

Moreover, the ads initiate an enrollment 

trajectory by setting beneficiary 

expectations that the beneficiary will 

call a number and be presented with 

Medicare choice options, which 

invariably means Medicare Advantage 

plan choices since the TPMO that 

receives the calls may only be selling a 

select number of MA plans, which can 

then lead to a beneficiary making a 

Medicare Advantage plan enrollment 

decision. CMS has reviewed marketing 

misrepresentation complaints and 

listened to agent sales calls where a 

beneficiary contacts a 1–800 number to 

learn more information from an 

advertisement, only to be led to an 

enrollment into a plan that does not best 

meet their health care needs, ultimately 

resulting in a complaint to CMS. 

To further illustrate this type of 

communication ad, CMS has seen 

TPMO television ads which, without 

mentioning an MA plan by name, ask 

the viewer to call a toll-free number to 

find out whether the viewer’s Medicare 

plans will be changing and whether that 

change might include potential rising 

costs or changes to the provider 

networks. The ad will list a 1–800 

number and encourage the viewer to 

call to find out the answers to whether 

there have been any changes to their 

Medicare plan. Similarly, CMS has seen 

TPMO websites that appear and purport 

to be educational, providing information 

on what MA or Part D is and how it 

works, while not mentioning any 

particular benefits and thus, not falling 

into the narrower definition of 

marketing. Yet, the website will also 

include an opportunity to collect and 

share a beneficiary’s information with a 

third-party, in order to market MA or 

Part D plans to the beneficiary which 

leads to a beneficiary providing their 

consent to be contacted and likely 

marketed to. Unlike advertisements that 

meet the definition of marketing, these 

more generic advertisements do not 

mention specific plans or benefits, yet 

through tactics that can be misleading or 

confusing, encourage a beneficiary to 

contact a 1–800 number where they 

unknowingly step into a chain of 

enrollment they were likely not 

expecting. 

Coinciding with these concerning 

trends, CMS has seen a sharp increase 

in beneficiary complaints of marketing 

misrepresentation since the issuance of 

the April 2018 final rule that made 

changes to and narrowed the marketing 

definition. These complaints 

corroborate the concerns with the 

marketing practices described in the 

previous paragraphs. Marketing 

misrepresentation complaints rose from 

approximately 9,000 complaints in 2018 

to approximately 41,000 by 2021, a fourfold increase since 2018. While the 

volume of marketing misrepresentation 

complaints declined in 2022 to roughly 

36,000, the number of complaints was 

still over three times greater, at 

approximately 32,000 in 2023, than in 

2018.191 As noted earlier, many of these 

complaints detail beneficiaries’ negative 

enrollment experience after calling a 1– 

800 number based on an ad. In fact, 

through CMS monitoring efforts of agent 

sales beginning in 2022, CMS has 

reviewed a representative sample of 

over 400 agent sales calls and associated 

marketing misrepresentation complaints 

in the CTM. Of the calls CMS has 

reviewed to date, approximately 33% of 

the agent sales calls include 

beneficiaries mentioning that they saw 

an ad on television or received 

something in the mail which prompted 

them to call. Complaints by 

beneficiaries who called or were 

contacted by 1–800 numbers seen 

through an ad often detail the 

beneficiary having a negative 

enrollment experience and opting to 

change the enrollment that was 

transacted on the phone call. As 

examples, there are some beneficiary 

complaints where a beneficiary 

describes being unwittingly enrolled 

into a plan without their consent when 

they called for more information. Other 

beneficiaries describe receiving 

inaccurate information regarding the 

plan they were being switched into and 

later learning their providers were out of 

network. Yet, when CMS conducted 

further investigations into these ads, we 

found that many of the ads in question 

were not submitted to CMS as marketing 

materials, and generally would be 

considered to be communications that 

did not require submission to CMS 

under our narrower definition of 

marketing. 

As previously mentioned, because the 

ads in question were not submitted to 

CMS, it hampers our ability to 

determine an ad’s origin, and in the case 

of TPMO ads, what MA organizations or 

Part D sponsors are associated with the 

TPMO. Additionally, since these 

advertisements are not submitted to 

CMS, CMS is unable to review to 

confirm whether the advertisement 

contains any misleading information. 

CMS believes stronger oversight and 

collection of materials that can 

influence a beneficiary’s decision 

making will ensure that CMS can better 


khammond on DSK9W7S144PROD with PROPOSALS2
99436 Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 

192HPMS Marketing Review Module Reports. 

193 Jeannie Fuglesten Biniek, Alex Cottrill, Nolan 

Sroczynski, Meredith Freed, Tricia Neuman, Breeze 

Floyd, Laura Baum, and Erika Franklin Fowler, 

How Health Insurers and Brokers Are Marketing 

Medicare, (KFF, [September 20, 2023]) [https://

www.kff.org/report-section/how-health-insurersand-brokers-are-marketing-medicare-report/

#flooded-with-ads] (August 6th, 2024). 

194How Health Insurers and Brokers Are 

Marketing Medicare, (KFF, [September 20, 2023]) 

[https://www.kff.org/report-section/how-healthinsurers-and-brokers-are-marketing-medicarereport/#flooded-with-ads] (August 6th, 2024). 

195United States Senate Committee of Finance, 

Deceptive Marketing Practices Flourish in Medicare 

Advantage, page 6. https://www.finance.senate.gov/ 

imo/media/doc/Deceptive%20Marketing

%20Practices%20Flourish%20in%20Medicare

%20Advantage.pdf. 

196 Deceptive Marketing Practices Flourish in 

Medicare Advantage, https://www.finance.

senate.gov/imo/media/doc/Deceptive%20Marketing

%20Practices%20Flourish%20in%20Medicare

%20Advantage.pdf, page 11. 

197 Deceptive Marketing Practices Flourish in 

Medicare Advantage, https://www.finance.

senate.gov/imo/media/doc/Deceptive%20Marketing

%20Practices%20Flourish%20in%20Medicare

%20Advantage.pdf, page 11. 

protect beneficiaries against misleading, 

inaccurate or confusing marketing 

tactics, in addition to expediting our 

ability to more quickly act on noncompliant ads associated with 

beneficiary complaints. 

When CMS created the content and 

intent standards beginning with the 

April 2018 final rule, we did not foresee 

advertisements that did not, as an 

example, contain a plan’s benefits, 

benefits structure, premiums, or cost 

sharing, leading to negative enrollment 

experiences. At the time, the bulk of 

advertisements were being created by a 

single plan, rather than a TPMO 

representing multiple plans. As stated 

earlier, the statutory requirements under 

section 1851(h)(1) of the Act provide 

CMS with the authority to review and 

approve materials most likely to mislead 

or confuse beneficiaries and lead to a 

negative enrollment experience. 

However, since the April 2018 final 

rule, CMS has observed a shifting MA 

and Part D marketing landscape, which 

alongside growing marketing 

misrepresentation complaints and 

changing marketing trends and tactics, 

requires an updated marketing 

definition that can better target the 

materials that mislead or confuse 

beneficiaries into making an adverse 

enrollment decision. This includes 

advertisements which encourage a 

beneficiary to call to review their plan 

changes or gather information, and sets 

a trajectory that ultimately leads to 

beneficiaries being unwittingly enrolled 

in a new plan with negative 

consequences. To date, CMS continues 

to receive concerning complaints related 

to misleading and confusing 

advertisements and marketing tactics, 

which are resulting in negative 

beneficiary enrollment experience. 

To further emphasize the need to 

expand our oversight, in 2023, CMS 

disapproved roughly half of all 

television ads that were submitted by 

TPMOs to CMS for prospective 

review.192 This begs the question, if this 

is true for materials that are being 

submitted to and reviewed by CMS 

under the current regulatory definition 

of marketing, what is the state of those 

materials that are not being submitted 

because of the limitations on the scope 

of our existing regulation? As noted 

earlier, CMS has received many 

complaints where a beneficiary calls a 

1–800 number after viewing a TV ad 

and ends up being enrolled in a plan 

that results in adverse effects. According 

to a KFF report on the state of TV 

marketing activities, during the 2023 

open enrollment period (10/1/2022 to 

12/7/2022), English language Medicare 

ad airings totaled 643,852 with 86% or 

556,068 of these television ads 

advertising MA plans.193 The report 

cited that viewers of programs across 

the top 20 markets saw an average of 

between 4 to 6 ads per day, depending 

on the network affiliation, and regular 

viewers of specific TV programs could 

expect to see 6–8 ads per day.194 It is 

clear from this report that beneficiaries 

are inundated with TV ads. 

As previously mentioned, when CMS 

has investigated TV ads based on 

complaints or concerns expressed by 

advocacy organizations, the ads could 

not be found in the HPMS marketing 

module, the system used to collect and 

review marketing materials. The 

takeaway from this investigative work is 

that a number of TV ads, intended to 

draw a beneficiary’s attention to MA or 

Part D plans and to ultimately influence 

a beneficiary’s decision-making process 

when making a MA or Part D plan 

selection, were not submitted to CMS by 

the creator and MA and Part D plans 

associated with these ads determined 

that the ads were not marketing as 

defined under §§ 422.2260 and 

423.2260. CMS believes broader 

oversight of the ads beneficiaries are 

confronted with, even if the ads do not 

contain content on specific topics such 

as benefits, co-pays or star ratings, will 

provide additional protections against 

misleading marketing practices. In these 

proposals, CMS is seeking to expand 

oversight over the materials that plans, 

and their downstream entities, use in 

their marketing activities that intend to 

draw a beneficiary to a plan or influence 

a beneficiary’s enrollment decisions. 

CMS expects that this approach, if 

finalized, would provide CMS with 

greater insight into the shifting 

landscape of MA and Part D advertising 

and the materials that are outside of the 

scope of the materials currently 

submitted to CMS for review. 

Similar trends were also reported by 

State oversight agencies, as detailed in 

a 2022 report from the United States 

Senate Committee of Finance titled 

Deceptive Marketing Practices Flourish 

in Medicare Advantage. The report 

shares data from State insurance 

commissioners and State Health 

Insurance Assistance Programs (SHIPs), 

with most of these entities reporting a 

similar increase in complaints from 

2020 to 2021,195 the same timeframe 

wherein CMS first reported that 

beneficiary complaints had doubled. In 

the report, which included data from 14 

states, ‘‘ten states reported that mail 

advertisements were a source for 

complaints, nine states reported that 

robocalls and telemarketers were a 

source for complaints, and eight states 

reported that television advertisements 

were a source for complaints.’’ 196 As 

one of many examples that illustrate the 

misleading marketing beneficiaries 

experience, states reported complaints 

about mailers that would appear to be 

official Medicare notices and ‘‘serve the 

explicitly misleading purpose of 

prompting beneficiaries to ‘‘initiate 

contact,’’ so that MA marketing 

prohibitions can be circumvented.’’ 197

Based on these reports, alongside 

beneficiary complaints and CMS 

marketing oversight and review of agent 

sales calls, it appears that various 

entities, including TPMOs, have 

exploited the current content 

requirements of our marketing 

definition as a means of skirting CMS 

oversight, with detrimental effects for 

beneficiaries and the marketplace. 

CMS’s existing regulations at 

§§ 422.2261(c)(2) and 423.2261(c)(2) 

provide that CMS may collect certain 

non-marketing communications 

materials. However, these mechanisms 

appear to be insufficient to provide 

appropriate oversight of MA and Part D 

marketing activities under the 

circumstances outlined above because 

without the requirement for these 

materials to be submitted, CMS is 

typically only able to address 

concerning materials of this nature after 

a complaint or concern has been 

received. In order to proactively monitor 

these materials and more efficiently 

review potentially misleading marketing 

materials before they are seen by 

beneficiaries, we believe that amending 

CMS’s marketing regulations to allow 


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Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 99437 

198https://www.cms.gov/files/document/ 

medicare-communications-marketing-guidelines-2- 

9-2022.pdf.*COM028* 199https://www.cms.gov/files/document/ 

medicare-communications-marketing-guidelines-2- 

9-2022.pdf. 200 83 FR 16629. 

for a more comprehensive review of the 

materials used by MA organizations, 

Part D sponsors, and their TPMOs, to 

market MA and Part D plans is 

appropriate to ensure beneficiaries are 

protected. 

In light of the facts and circumstances 

set forth above, and in accordance with 

our statutory authority to review 

marketing materials and application 

forms, and to develop marketing 

standards under these sections, we are 

proposing to eliminate the content 

standard, as described in §§ 422.2260(2) 

and 423.2260(2) of the marketing 

definition, so that all communications 

materials and activities that meet the 

existing intent standard are considered 

marketing for purposes of CMS’s MA 

and Part D marketing and 

communications regulations. This 

proposed change would improve CMS 

oversight over the full scope of materials 

and activities that are intended to draw 

a beneficiary’s attention to one or more 

specific MA plans, Part D plans or other 

plans, influence a beneficiary’s 

decision-making process when making a 

MA or Part D plan selection or influence 

a beneficiary’s decision to stay enrolled 

in a plan. CMS expects that this broader 

level of oversight will further strengthen 

beneficiary protections against 

misleading or confusing marketing 

tactics so that CMS can better ensure 

that MA organizations, Part D sponsors 

and their downstream entities are not 

providing misleading, inaccurate, or 

confusing information to current or 

potential enrollees, or engaging in 

activities that could misrepresent the 

MA organization or Part D sponsor, in 

accordance with §§ 422.2262 and 

423.2262. By expanding CMS’s 

oversight of these materials, CMS can 

more readily review ads related to 

marketing misrepresentation complaints 

and quickly act on them, without 

concern over whether the material has 

been submitted. Additionally, 

submission of all materials that are 

intended to draw a beneficiary’s 

attention to a plan or influence a 

beneficiary’s decisions will also enable 

CMS to more readily address materials 

that are attempting evade CMS 

submission requirements while 

attempting to influence beneficiary 

enrollment decision making. Further, by 

ensuring these materials are included in 

CMS submission and review processes, 

CMS can more effectively, speedily and 

reliably detect problematic materials 

that seem to be designed to circumvent 

CMS’s existing submission requirements 

and may negatively impact a 

beneficiary’s enrollment experience. 

The MCMG provides a few scenarios 

to illustrate distinctions between 

communications or marketing materials 

under CMS’s current regulatory 

definitions of those two terms. One 

scenario provided in the MCMG 

discussed a flyer that reads, ‘‘Swell 

Health is now offering Medicare 

Advantage coverage in Nowhere 

County. Call us at 1–800–BE–SWELL for 

more information.’’ As the MCMG 

explains, under the current marketing 

definition, this flyer would not be 

considered a marketing material because 

it does not include specific plan 

benefits, benefits structure, ranking 

standards or any other element of the 

current content standard within the 

marketing definition.198 However, under 

the proposed update to the marketing 

definition, this material would be 

considered marketing because of its 

intent to draw a beneficiary’s attention 

to a plan or plans. Alternatively, the 

MCMG discusses a scenario where a 

letter is sent to current enrollees 

reminding them to get their flu shot. In 

the letter, it says that ‘‘Swell Health 

enrollees can get their flu shot for $0 

copay at a network pharmacy . . .’’ 199

Under the current definition of 

marketing, this material is not 

considered marketing as it does not 

meet the intent standard to ‘‘draw a 

beneficiary’s attention to a MA plan or 

plans, influence a beneficiary’s 

decision-making process when making a 

MA plan selection, or influence a 

beneficiary’s decision to stay enrolled in 

a plan (that is, retention-based 

marketing).’’ Instead, the material is 

solely intended to encourage current 

enrollees to get the flu shot. Therefore, 

under the proposed changes to the 

marketing definition, this material 

would remain a communications 

material. If the plan were to be 

advertising this, say through a flyer, this 

would change the intent and hence be 

considered a marketing material as the 

intent would be to draw a beneficiary’s 

attention to an MA plan through 

advertising their access to certain 

benefits. However, a material that is 

solely explaining benefits to a current 

enrollee for educational purposes would 

not be considered marketing under our 

proposed definition. 

In the April 2018 final rule, when 

updating the marketing and 

communications definitions, we 

finalized ‘‘an exclusion from marketing 

materials that provides that unless CMS 

provides otherwise, materials required 

under §§ 422.111 and 423.128 are not 

marketing materials.’’ 200 While CMS is 

proposing to expand the materials 

defined as marketing, CMS intends to 

retain the material designations for 

required materials listed under 

§§ 422.2267(e) and 423.2267(e) and 

continue excluding those materials 

required under §§ 422.111 and 423.128, 

that are defined as communications, 

from requirements to submit for CMS 

review, unless otherwise noted in our 

regulation. Where relevant, all required 

materials listed under §§ 422.2267(e) 

and 423.2267(e), CMS required 

materials and content, have been 

defined as either marketing or 

communications. Since these materials 

are required, CMS has a clear 

understanding of the intent behind each 

material and whether it should be 

designated as communications or 

marketing. Therefore, we are also 

proposing to reference in the marketing 

definition the exception for required 

materials specified in §§ 422.2267(e) 

and 423.2267(e), which will maintain 

the material designation as provided by 

CMS. Those materials that are currently 

identified as communications will 

continue to be defined as 

communications and will continue to 

follow the same submission and review 

process as prior to this proposed rule. 

As an example, in §§ 422.2267(e)(4) and 

423.2267(e)(4), the Pre-Enrollment 

checklist (PECL) is defined as a 

standardized communications material 

and is not currently required to be 

submitted to CMS for review. CMS 

wants to make it clear that even with the 

proposed changes to the marketing 

definition in this rule, the PECL would 

continue to be considered a 

communications material and not be 

required to be submitted to CMS for 

review. Separately, there are certain 

communications materials that CMS 

indicates in §§ 422.2267(e) and 

423.2267(e) as required to be submitted 

for review (such as the Evidence of 

Coverage). This proposed rule will not 

include any changes to this process or 

to the non-marketing communications 

materials that are required to be 

submitted for review. 

We are proposing conforming edits to 

the definition of ‘‘Advertisement (Ad)’’ 

in §§ 422.2260 and 423.2260 to align 

with the proposed updates to the 

definition of marketing. Specifically, we 

are proposing to remove the second 

sentence from the advertisement 

definition, as the content standard will 

be eliminated from the marketing 

definition. Advertisements, as with all 

other materials and activities, will be 

subject to the considerations set forth in 


khammond on DSK9W7S144PROD with PROPOSALS2
99438 Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 

201OMB 0938–0982, CMS–10174, expiration 

February 28, 2025 (available at https://

www.reginfo.gov/public/do/PRAViewDocument?

ref_nbr=202403-0938-002). 

202The PDE file layouts are available at https:// 

www.csscoperations.com/internet/csscw3.nsf/DID/ 

M7XCJKG0JI. 

203 42 CFR 423.505(k)(3). 

204For PDE edits, see generally, DDPS Edit 

Lookup, available at https://www.csscoperations.

com/internet/csscw3.nsf/DIDC/FGSMOX8LWK∼

Prescription%20Drug%20Program%20(Part%20D)∼

References (click Download). 

205For additional information and examples that 

result in adjustment and deletion PDE records, see 

HPMS memorandum, PDE Guidance for Post Pointof-Sale Claim Adjustments, July 3, 2013, available 

at https://www.hhs.gov/guidance/sites/default/files/ 

hhs-guidance-documents/post%20pos

%20adjustments_247.pdf. 

the proposed revised definition of 

marketing. With that said, considering 

the nature of advertisements pertaining 

to MA and Part D, CMS believes that 

most, if not all, advertisements 

pertaining to MA and Part D created or 

administered by an MA organization or 

Part D sponsor or any downstream 

entity operating on their behalf, will fall 

under the proposed updated marketing 

definition. However, even though these 

materials will now need to be submitted 

to CMS, the overall burden will be 

tempered by the fact that we anticipate 

the majority of them will be accepted as 

File and Use per §§ 422.2261(b)(3) and 

423.2261(b)(3) where plans may 

distribute or make available certain 

types of marketing materials, designated 

by CMS based on the material’s content, 

audience, and intended use, as they 

apply to potential risk to the 

beneficiary, 5 days following the 

submission. Additionally, we are 

proposing to consolidate the remaining 

definition of marketing to exclude 

extraneous numbering, which is no 

longer needed, as a result of the 

elimination of the content standard. 

Under §§ 422.2260 and 423.2260, we 

will consolidate the remaining portion 

of the definition currently under 

sections (1)(i) and (1)(ii) to simply be a 

two-sentence definition in line with the 

rest of this section. 

Finally, to combat any ambiguity with 

the intent standard of the marketing 

definition, we emphasize that in 

evaluating the intent of an activity or 

material, CMS may look beyond and 

broadly consider the MA organization’s 

or Part D sponsor’s ‘‘stated intent,’’ as 

described under current 

§§ 422.2260(1)(ii) and 423.2260(1)(ii), 

which will be consolidated through the 

proposed update to the marketing 

definition. This means that, under this 

proposed rule, the activities or materials 

of an MA organization or Part D sponsor 

may meet the regulatory definition of 

marketing even if it is not immediately 

apparent to the recipient of such 

materials or activities that they are 

intended to be influencing a 

beneficiary’s decision-making process 

when making a plan selection, 

influencing a beneficiary’s decision to 

stay enrolled in a plan or drawing a 

beneficiary’s attention to a plan or 

plans. In evaluating such activities and 

materials, CMS will continue to 

consider the corollary result of any call 

to attention that aims to ‘‘draw a 

beneficiary’s attention to a MA or Part 

D plan or plans, influence a 

beneficiary’s decision-making process 

when making a MA or Part D plan 

selection, or influence a beneficiary’s 

decision to stay enrolled in a plan (that 

is, retention-based marketing).’’ As an 

example, if a television advertisement 

says, ‘‘Questions about Medicare, call 1– 

800–LEARN–MORE,’’ and the call 

results in MA or Part D plans being 

discussed as an option, the 

advertisement would fall under 

§§ 422.2260 and 423.2260 and be 

considered marketing under this 

proposed rule because the intent of the 

advertisement is ultimately to draw a 

beneficiary’s attention to an MA or Part 

D plan or to encourage a beneficiary to 

call the number and speak to someone 

about enrollment and plan choice 

options. 

In summary, this proposal would 

enhance CMS’s oversight of the 

marketing and communications 

materials and activities most likely to 

influence a beneficiary’s enrollment 

decision. CMS believes that the content 

standard within the marketing 

definition is limiting CMS’s ability to 

review and target materials that are 

negatively influencing a beneficiary’s 

enrollment experience. By removing the 

content standard from the marketing 

definition at §§ 422.2260 and 423.2260, 

CMS can better ensure that 

communications activities and materials 

that are intended to ‘‘draw a 

beneficiary’s attention to a MA plan or 

plans or Part D plans, influence a 

beneficiary’s decision-making process 

when making a MA plan or Part D plan 

selection, or influence a beneficiary’s 

decision to stay enrolled in a plan (that 

is, retention-based marketing)’’ will fall 

under the definition of marketing, and 

that materials are submitted to CMS and 

subject to review under §§ 422.2261 and 

423.2261. Our goal is to ensure that 

beneficiaries are protected from 

misleading marketing so that they 

receive the best information to enroll in 

a plan that best meets their health care 

needs. We solicit comments on our 

proposed amendments to update the 

marketing definition at §§ 422.2260 and 

423.2260, and we thank commenters in 

advance for their feedback. We are also 

soliciting specific comment on the 

potential or alternative financial 

impacts of this proposal. 

R. Timely Submission Requirements for 

Prescription Drug Event (PDE) Records 

(§ 423.325) 

CMS requires that Part D sponsors 

submit certain prescription drug claims 

information to CMS for specified 

Medicare Part D-related purposes as 

described in the Social Security Act (the 

Act). In accordance with the authority 

under sections 1860D–15(c)(1)(C), 

1860D–15(d)(2) and 1860D–15(f) of the 

Act, CMS conditions Medicare Part D 

program payments to Medicare Part D 

plans upon the disclosure and provision 

of information needed to carry out 

payment. In addition, section 1860D– 

15(f)(2)(A) of the Act allows CMS to 

utilize information collected under 

section 1860D–15(f) of the Act for the 

purposes of, and to the extent necessary 

in, conducting oversight, evaluation, 

and enforcement under Title XVIII of 

the Act and carrying out section 1860D– 

15 of the Act or the Medicare Drug Price 

Negotiation Program (‘‘Negotiation 

Program’’) under Part E of Title XI of the 

Act. Under sections 1860D–14A(c)(1)(C) 

and 1860D–14C(c)(3) of the Act, CMS 

collects information from Part D 

sponsors that allows for discounts under 

the Coverage Gap Discount Program and 

Manufacturer Discount Program, 

respectively, to be provided to 

applicable beneficiaries for applicable 

drugs. Part D sponsors submit this 

prescription drug claims information to 

CMS on prescription drug event (PDE) 

records through the CMS Drug Data 

Processing System (DDPS).201

A PDE record is data summarizing the 

final adjudication of a Part D dispensing 

event that is reported to CMS by the Part 

D sponsor using a CMS-defined file 

layout.202 CMS requires that PDE 

records are accurate, complete, and 

truthful since they are used for the 

purposes of obtaining Federal 

reimbursement.203 These records are 

critical not only for accurate payment, 

but also for a wide range of sponsor 

compliance assessment activities, and 

other Part D program integrity audits. To 

that end, CMS performs checks (or 

edits) on the PDE data to validate and 

help ensure its accuracy.204 This 

process results in the PDE records being 

accepted or rejected by CMS. Accepted 

PDE records may be subsequently 

adjusted or deleted by the Part D 

sponsor by submitting adjustment PDE 

records or deletion PDE records to 

CMS.205 Rejected PDE records must be 

reviewed, resolved, and, if appropriate, 


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206HPMS memorandum, Medicare Part D 

Manufacturer Discount Program Final Guidance, 

November 17, 2023 (available at https://

www.cms.gov/files/document/manufacturerdiscount-program-final-guidance.pdf). 

207Medicare Drug Price Negotiation Program: 

Revised Guidance, Implementation of Sections 

1191—1198 of the Social Security Act for Initial 

Price Applicability Year 2026 https://www.cms.gov/ 

files/document/revised-medicare-drug-pricenegotiation-program-guidance-june-2023.pdf. 

208Medicare 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 https://www.cms.gov/files/document/ 

medicare-drug-price-negotiation-final-guidanceipay-2027-and-manufacturer-effectuation-mfp2026-2027.pdf. 

209HPMS 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.hhs.gov/guidance/sites/ 

default/files/hhs-guidance-documents/hpms_

memo_pde_timeliness_clarification_240.pdf. 210HPMS memorandum, Timely Submission of 

Prescription Drug Event (PDE) Records and 

Resolution of Rejected PDEs, May 16, 2011, 

available at https://www.cms.gov/httpseditcms

govresearch-statistics-data-and-systemscomputerdata-and-systemshpmshpms-memos-archive/hpmsmemo-qtr1-4. 

211HPMS 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.hhs.gov/guidance/sites/ 

default/files/hhs-guidance-documents/hpms_

memo_pde_timeliness_clarification_240.pdf. 

212Medicare 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 https://www.cms.gov/files/document/ 

Continued 

resubmitted by the plan to CMS. The 

resubmitted PDE record goes through 

the same editing process and results in 

CMS accepting or rejecting the 

resubmitted PDE record. 

CMS uses accepted PDE records in the 

Part D payment reconciliation described 

at § 423.336 and 423.343(c) and (d), 

reopenings of Part D payment 

reconciliations described at § 423.346, 

the Coverage Gap Discount Program 

invoicing process described generally at 

§ 423.2315, and the Manufacturer 

Discount Program invoicing process.206

PDE records for selected drugs (as 

described at section 1192(c) of the Act) 

will also be used to administer the 

Negotiation Program.207 208 In order for 

CMS to make payments, conduct 

oversight, administer the various 

programs under Medicare Part D and the 

Negotiation Program, as well as perform 

other statutory obligations, the PDE 

records must be received from Part D 

sponsors in a timely manner. Part D 

sponsors that do not submit PDE data in 

a timely manner (as explained in the 

following Background and 

Requirements sections) may be 

determined to be out of compliance 

consistent with § 423.505(n)(1)(i) and 

may be subject to compliance actions 

described at § 423.505(n)(3). 

In this rule, we propose to codify the 

general PDE submission timeliness 

guidance that currently applies and that 

addresses three types of PDE 

submissions: initial PDE records 

submitted after a pharmacy claim is 

received by the Part D sponsor 

(hereinafter referred to as ‘‘initial PDE 

records’’), adjustment and deletion PDE 

records that update previously 

submitted records that have been 

accepted by CMS, and records to resolve 

PDE records that were rejected by 

CMS.209 Further, we propose to codify 

a specific PDE submission timeliness 

requirement for initial PDE records 

when those PDE records are for selected 

drugs. 

1. Background—General PDE 

Submission Timeliness 

CMS has always required that Part D 

sponsors submit their PDE data to CMS 

in a timely manner. Timely PDE 

submissions assist in the effective 

quality review of PDE data prior to CMS 

using the data in payment 

reconciliations and invoicing to 

manufacturers for the Coverage Gap 

Discount Program and Manufacturer 

Discount Program (hereinafter referred 

to collectively as the discount 

programs). We conduct analysis and 

validation of PDE data on an ongoing 

basis and identify data quality issues for 

Part D sponsors’ review and action. This 

pre-reconciliation data quality review 

initiative promotes accuracy in the planreported financial data used in the Part 

D payment reconciliation and the 

invoice and reconciliation processes for 

the discount programs. 

Accordingly, in 2011, we released 

guidance on the timely submission of 

PDE records. On May 16, 2011, CMS 

released a memorandum ‘‘Timely 

Submission of Prescription Drug Event 

(PDE) Records and Resolution of 

Rejected PDEs.’’ 210 The guidance 

described the PDE submission 

timeframes for initial PDE records, 

adjustment and deletion records, and 

records to resolve PDE records that CMS 

rejected through the PDE editing 

process. After consideration of industry 

comments, CMS modified the PDE 

submission timeframes and released 

revised PDE submission timeliness 

guidance on October 6, 2011.211 As 

described in that guidance, initial PDE 

records are due within 30 days 

following the date the claim is received 

by the Part D sponsor or the date of 

service, whichever is greater. 

Adjustment and deletion PDE records 

are due within 90 days following 

discovery of the issue requiring a 

change to the PDE. Resolution of 

rejected PDE records are due within 90 

days following the receipt of rejected 

record status from CMS. We propose to 

codify PDE submission timeframes 

similar to those timeframes described in 

the October 2011 guidance and refer to 

those timeframes as the General PDE 

Submission Timeliness Requirements. 

2. Background—Selected Drugs PDE 

Submission Timeliness 

On August 16, 2022, the Inflation 

Reduction Act of 2022 (IRA) (Pub. L. 

117–169) was signed into law. It 

established the Negotiation Program to 

negotiate maximum fair prices (MFPs) 

for certain high expenditure, single 

source drugs and biological products 

(i.e., selected drugs). The requirements 

for this program are described in 

sections 1191 through 1198 of the Act, 

as added by sections 11001 and 11002 

of the IRA. 

Under section 1193(a) of the Act, 

participating manufacturers must not 

only provide access to the MFP for a 

selected drug to MFP-eligible 

individuals (as defined in section 

1191(c)(2) of the Act), but they must 

also provide access to the MFP to 

pharmacies, mail order services, and 

other dispensing entities with respect to 

such MFP-eligible individuals who are 

dispensed the selected drug during a 

price applicability period (as defined in 

section 1191(b)(2) of the Act). This 

distinguishes the Negotiation Program 

from Part D programs such as the 

Coverage Gap Discount Program and the 

Manufacturer Discount Program where 

there is no such statutory requirement 

for the manufacturer to provide a 

specified price to a pharmacy or other 

dispensing entity. CMS stated in section 

40.4 of the Medicare Drug Price 

Negotiation Program: Final Guidance, 

Implementation of Section 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 

(hereinafter referred to as the final 

guidance) that a Primary Manufacturer 

(as defined in section 40 of the final 

guidance) must provide access to the 

MFP in one of two ways: (1) 

prospectively ensuring that the price 

paid by the dispensing entity when 

acquiring the drug is no greater than the 

MFP; or (2) retrospectively providing 

reimbursement for the difference 

between the dispensing entity’s 

acquisition cost and the MFP.212


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213See 42 CFR 423.520, Prompt Payment by Part 

D Sponsors, which requires Part D sponsor to 

transmit payment to pharmacies within 14 days 

after receiving an electronic Part D claim that is a 

clean claim. 

214Medicare Drug Price Negotiation Program: 

Draft 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 (MFP) in 

2026 and 2027 https://www.cms.gov/files/ 

document/medicare-drug-price-negotiation-draftguidance-ipay-2027-and-manufacturer-effectuationmfp-2026-2027.pdf. 

215 Insert link to final guidance when it is 

available. 

To help operationalize dispensing 

entity access to the MFP, in section 40.4 

of the final guidance, CMS stated it will 

engage with a Medicare Transaction 

Facilitator (MTF) to facilitate the 

exchange of data and payment between 

Primary Manufacturers and dispensing 

entities and to support the verification 

that the selected drug was dispensed to 

an MFP-eligible individual. The MTF 

will use the PDE records submitted by 

Part D sponsors to CMS through DDPS 

to verify that the selected drug was 

dispensed to an MFP-eligible 

individual. Additionally, the MTF will 

furnish Primary Manufacturers with 

certain claim-level data elements, 

including from PDE records, confirming 

that a selected drug was dispensed to an 

MFP-eligible individual and identifying 

which dispensing entity dispensed the 

selected drug to the MFP-eligible 

individual. In the final guidance, unless 

the dispensing entity’s acquisition cost 

for the selected drug is equal to or less 

than the MFP, or, as detailed in section 

40.4.5 of the final guidance, the Primary 

Manufacturer establishes that section 

1193(d)(1) of the Act (related to 340B 

discounts) applies, CMS requires that 

the Primary Manufacturer transmit 

payment of an amount that provides 

access to the MFP within 14 calendar 

days of when the MTF sends the claimlevel data elements that verify the 

selected drug was dispensed to an MFPeligible individual to the Primary 

Manufacturer (‘‘14-day prompt MFP 

payment window’’). CMS notes that the 

14-day prompt MFP payment window 

aligns with the timing requirement in 

the longstanding prompt pay rules in 

Part D for plan sponsors.213 However, 

dispensing entities should be aware that 

they may not receive payment from a 

Part D plan sponsor for the Part D claim 

on the same date that the Primary 

Manufacturer provides a retrospective 

MFP refund to the dispensing entity. 

Due to operational differences between 

the Part D program and the Negotiation 

Program, the respective prompt 

payment windows for a particular 

dispensed prescription may start on 

different dates for the Part D sponsor 

and the Primary Manufacturer. 

To help ensure prompt payments by 

Primary Manufacturers to dispensing 

entities to provide access to the MFP, 

initial PDE records for selected drugs 

under the Negotiation Program 

necessitate a PDE submission timeliness 

requirement that is different from the 

general PDE submission timeliness 

requirement for initial PDE records. 

Under the current general PDE 

submission timeliness requirements, 

dispensing entities could wait up to 

approximately six weeks to receive 

access to the MFP (e.g., 30 calendar days 

for the Part D sponsor to submit PDE 

data to the DDPS, plus approximately 

one to three days for the PDE data to 

move from DDPS to the MTF to the 

Primary Manufacturer, plus up to an 

additional 14 days for the Primary 

Manufacturer to transmit an MFP refund 

payment). If the Primary Manufacturer 

does not prospectively make the MFP 

available to the dispensing entity, then 

the lag between when the dispensing 

entity receives payment from the Part D 

plan and when the dispensing entity 

receives the MFP refund payment from 

the Primary Manufacturer could impose 

a financial strain on dispensing entities 

given that anticipated MFP refunds 

could be a material percent of the 

dispensing entity’s purchase price. To 

mitigate potential financial hardship on 

dispensing entities such as pharmacies, 

which could impact Part D beneficiary 

access to selected drugs, and more 

closely align MFP refund payments with 

the timing requirements in the 

longstanding prompt pay rules in the 

Part D program, CMS believes it is 

necessary to create a specific new 

requirement for PDE submission 

timeliness requirements for selected 

drugs. Therefore, CMS is proposing to 

shorten the PDE submission timeliness 

requirements for selected drugs to 

reduce the maximum amount of time a 

dispensing entity could wait to receive 

access to the MFP. 

On May 3, 2024, when CMS released 

draft guidance describing the 

implementation of the Negotiation 

Program for initial price applicability 

year 2027 and manufacturer effectuation 

of the MFP in 2026 and 2027 (draft 

guidance), CMS noted that it was 

evaluating a PDE submission timeliness 

requirement for PDE records that is 

different from the general PDE 

submission timeliness requirement for 

initial PDE records.214 To ensure that 

dispensing entities receive timely 

payment of MTF refunds, CMS stated 

that it was evaluating whether the 30- 

day window for Part D sponsors to 

submit PDE records should be shortened 

to 7 days of receipt of the claim to help 

ensure dispensing entities receive 

timely payment of MFP refunds. 

CMS received and reviewed 

comments from interested parties on the 

draft guidance related to the 

consideration of a shorter PDE 

submission timeliness requirement for 

selected drugs and addressed those 

comments on page 53 of the final 

guidance.215 To inform policy 

development for this rulemaking, CMS 

re-reviewed all comments received on 

the topic of PDE submission timeliness 

requirements. Many commenters 

supported CMS shortening the PDE 

submission window and agreed with the 

7-day timeliness requirement or 

recommended other timeliness 

requirements shorter than 30 calendar 

days. Some commenters recommended 

CMS not change the PDE reporting 

general timeliness requirement and keep 

the 30-day window for selected drugs. 

Many commenters noted that shortening 

the PDE submission window could 

increase the volume of claim 

adjustments and reversals during and 

after the 14-day prompt MFP payment 

window. These commenters noted that 

it typically takes pharmacies up to 14 

days to reverse a claim when a 

beneficiary does not pick up a 

prescription and asked CMS to provide 

more detail on how the MTF will 

address claim reversals and 

adjustments. One commenter noted that 

if CMS shortens the PDE submission 

window, plan sponsors would need 

additional implementation time to 

revise agreements and internal 

processes. While CMS addressed these 

comments in final guidance by stating 

that it intends to propose to shorten the 

current 30-day window for plans to 

submit PDE records for selected drugs to 

7 calendar days, CMS also received 

several comments posing technical 

questions on the PDE reporting process 

and DDPS operations, and offering input 

on other PDE operational matters, which 

CMS considered out of scope for final 

guidance. However, CMS recognizes the 

importance of public feedback on 

potential operational concerns 

surrounding a shorter PDE submission 

window for selected drugs. CMS is 

soliciting comments in this proposed 

rule on the operational considerations of 

shortening the timeframe for initial PDE 

records for selected drugs to 7 calendar 

days, including potential challenges 


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Part D sponsors may face in 

implementing the proposed timeframe. 

CMS is also soliciting comments on 

whether it should shorten the 

submission timeline for selected drugs 

for adjustment and deletion PDE 

records, and for records to resolve PDE 

records that were rejected by CMS. CMS 

is particularly interested in comments 

on operational feasibility, as well as 

comments that address whether a 

shorter submission timeline would help 

facilitate timely payments by Primary 

Manufacturers to dispensing entities, or 

whether the 90-calendar day submission 

timeframe for adjustments and deletions 

and/or for the resolution of rejected 

records is sufficient for the purpose of 

the Negotiation Program. 

We propose to codify this 7-calendar 

day timeframe for initial PDE records for 

selected drugs and refer to this 

timeframe as the Selected Drugs PDE 

Submission Timeliness Requirement. 

3. Requirements—General PDE 

Submission Timeliness 

We propose to codify the existing 30- 

day and 90-day general PDE submission 

timeframes, with two slight 

modifications. First, we propose that the 

30-day and 90-day requirements refer to 

calendar days, as opposed to business 

days. Second, we propose to modify the 

timing of the initial PDE records 

submission, which currently begins 

from the date the claim is received by 

the Part D sponsor or the date of service, 

whichever is greater. Given that the 

claim cannot be received by the Part D 

sponsor (or its contracted first tier, 

downstream, or related entity (for 

example, pharmacy benefit manager 

(PBM))) until on or after the date of 

service, we propose to clarify that initial 

PDE records must be submitted within 

30 calendar days of when the Part D 

sponsor (or its contracted first tier, 

downstream, or related entity) receives 

the claim. 

Based on our experience with the Part 

D program, these proposed 30-calendar 

day and 90-calendar day PDE 

submission timeframes are appropriate, 

striking a balance between allowing 

sufficient time for the Part D sponsors 

to submit PDE records while providing 

sufficient time for CMS to review and 

flag data quality issues that may require 

action from the Part D sponsor prior to 

the PDE record being used in the 

invoicing and reconciliation processes 

for the discount programs and the Part 

D payment reconciliations. These 

proposed timeframes, which CMS 

developed with industry feedback, have 

been in subregulatory guidance since 

2011 and have worked well for Part D 

sponsors and CMS. 

Therefore, we propose the following 

general PDE submission timeliness 

requirements. We propose that the Part 

D sponsor must submit an initial PDE 

record within 30 calendar days from the 

date the Part D sponsor receives the 

claim. We propose that the Part D 

sponsor must 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. We 

propose that the Part D sponsor must 

resolve rejected PDE records within 90 

calendar days of the rejection. We 

propose that these general PDE 

submission timeliness requirements 

apply unless, for the initial PDE records 

submissions, the proposed selected 

drugs PDE submission timeliness 

requirement applies. 

4. Requirement—Selected Drugs PDE 

Submission Timeliness 

We propose to establish a selected 

drugs PDE submission timeliness 

requirement, in which CMS requires 

that a Part D sponsor must submit initial 

PDE records for selected drugs (as 

described at section 1192(c) of the Act) 

within 7 calendar days from the date the 

Part D sponsor (or its contracted first 

tier, downstream, or related entity) 

receives the claim. The proposed PDE 

submission timeliness requirement is 

consistent with CMS’ authority under 

section 1860D–15(f) of the Act, which 

authorizes CMS to collect PDE data for 

the purposes of, and to the extent 

necessary in, carrying out both section 

1860D–15 of the Act and part E of title 

XI of the Act (i.e., the Negotiation 

Program). 

Figure 1 illustrates the general and 

selected drugs PDE submission timeline 

requirements. 

CMS believes Part D sponsors are 

compliant with the longstanding 

guidance pertaining to 30- and 90-day 

PDE submission timelines, and thus, 

CMS does not expect the proposed 

change to result in additional costs or 

savings and are not scoring these 

requirements in the Regulatory Impact 

Analysis section. We are not imposing 

any new reporting requirements for 

drugs other than selected drugs. We do 

not believe that our proposal pertaining 

to 7-, 30-, and 90-day PDE submission 

timeline will result in additional 

paperwork burden and have not 

incorporated a burden increase in the 

Collection of Information section. 

5. Severability 

The general PDE submission 

timeliness requirements and the 

selected drugs PDE submission 

timeliness requirement provisions 

proposed herein are separate and 

severable from one another. If either 

provision, once finalized, is held to be 

invalid or unenforceable by its terms, or 

as applied to any person or 

circumstance, or stayed pending further 

agency action, it is our intention that 

such provision shall be severable from 

this rule and not affect the remainder 

thereof, or the application of such 

provision to other persons not similarly 

situated or to other, dissimilar 

circumstances. 

S. Medicare Transaction Facilitator 

Requirements for Network Pharmacy 

Agreements 

The Inflation Reduction Act of 2022 

(IRA) (Pub. L. 117–169), enacted August 

16, 2022, established the Medicare Drug 

Price Negotiation Program (hereinafter 

the ‘‘Negotiation Program’’) to negotiate 

maximum fair prices (MFPs) for certain 

high expenditure, single source drugs 


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216Medicare 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 https://www.cms.gov/files/document/ 

medicare-drug-price-negotiation-final-guidanceipay-2027-and-manufacturer-effectuation-mfp2026-2027.pdf. 

217See 42 CFR 423.520, Prompt Payment by Part 

D Sponsors, which requires the Part D sponsor to 

transmit payment to network pharmacies within 14 

days after receiving an electronic Part D claim that 

is a clean claim. 

and biological products. The 

requirements for the Negotiation 

Program are described in sections 1191 

through 1198 of the Social Security Act 

(hereinafter ‘‘the Act’’), as added by 

sections 11001 and 11002 of the IRA. 

Sections 11001(c) and 11002(c) of the 

IRA direct the Secretary of the United 

States Department of Health and Human 

Services (hereinafter ‘‘the Secretary’’) to 

implement the Negotiation Program 

provisions in sections 11001 and 11002 

of the IRA, including amendments made 

by such sections, for 2026, 2027, and 

2028 by program instruction or other 

forms of program guidance. In 

accordance with the law, CMS issued 

the Medicare Drug Price Negotiation 

Program: Draft 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 (MFP) in 2026 and 

2027 on May 3, 2024 (hereinafter ‘‘draft 

guidance’’), and the 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 (MFP) in 2026 and 

2027 on October 2, 2024 (hereinafter 

‘‘final guidance’’).216 In the final 

guidance, CMS noted that it also 

planned to engage in rulemaking to 

propose certain policies under Medicare 

Part D that relate to or have implications 

for the Negotiation Program but involve 

exercising authorities under the Act that 

are not subject to the IRA’s program 

instruction requirement. Accordingly, as 

discussed in more detail below, in this 

rule, CMS proposes at § 423.505(q) to 

require that Part D sponsors’ network 

contracts with pharmacies require such 

pharmacies to be enrolled in the 

Negotiation Program’s Medicare 

Transaction Facilitator (MTF) Data 

Module (DM) (hereinafter ‘‘MTF DM’’). 

1. Background on the Medicare 

Transaction Facilitator 

Section 1193(a) of the Act instructs 

CMS to enter into agreements (a 

‘‘Medicare Drug Price Negotiation 

Program Agreement,’’ hereinafter 

referred to as a ‘‘Negotiation Program 

Agreement’’) with willing 

manufacturers of selected drugs (as 

described in section 1192(c) of the Act) 

for a price applicability period (as 

defined in section 1191(b)(2) of the Act). 

After entering into a Negotiation 

Program Agreement with CMS and in 

accordance with section 1193(a) of the 

Act, any ‘‘Primary Manufacturer’’ (as 

defined in section 40 of the final 

guidance) of a selected drug that 

continues to participate in the 

Negotiation Program and reaches 

agreement upon an MFP must provide 

access to the MFP to MFP-eligible 

individuals (defined in section 

1191(c)(2)(A) of the Act) and to 

pharmacies, mail order services, and 

other dispensing entities that dispense 

drugs covered under Medicare Part D 

(hereinafter ‘‘dispensing entities’’) with 

respect to such MFP-eligible 

individuals. In section 40.4 of the final 

guidance, CMS stated that a Primary 

Manufacturer must provide access to the 

MFP in one of two ways: (1) 

prospectively ensuring that the price 

paid by the dispensing entity when 

acquiring the drug is no greater than the 

MFP, or (2) retrospectively providing 

reimbursement for the difference 

between the dispensing entity’s 

acquisition cost and the MFP. 

Consistent with longstanding Part D 

prompt pay rules regarding payment by 

plan sponsors to network 

pharmacies,217 CMS will require that a 

Primary Manufacturer transmit payment 

of an amount that provides access to the 

MFP within 14 calendar days of when 

certain claim-level data elements are 

sent to the Primary Manufacturer by the 

MTF DM. 

In section 40.4 of the final guidance, 

CMS stated, based on CMS’ continuous 

engagement with and extensive 

feedback from interested parties, for 

2026 and 2027, CMS will engage with 

MTF contractors to facilitate the 

exchange of data and payment between 

pharmaceutical supply chain entities for 

the purposes of the Negotiation 

Program. The MTF will have two 

distinct modules, the MTF DM and the 

MTF Payment Module (hereinafter 

‘‘MTF PM’’), a voluntary option to pass 

payment for MFP refunds from Primary 

Manufacturers to dispensing entities. 

The combined data and payment 

facilitation functionalities present in the 

MTF DM and the MTF PM will attempt 

to address the interests expressed by 

dispensing entities and manufacturers 

in a single platform for transmitting the 

data necessary for program 

administration and supporting MFP 

refund payments to create greater 

efficiency, standardization, and 

predictability in the execution of a high 

volume of continuous payments. 

The MTF DM will facilitate the 

exchange of certain claim-level data 

elements and claim-level payment 

elements for selected drugs to support 

the verification that the selected drug 

was dispensed to an MFP-eligible 

individual, as described in section 

40.4.2 of the final guidance. The data 

supplied by the MTF DM to Primary 

Manufacturers will have been verified 

by both the Part D sponsor and CMS’ 

Drug Data Processing System (DDPS) 

resulting in dual verification of both an 

individual’s eligibility for Part D, and 

Part D coverage of the selected drug for 

each claim being transmitted. For 

context, when a Part D plan sponsor 

receives a claim for a selected drug from 

a dispensing entity, the Part D plan 

sponsor verifies that the beneficiary 

listed on the claim paid by the Part D 

plan sponsor is enrolled in Medicare 

Part D and coverage is provided under 

Part D for the dispensed drug. After the 

Part D plan sponsor verifies Medicare 

eligibility and coverage of the selected 

drug, the plan pays the dispensing 

entity no more than the MFP plus any 

dispensing fees for the selected drug. 

Then, the Part D plan sponsor sends the 

data on the Part D claim as a 

Prescription Drug Event (PDE) record 

(i.e., claim summary records submitted 

by Medicare Part D plan sponsors to 

CMS for every prescription filled by a 

dispensing entity for a Medicare Part D 

beneficiary) to DDPS. CMS uses DDPS 

to perform verification steps to validate 

that the individual was an eligible Part 

D enrollee at the time of the claim, as 

described in section 40.4.2.1 of the final 

guidance. After CMS verifies MFP 

eligibility for the individual related to 

the claim, DDPS will transmit the PDE 

record for the Part D claim for the 

selected drug to the MTF DM. 

Therefore, because MFP eligibility 

status has been twice validated before 

the data elements are sent from the MTF 

DM to the Primary Manufacturer, the 

data elements will have been verified as 

involving a selected drug that was 

dispensed to an MFP-eligible 

individual. 

As stated in section 40.4.2.1 of the 

final guidance, enrollment in the MTF 

DM will be mandatory for Primary 

Manufacturers. CMS will require all 

Primary Manufacturers to register with 

the MTF DM by a deadline to be 

specified by CMS and to maintain the 

functionality necessary to receive 

certain claim-level data elements from 

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level payment elements to the MTF DM. 

Each Primary Manufacturer will be 

required to sign data use, privacy, and 

security agreements with CMS and 

comply with data use, privacy, and 

security requirements to protect the data 

elements received from and transmitted 

to the MTF. 

As discussed in section 40.4.2.2 of the 

final guidance and in more detail below, 

dispensing entity enrollment in the 

MTF DM is also needed for necessary 

operations related to administration of 

the Negotiation Program and the Part D 

program. Dispensing entity enrollment 

in the MTF DM allows for several key 

functionalities that help ensure accurate 

Part D claims information and payment 

and continued access for beneficiaries 

and dispensing entities to selected 

drugs. These functionalities include the 

collecting and sharing of banking 

information from dispensing entities to 

Primary Manufacturers; creating and 

sending of Electronic Remittance 

Advice that uses the X12 835 standard 

adopted under the Health Insurance 

Portability and Accountability Act of 

1996 (hereinafter ‘‘ERAs’’) (for 

electronic transfer of funds) or 

remittances (for paper checks) to 

dispensing entities; a streamlined ability 

to submit complaints and disputes 

regarding selected drugs dispensed; and 

an opportunity for dispensing entities to 

identify themselves as anticipating 

material cashflow concerns at the start 

of a price applicability period with 

respect to selected drugs as a result of 

potential delays created by reliance on 

retrospective MFP refunds within the 

14-day prompt MFP payment window. 

Accordingly, CMS proposes to require 

Part D plan sponsors to include in their 

network pharmacy agreements 

provisions requiring dispensing entities 

to be enrolled in the MTF DM. 

If a Primary Manufacturer elects to 

utilize the MTF PM, then the MTF PM 

will complement the data-related 

activities of the MTF DM and facilitate 

payment of an MFP retrospective refund 

on MFP-eligible claims of selected drugs 

from the participating Primary 

Manufacturer to the dispensing entity. 

Specifically, as discussed in section 

40.4.3 of the final guidance, the MTF 

PM will (1) provide Primary 

Manufacturers with a mechanism for 

electronic transfer of funds or payment 

by paper check to facilitate MFP refund 

payments from Primary Manufacturers 

to dispensing entities; and (2) provide 

Primary Manufacturers with a credit/ 

debit ledger system to track the flow of 

MFP refunds and to handle reversals, 

adjustments, and other claim revisions 

inevitable in a dynamic claim payment 

system. Participation in the MTF PM 

will be voluntary for Primary 

Manufacturers, which will have the 

option of passing MFP refund payments 

to dispensing entities through the MTF 

PM or using their own processes outside 

of the MTF PM to effectuate the MFP. 

Primary Manufacturers that elect to use 

the MTF PM to pass through payments 

will be required to execute MTF 

agreements with the MTF PM outlining 

each party’s rights, responsibilities, and 

potential liabilities associated with the 

transfer and receipt of funds through the 

MTF PM. 

2. Network Pharmacy Contracts With 

Part D Plan Sponsors 

CMS has broad contracting authority 

with respect to Part D plan sponsors 

under section 1860D–12 of the Act. As 

applied to the Part D program through 

section 1860D–12(b)(3)(D) of the Act, 

section 1857(e)(1) of the Act authorizes 

the Secretary to adopt contract terms 

and conditions as necessary and 

appropriate and not inconsistent with 

the Part D statute. Additionally, section 

1860D–12(b)(3)(D)(i) of the Act specifies 

that information provided to the 

Secretary under the application of 

section 1857(e)(1) of the Act may be 

used (in relevant part) for the purposes 

of carrying out the Part D program or 

Part E of Title XI of the Act (i.e., the 

Negotiation Program). Pursuant to these 

authorities, CMS proposes to require 

plan sponsors (or first tier, downstream, 

or related entities, such as PBMs, on the 

sponsors’ behalf) to include in their 

network participation agreements with 

contracting pharmacies a provision that 

requires the pharmacy to be enrolled in 

the MTF DM (or any successor to the 

MTF DM) in a form and manner to be 

determined by CMS. CMS emphasizes 

that under the proposed regulation, 

such provision must require the 

pharmacy ‘‘to be enrolled’’ in the MTF 

DM, as opposed to merely requiring the 

pharmacy ‘‘to enroll’’ in the MTF DM, 

to establish an ongoing obligation that 

the pharmacy maintain its enrollment in 

the MTF DM. CMS also proposes that 

such provision must require the 

pharmacy to maintain and certify to 

CMS that the enrollment information 

provided in the MTF DM is accurate, 

complete, and up to date, pursuant to 

applicable terms and conditions of 

participation with the MTF DM, in a 

form and manner to be determined by 

CMS. CMS proposes amending 

§ 423.505 by adding paragraph (q) to 

codify this requirement. 

Consistent with section 1860D– 

12(b)(3)(D) of the Act, such a 

requirement would be necessary and 

appropriate and not inconsistent with 

the Part D statute. As previously 

mentioned, the MTF DM will contain 

several key functionalities that are 

necessary and appropriate for 

operations related to administration of 

the Negotiation Program and the Part D 

program. Through each of the 

functionalities outlined below, 

dispensing entity enrollment in the 

MTF DM would help ensure continued 

access to selected drugs that are covered 

under Part D for beneficiaries and 

dispensing entities and help maintain 

the accuracy of Part D claims 

information and payment. 

First, the MTF DM will provide 

dispensing entities enrolled in the MTF 

DM with remittances or ERAs to 

reconcile MFP refund payments when a 

Primary Manufacturer chooses to pass 

payment to the dispensing entity 

through the MTF PM. Interested parties 

strongly requested that electronic MFP 

refunds be accompanied by an ERA or 

remittance. To meet standards in the 

creation of an accurate ERA or 

remittance, up-to-date banking 

information for a dispensing entity will 

be needed. Dispensing entities will be 

asked to provide up-to-date banking 

information during MTF DM 

enrollment. For Primary Manufacturers 

that make payments outside of the MTF 

PM, CMS plans to make available 

through the MTF DM dispensing 

entities’ bank account information and 

designated destination for ERAs or 

remittances, as applicable. 

These ERAs or remittances will assist 

dispensing entities in closing out their 

open accounts receivable, thereby 

minimizing cashflow interruptions. 

Specifically, the information contained 

in the ERA or remittance will connect 

claims payment determination and 

amount with how the payment was 

made, including the electronic funds 

transfer information, if applicable. 

Consistent with each dispensing entity’s 

own standard business practices, CMS 

expects dispensing entities to review 

their accounts receivables for each claim 

for which a Primary Manufacturer owes 

an MFP refund and determine whether 

a Primary Manufacturer has paid all the 

claims the dispensing entity believes are 

MFP-eligible claims, in the amounts the 

dispensing entity believes are sufficient 

to effectuate the MFP. Moreover, CMS 

has consistently heard from interested 

parties that without an ERA or 

remittance, MFP refund payments may 

be rejected, and, in these scenarios, 

dispensing entities would not have 

means to reconcile received payments 

against outstanding MFP-eligible claims. 

Second, there will be streamlined 

access for dispensing entities enrolled 

in the MTF DM to submit complaints 

and disputes within the MTF DM to 


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help identify issues with timely MFP 

refund payment, supporting dispensing 

entities to continue efficient operations 

and prevent undue financial hardship, 

while maintaining accuracy of Part D 

claims information and payment. 

Allowing dispensing entities 

streamlined access to this system will 

support the administration of the 

Negotiation Program and Part D 

program. Through the MTF DM, a 

dispensing entity can submit a 

complaint concerning claims for 

selected drugs that potentially require 

an MFP refund, which CMS will review. 

Additionally, all Primary Manufacturers 

will be required to utilize the MTF DM 

to report to the MTF DM information 

(claim-level payment elements) about 

how the Primary Manufacturer has 

made the MFP available for each claim 

for which the Primary Manufacturer 

received data from the MTF DM or 

indicate why no MFP refund payment 

has been made on a claim. While 

dispensing entities are encouraged to 

remediate with the manufacturer 

directly if they believe that they have 

not received a retrospective refund 

payment that effectuates the MFP, 

dispensing entities may use the 

complaints process within the 

complaint and dispute system in the 

MTF DM to alert CMS. 

Third, the MTF DM will serve as a 

central repository for information about 

dispensing entities enrolled in the MTF 

DM that anticipate material cashflow 

concerns due to the reliance on 

retrospective MFP refunds within the 

14-day prompt MFP payment window. 

Interested parties have noted that small 

pharmacies that rely primarily on 

prescription revenue to maintain 

business operations would face material 

cashflow pressures due to the shift from 

payment by the Part D plan sponsor to 

a combination of Part D plan sponsor 

payment plus a potentially lagged MFP 

refund. Based on this input, CMS is 

concerned that this challenge will be 

most acute in the transition period 

when MFPs for selected drugs first 

become effective in January 2026 and at 

the start of each subsequent initial price 

applicability year when MFPs for new 

selected drugs first become effective 

(i.e., at the start of a price applicability 

period with respect to a selected drug). 

CMS does not anticipate this challenge 

to continue with respect to a selected 

drug once MFP refunds for that selected 

drug are flowing and dispensing entities 

become accustomed to the 14-day 

prompt MFP payment window. 

Consider a scenario in which the 

dispensing entity purchases a selected 

drug at a price discounted from the 

wholesale acquisition cost (WAC), for 

example, at WAC minus four percent, 

for ten units. Initially, this expenditure 

creates a temporary cashflow gap. 

However, upon receiving the MFP 

refund payment, the dispensing entity’s 

upfront cost is offset, effectively 

restoring its financial position. 

Assuming a consistent utilization rate 

for the drug, any temporary negative 

cashflow should be balanced by the 

subsequent MFP refund payment. The 

timing and consistency of this pattern 

should lead to stable cashflow and 

avoid a long-term cash deficit over time. 

During MTF DM enrollment, CMS will 

ask dispensing entities to self-identify 

whether they are a dispensing entity 

that anticipates having material 

cashflow concerns. CMS expects 

dispensing entities of the types that 

have raised material concerns about 

cashflow related to the effectuation of 

MFP—such as sole proprietor rural and 

urban pharmacies with high volume of 

Medicare Part D prescriptions 

dispensed, pharmacies who 

predominantly rely on prescription 

revenue to maintain business 

operations, long-term care pharmacies, 

340B covered entities with in-house 

pharmacies, and I/T/U pharmacies— 

may self-identify through this process. 

This information will be provided to 

Primary Manufacturers to assist in the 

development of their MFP effectuation 

plans, which must include a process for 

mitigating material cashflow concerns 

for dispensing entities. The MTF DM 

will also be available to dispensing 

entities enrolled in the MTF that need 

to update their self-identification with 

respect to material cashflow concerns, 

as CMS anticipates that indication could 

change over time. 

Fourth, CMS intends that dispensing 

entities will be able to view the status 

of MFP refunds from Primary 

Manufacturers through the MTF DM. 

The ability to track MFP refunds could 

also help dispensing entities better 

manage their cashflow or aid their 

financial planning to meet other 

administrative burdens or operational 

costs. 

Fifth, the MTF DM will collect and 

share bank account information 

belonging to dispensing entities 

enrolled in the MTF DM with Primary 

Manufacturers that pay MFP refunds to 

dispensing entities outside the MTF PM. 

Through CMS’ engagement with 

interested parties, both manufacturers 

and dispensing entities have expressed 

the concern that they typically do not 

have direct financial relationships with 

one another, increasing dispensing 

entities’ risk of experiencing payment 

delays. As such, during MTF DM 

enrollment, CMS will ask dispensing 

entities to provide their bank account 

information. CMS believes that the 

collecting and sharing of dispensing 

entities’ bank account information with 

Primary Manufacturers will address 

interested parties’ concerns related to 

the lack of an established channel to 

support MFP refund payments made 

outside the MTF PM, and help 

dispensing entities to continue efficient 

operations. 

In sum, CMS believes that enrollment 

in the MTF DM by dispensing entities 

would facilitate continued beneficiary 

and dispensing entity access to selected 

drugs that are covered Part D drugs. 

Manufacturers and dispensing entities 

have asked the agency to undertake a 

role in assuring that MFP refund 

payments to dispensing entities can be 

made efficiently, and the development 

of an MTF DM has an important role in 

that process. With less financial 

uncertainty, dispensing entities are 

better positioned to keep dispensing 

selected drugs covered under Part D. 

Given the wide number and scope of 

dispensing entities that dispense drugs 

to Part D beneficiaries—which is 

currently approximately 60,000-plus 

community pharmacies and 80,000-plus 

dispensing entities in total—this 

proposed requirement will help reach 

the maximum number of entities that 

serve Medicare beneficiaries. Requiring 

network pharmacy agreements to 

require enrollment by pharmacies in the 

MTF DM will help promote successful 

MFP effectuation under the Negotiation 

Program and facilitate continued access 

to selected drugs covered under Part D 

for Medicare beneficiaries. 

For the reasons stated above, CMS 

proposes to require plan sponsors (or 

first tier, downstream, or related 

entities, such as PBMs, on the sponsors’ 

behalf) to include in their network 

participation agreements with 

contracting pharmacies a provision that 

requires the pharmacy to be enrolled in 

the MTF DM (or any successor to the 

MTF DM), which would entail an 

ongoing obligation that the pharmacy 

maintain its enrollment in the MTF DM, 

in a form and manner to be determined 

by CMS. CMS also proposes that such 

provision must require the pharmacy to 

maintain and certify to CMS that the 

enrollment information provided in the 

MTF DM is accurate, complete, and up 

to date, pursuant to applicable terms 

and conditions of participation with the 

MTF DM, in a form and manner to be 

determined by CMS. CMS seeks 

comment on this proposal. 


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218See: https://www.cms.gov/inflation-reductionact-and-medicare. 

3. Overview for Dispensing Entity 

Enrollment in the MTF DM 

As of the date of the publication of 

this proposal in the Federal Register, 

CMS is still determining the exact 

process for enrollment of dispensing 

entities in the MTF DM and welcomes 

feedback on factors CMS should 

incorporate into this process. Currently, 

for 2026 and 2027, CMS may use 

existing databases to identify contact 

information for dispensing entities that 

dispense prescription drugs to Medicare 

beneficiaries or participate in one or 

more parts of the Medicare program. 

CMS may use that information to 

facilitate the process for dispensing 

entities to enroll in the MTF DM. CMS 

may also use that information to 

conduct outreach activities to 

dispensing entities such that they are 

aware of the MTF, including the 

benefits, functions, and process for 

enrollment, and, if finalized, this 

proposed contractual requirement to be 

enrolled in the MTF DM. Regardless of 

whether CMS conducts any outreach to 

dispensing entities, under this proposal, 

the plan sponsor would remain 

responsible for ensuring that its network 

agreements with pharmacies include a 

provision that requires the pharmacy to 

be enrolled in the MTF DM in a form 

and manner to be determined by CMS. 

When enrolling in the MTF DM, the 

dispensing entity would enter, certify, 

and maintain its enrollment 

information, including but not limited 

to: (1) legal business name and address; 

(2) Tax Identification Number (TIN) 

and/or NPI; (3) financial institution 

details, including address and contact 

information; (4) financial institution 

routing number; (5) deposit or account 

number with financial institution; (6) 

type of registered financial account; and 

(7) secure location for making available 

the ERA or remittance, as applicable. 

During MTF DM enrollment, CMS 

would allow dispensing entities to 

identify themselves as anticipating 

material cashflow concerns at the start 

of a price applicability period with 

respect to selected drugs as a result of 

potential delays created by reliance on 

retrospective MFP refunds within the 

14-day prompt MFP payment window. 

The dispensing entity’s (and, as 

applicable, their third-party support 

entity’s) banking information would be 

shared with Primary Manufacturers to 

establish accurate ERA for electronic 

MFP refund payments (or remittance 

advice for paper checks) made outside 

of the MTF PM. 

CMS would require each dispensing 

entity to execute an agreement package 

during the MTF enrollment process, 

which, for example, may include an 

MTF agreement with CMS and a 

participation agreement with CMS’ MTF 

DM contractor. Under the terms and 

conditions of participation in the MTF 

DM, the dispensing entity would be 

responsible for maintaining MTF 

enrollment information in the MTF DM 

and be subject to audits conducted by 

CMS or its agents. If any of the 

dispensing entity’s enrollment 

information in the MTF DM changes, 

the dispensing entity would also be 

required to update and recertify the 

information in the MTF DM. CMS 

intends to publish copies of draft MTF 

terms and conditions of the agreement 

package on the CMS IRA website.218

T. Proposed Regulatory Changes to 

Medicare Advantage (MA) and Part D 

Medical Loss Ratio (MLR) Standards 

(§§ 422.2401, 422.2420, 422.2430, 

422.2450, 422.2452, 422.2454, 422.2460, 

422.2480, 422.2490, 423.2401, 423.2420, 

423.2430, 423.2450, 423.2452, 423.2454, 

423.2480, 423.2490) 

1. Background 

Section 1103 of Title I, Subpart B of 

the Health Care and Education 

Reconciliation Act (Pub. L. 111–152) 

amended section 1857(e) of the Act to 

add a medical loss ratio (MLR) 

requirement to Medicare Part C (MA 

program). An MLR is expressed as a 

percentage, generally representing the 

percentage of revenue used for patient 

care rather than for such other items as 

administrative expenses or profit. 

Because section 1860D–12(b)(3)(D) of 

the Act incorporates by reference the 

requirements of section 1857(e) of the 

Act, these MLR requirements also apply 

to the Medicare Part D program. In the 

May 23, 2013, Federal Register, we 

published a final rule titled ‘‘Medicare 

Program; Medical Loss Ratio 

Requirements for the Medicare 

Advantage and the Medicare 

Prescription Drug Benefit Programs’’ (78 

FR 31284) (hereinafter referred to as the 

May 2013 Medicare MLR final rule), in 

which we codified the MLR 

requirements for MA organizations and 

Part D prescription drug plan sponsors 

(‘‘Part D sponsors’’) (including 

organizations offering cost plans that 

offer the Part D benefit) in the 

regulations at 42 CFR part 422, subpart 

X, and part 423, subpart X. 

Generally, the MLR for each MA and 

Part D contract reflects the ratio of costs 

(numerator) to revenues (denominator) 

for all enrollees under the contract. For 

an MA contract, the MLR reflects the 

percentage of revenue received under 

the contract spent on the following 

categories of expenditures: incurred 

claims for all enrollees, prescription 

drug costs for those enrollees in MA 

plans under the contract offering the 

Part D benefit, quality initiatives that 

meet the requirements at § 422.2430, 

and amounts used to reduce Part B 

premiums. The MLR for a Part D 

contract reflects the percentage of 

revenue received under the contract 

spent on incurred claims for all 

enrollees for Part D prescription drugs 

and on quality initiatives that meet the 

requirements at § 423.2430. The 

percentage of revenue that is used for 

other items such as administration, 

marketing, and profit is excluded from 

the numerator of the MLR for MA and 

Part D (see §§ 422.2401 and 423.2401; 

422.2420(b)(4) and 423.2420(b)(4); 

422.2430(b) and 423.2430(b)). 

The MLR calculation, prior to any 

credibility adjustment, can be depicted 

as the following general formula: 

MRL = (Incurred Claims + Quality 

Improving Activities) ÷ (Revenue ¥ 

Certain Taxes and Fees) 

In the May 2013 Medicare MLR final 

rule, we codified at §§ 422.2410 and 

423.2410 the requirements for 2014 and 

subsequent years that MA organizations 

and Part D sponsors are subject to 

financial and other sanctions for failure 

to meet the requirement that they have 

an MLR of at least 85 percent. 

Specifically, CMS set forth that, if we 

determine that a contract of an MA 

organization or Part D sponsor has an 

MLR that is less than 0.85 for a contract 

year, the contract has not met the MLR 

requirement and the MA organization or 

Part D sponsor must remit to CMS an 

amount equal to the product of (1) the 

total revenue of the MA or Part D 

contract for the contract year multiplied 

by (2) the difference between 0.85 and 

the MLR for the contract year (see 

§§ 422.2410 and 423.2410). We also 

established at §§ 422.2460 and 423.2460 

that, for each contract year, each MA 

organization and Part D sponsor must 

submit an MLR Report to CMS that 

included the data needed from the MA 

organization or Part D sponsor to 

calculate and verify the MLR and 

remittance amount, if any, for each 

contract such as the amount of incurred 

claims, expenditures on quality 

improving activities, non-claims costs, 

taxes, licensing and regulatory fees, total 

revenue, and any remittance owed to 

CMS under § 422.2410 or § 423.2410. 

To facilitate the submission of MLR 

data, CMS developed a standardized 

MLR Report template that MA 

organizations and Part D sponsors are 


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required to populate with their data and 

upload to the Health Plan Management 

System (HPMS), starting with contract 

year (CY) 2014 MLR reporting. For any 

given reporting year (calendar year), MA 

organizations and Part D sponsors must 

submit their MLR Reports in December 

of the year following the reporting year, 

or another time as determined by CMS. 

Based on the data entered by the MA 

organization or Part D sponsor for each 

component of the MLR numerator and 

denominator, the MLR reporting 

software would calculate an unadjusted 

MLR for each contract. The MLR 

reporting software would also calculate 

and apply a credibility adjustment 

provided for in §§ 422.2440 and 

423.2440, based on the number of 

member months entered into the MLR 

Report, in order to calculate the 

contract’s adjusted MLR and remittance 

amount (if any). The credibility 

adjustment takes into account the 

specific circumstances of contracts with 

lower enrollment and reduces the 

probability that an MA organization or 

Part D sponsor with relatively smaller 

enrollment has to pay a remittance in a 

given year due to the propensity for 

random fluctuations in claims each 

year. In addition to the numerical fields 

used to calculate the MLR and 

remittance amount, the MLR Report 

template included narrative fields in 

which MA organizations and Part D 

sponsors provided detailed descriptions 

of the methods used to allocate 

expenses, including how each specific 

expense met the criteria for the expense 

category to which it was assigned. 

In the final rule titled ‘‘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’’ (83 FR 16440), 

which appeared in the April 16, 2018, 

Federal Register (hereinafter referred to 

as the April 2018 final rule), we 

finalized a proposal to modify the MLR 

reporting requirements by significantly 

reducing the amount of MLR data that 

MA organizations and Part D sponsors 

submit to CMS on an annual basis, 

starting with contract year 2018. 

Specifically, the reporting requirement 

was changed to collect the minimum 

amount of information needed for 

Medicare MLR reporting: the 

organization name, contract number, 

adjusted MLR, and the remittance 

amount. 

In light of subsequent experience 

overseeing the administration of the 

Medicare MLR program while relying 

on the simplified MLR reporting 

requirements, and after further 

consideration of the potential impacts 

on beneficiaries and costs to the 

government and taxpayers when CMS 

has limited access to detailed MLR data, 

we proposed to reinstate the detailed 

MLR reporting requirements that were 

in effect for contract years 2014 through 

2017. This detailed reporting required 

the submission of the underlying data 

used to calculate and verify the MLR 

and any remittance amount, such as 

incurred claims, total revenue, 

expenditures on quality improving 

activities, non-claims costs, taxes, and 

regulatory fees. We also proposed some 

modifications to the reinstated reporting 

requirements. These modifications 

included three types of changes to the 

MLR Reporting Tool. First, the MLR 

Reporting Tool’s formulas were revised 

to incorporate changes to the MLR 

calculation such as adding categories for 

fraud reduction expenses in the section 

for Activities that Improve Healthcare 

Quality. Second, CMS separated out 

certain items that were consolidated, for 

example, the low-income cost-sharing 

subsidy amounts were added as an 

information-only line in the MLR 

Reporting Tool. Third, CMS included 

expenditures related to supplemental 

benefits in the MLR Reporting Tool. 

These modifications were proposed in 

the rule titled ‘‘Medicare Program; 

Contract Year 2023 Policy and 

Technical Changes to the Medicare 

Advantage and Medicare Prescription 

Drug Benefit Programs’’ (87 FR 1842), 

which appeared in the March 7, 2022, 

Federal Register (hereinafter referred to 

as the March 2022 proposed rule) and 

finalized 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’’ (87 FR 27704), which 

appeared in the May 9, 2022, Federal 

Register (hereinafter referred to as the 

May 2022 final Medicare rule). 

The factors that led us to make these 

changes included the growth of the MA 

and Part D programs, the related growth 

in MLR remittances, and the growth in 

the number of contracts that failed to 

meet the MLR requirement during the 

period when MA organizations and Part 

D sponsors had reduced reporting 

requirements. When the proposed rule 

titled ‘‘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’’ (82 

FR 56336), which appeared in the 

November 28, 2017, Federal Register 

(hereinafter referred to as the November 

2017 proposed rule), to eliminate the 

detailed Medicare MLR reporting 

requirements was released, MA 

organizations and Part D sponsors had 

submitted MLR data for CYs 2014 and 

2015. Total remittances for all contracts 

for the two years averaged $29.6 

million, and an average of 16 contracts 

failed to meet the minimum Medicare 

MLR requirement. By the time CMS 

issued the April 2018 final rule, annual 

average remittances for CYs 2014 

through 2016 totaled $91.8 million, and 

an annual average of 21 contracts failed 

to meet the MLR requirement. 

Thereafter, for CYs 2017 through 2019, 

the average amount of annual 

remittances more than doubled to 

$204.9 million, and the average number 

of contracts that failed to meet the MLR 

requirement nearly doubled to 40 

contracts per year. 

In the May 2013 Medicare MLR final 

rule, we also codified sanctions at 

§§ 422.2410 and 423.2410 as set forth in 

statute. Specifically, the statute imposes 

several levels of sanctions for failure to 

meet the 85 percent minimum MLR 

requirement, including remittance of 

funds, a prohibition on enrolling new 

members, and ultimately, contract 

termination. The minimum MLR 

requirement creates incentives for MA 

organizations and Part D sponsors to 

reduce administrative costs, such as 

marketing costs, profits, and other uses 

of the revenue received by plan 

sponsors and helps ensure that 

taxpayers and enrolled beneficiaries 

receive value from Medicare health and 

drug plans. 

Section 1001(5) of the 2010 Patient 

Protection and Affordable Care Act 

(Pub. L. 111–148), as amended by 

section 10101(f) of the 2010 Health Care 

and Education Reconciliation Act (Pub. 

L. 111–152), also established new MLR 

reporting and rebate requirement under 

section 2718 of the Public Health 

Service Act that applies to health 

insurance issuers (issuers) of private 

health insurance coverage in the 

employer group and individual markets 

as of CY 2011. We will refer to the MLR 

requirements that apply to issuers of 

private insurance as the ‘‘commercial 

MLR rules.’’ Regulations implementing 

the commercial MLR rules are 

published at 45 CFR part 158. 

In a 2016 rule titled ‘‘Medicaid and 

Children’s Health Insurance Program 

(CHIP) Programs; Medicaid Managed 

Care, CHIP Delivered in Managed Care, 

and Revisions Related to Third Party 


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00117/p-656. 

Liability’’ (81 FR 27853), which 

appeared in the May 6, 2016, Federal 

Register, we also established Medicaid 

and CHIP managed care regulations at 

§§ 438.8(k) and 457.1203(f) respectively, 

that require managed care plans to 

annually submit reports of their MLR to 

States, and, at §§ 438.74 and 457.1203(e) 

respectively, we require States to submit 

annually a summary of those reports to 

CMS based on our authority under 

sections 1903(m)(2)(A)(iii), 1902(a)(4), 

and 2101(a) of the Act. 

In the May 2013 Medicare MLR final 

rule, we stated that we would use the 

commercial MLR rules as a reference 

point for developing the Medicare MLR 

requirements because the intent of the 

provisions is comparable. We observed 

that maintaining consistency between 

the commercial MLR rules and 

Medicare MLR rules serves to limit 

burden on organizations that participate 

in both markets and makes commercial 

and Medicare MLRs as comparable as 

possible for comparison and evaluation 

purposes. In the March 2022 proposed 

rule, we reiterated our longstanding 

policy of attempting to align the 

Medicare MLR requirements with the 

commercial MLR requirements to limit 

burden on organizations that participate 

in both markets.219 We also cited this 

policy when we amended our 

regulations to authorize the public 

release of the Part C and Part D MLR 

data that we collect for a contract year 

under §§ 422.2460 and 423.2460 in the 

rule titled ‘‘Medicare Program; 

Revisions to Payment Policies Under the 

Physician Fee Schedule and Other 

Revisions to Part B for CY 2017; 

Medicare Advantage Bid Pricing Data 

Release; Medicare Advantage and Part D 

Medical Loss Ratio Data Release; 

Medicare Advantage Provider Network 

Requirements; Expansion of Medicare 

Diabetes Prevention Program Model; 

Medicare Shared Savings Program 

Requirements’’ (81 FR 80170), which 

appeared in the November 15, 2016, 

Federal Register. At the same time, in 

developing the Medicare MLR 

regulations, we have recognized that 

some aspects of the regulation for 

commercial plans needed to be tailored 

to fit the unique characteristics of the 

MA and Prescription Drug plan (PDP) 

markets. For example, Medicare MLRs 

are reported on a contract basis, rather 

than by state and market. 

In this proposed rule, we propose to 

make certain modifications to the MLR 

reporting requirements and to add 

requirements based upon MLR audit 

examinations in the Medicare Part C 

and Part D programs. The overall goal of 

the modifications is to do all of the 

following: 

• Further align the Medicare MLR 

program with the commercial and 

Medicaid MLR programs. 

• Improve the accuracy of MA and 

Part D MLR reporting. 

• Safeguard the integrity of the 

Medicare program. 

• Ensure beneficiaries receive value 

from the MA and Part D programs. 

Specifically, we propose to amend 

§ 422.2420(b)(2)(xi) to establish clinical 

or quality improvement standards for 

provider incentives and bonus 

arrangements included in the MA MLR 

numerator. We propose to amend 

§§ 422.2430(a) and 423.2430(a) to 

prohibit administrative costs from being 

included in quality improving activities 

in the MA and Part D MLR numerators. 

We also propose to amend 

§§ 422.2420(d)(2)(i) and 

423.2420(d)(2)(i)) to impose additional 

requirements for the allocation of 

expenses in the MLR. Additionally, we 

propose to add new paragraphs 

§§ 422.2450, 422.2452, 422.2454, 

423.2450, 423.2452, and 423.2454 to 

establish new audit and appeals 

processes for MLR compliance. We also 

propose to add §§ 422.2490(b)(6) and 

423.2490(b)(6), to add an exclusion to 

the data release, to exclude from release 

the DIR information reported within the 

MLR data as part of incurred claims. 

Furthermore, we propose to exclude 

unsettled balances from the Medicare 

Prescription Payment Plan from the 

MLR numerator at § 423.2420(b)(4)(iii). 

We are issuing a request for information 

on whether CMS could and should 

adopt policies regarding how the MA 

and Part D MLRs are calculated to help 

enable policymakers to address 

concerns surrounding vertical 

integration in MA and Part D. Finally, 

we are proposing to amend 

§§ 422.2460(a) and 422.2490(b) to 

explicitly provide that the MLR 

reporting includes detailed information 

regarding provider payment 

arrangements. These proposals are 

described in detail below. 

2. Proposal To Require Clinical or 

Quality Improvement Standards for 

Provider Incentive and Bonus 

Arrangements To Be Included in the 

MA MLR Numerator (§ 422.2420) 

Section 1857(e)(4) of the Act requires 

the Secretary to determine for a contract 

year whether an MA organization has 

failed to have an MLR of at least 85 

percent. Because section 1860D– 

12(b)(3)(D) of the Act incorporates by 

reference the requirements of section 

1857(e) of the Act, these MLR 

requirements also apply to the Medicare 

Part D program. However, the statute 

does not specify how the Secretary must 

calculate the MLR. Accordingly, in the 

May 2013 Medicare MLR final rule, we 

established regulations specifying how 

we calculate the MLR for MA and Part 

D contracts. 

For MA and Part D contracts, we 

identify the elements that are required 

to be included in the MLR numerator for 

a contract at §§ 422.2420(b) and 

423.2420(b). Specifically, under 

§§ 422.2420(b)(1) and 423.2420(b)(1), 

MA organizations and Part D sponsors 

must include in the MLR numerator 

incurred claims (as defined in 

paragraphs (b)(2) through (b)(4) for both 

programs); expenditures under the 

contract for activities that improve 

health care quality, which are 

referenced at paragraph (b)(1)(iii), and 

described in detail at §§ 422.2430 and 

423.2430; and, under 

§ 422.2420(b)(1)(ii), for the MA program, 

the amount to reduce the Part B 

premium, if any, for all MA plans under 

the contract for the contract year. 

For the MA program, incurred claims 

include direct claims that the MA 

organization pays to providers 

(including under capitation contracts) 

for covered services that are provided to 

all enrollees under the contract. Under 

§ 422.2420(b)(2)(xi), incurred claims for 

clinical services and prescription drug 

costs must include ‘‘the amount of 

incentive and bonus payments made to 

providers,’’ which includes paid and 

accrued medical incentives and 

bonuses. Currently, incentive and bonus 

payments made to providers are 

included as incurred claims in the MLR 

numerator regardless of whether they 

are tied to clinical or quality 

improvement standards for providers. 

While many types of provider 

incentives and bonuses can reward 

higher-quality care to enrollees, MLR 

examinations in other markets have 

found some incentive or bonus 

payments to providers are not based on 

quality or performance metrics. For 

example, as noted in the final rule titled 

‘‘Patient Protection and Affordable Care 

Act; HHS Notice of Benefit and Payment 

Parameters for 2023’’ (87 FR 27208), 

which appeared in the May 6, 2022, 

Federal Register (hereinafter referred to 

as the May 2022 commercial final rule), 

commercial examinations have found 

issuers reporting incentive or bonus 

payments to affiliated providers that are 

not based on quality or performance 

metrics, but rather, involve transferring 

excess premium revenue to providers to 

circumvent MLR rebate requirements. In 

addition, as discussed in the final rule 

titled ‘‘Medicaid Program; Medicaid and 


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220 https://www.govinfo.gov/content/pkg/FR2022-05-06/pdf/2022-09438.pdf. 

221 For additional discussion of negative DIR, 

please review the Final Medicare Part D DIR 

Reporting Guidance, which is released by CMS 

annually. 

Children’s Health Insurance Program 

(CHIP) Managed Care Access, Finance, 

and Quality’’ (89 FR 41002), which 

appeared in the May, 10, 2024, Federal 

Register (hereinafter referred to as the 

May 2024 Medicaid final rule), 

Medicaid reviews of States’ oversight of 

managed care plan MLR reporting found 

many managed care plans’ contracts 

with network providers did not base 

incentive payments on a requirement for 

the provider to meet quantitative 

clinical or quality improvement 

standards or metrics. 

Given these findings, we revised the 

commercial MLR regulations at 45 CFR 

158.140(b)(2)(iii) to only permit issuers 

to include provider incentive and bonus 

payments in their MLR numerator if 

they are tied to clearly defined, 

objectively measurable, and welldocumented clinical or quality 

improvement standards for these costs 

to qualify as expenditures in the MLR 

numerator in the May 2022 commercial 

final rule.220 Similarly, effective July 9, 

2024, we revised the Medicaid and 

CHIP regulations at 42 CFR 438.3(i), 

438.8(e)(2), 457.1201, and 457.1203 to 

specify that only those provider 

incentives and bonuses tied to clearly 

defined, objectively measurable, and 

well-documented clinical or quality 

improvement standards that apply to 

providers may be included in incurred 

claims for MLR reporting in the May 

2024 Medicaid final rule. 

Given the similarities between the 

commercial MLR regulations when 

these findings were made and current 

MA MLR regulations, we believe that 

the concerns identified about incentive 

or bonus payments to providers not 

being based on quality or performance 

metrics in the commercial market are 

also applicable to the MA market. If MA 

organizations or Part D sponsors use 

incentive or bonus payments to 

providers to inflate their MLRs by 

including such payments for the sole 

purpose of meeting the MLR and not for 

clinical or quality improvement 

purposes, that would conflict with the 

purpose of the MLR requirement. 

Generally, the purpose of the MLR 

requirement is to create incentives for 

MA organizations and Part D sponsors 

to reduce administrative costs, as well 

as reduce funding for activities such as 

marketing, profits, and other business 

functions and thereby ensure that 

taxpayers and enrolled beneficiaries 

receive maximum value from Medicare 

health plans. If incentive and bonus 

payments are not tied to clinical or 

quality improvement purposes, 

taxpayers and enrolled beneficiaries 

would not receive any value from such 

payments. 

Furthermore, we believe that aligning 

our regulations with the commercial 

and Medicaid regulations would be 

consistent with our longstanding policy 

of modeling Medicare MLR rules on 

commercial MLR rules and would limit 

the burden on organizations that 

participate in multiple markets and 

promote comparability of commercial, 

Medicaid, and Medicare MLRs for 

comparison and evaluation purposes. 

As such, we propose to amend 

§ 422.2420(b)(2)(xi) such that only those 

provider incentives and bonuses made, 

or expected to be made, that are tied to 

clearly defined, objectively measurable, 

and well documented clinical or quality 

improvement standards that apply to 

providers may be included in incurred 

claims in the numerator for MA MLR 

reporting and remittance purposes. 

While we believe that concerns about 

incentive or bonus payments to 

providers not based on quality or 

performance metrics in the MA market 

and our longstanding policy of 

alignment with the commercial MLR 

rules support amending the MA MLR 

rules to reflect the commercial MLR 

rules for provider incentive and bonus 

payments, we believe that certain 

unique characteristics of the Part D 

program may counsel against a similar 

change for that program at this time. 

Specifically, under § 423.2420(b)(2)(i), 

for MA contracts that include MA–PD 

plans and for PDP contracts, incurred 

claims include only drug costs that are 

‘‘actually paid’’ by the Part D sponsor. 

The concept of ‘‘actually paid’’ is 

defined at § 423.308 and refers to Part D 

costs that must be actually incurred by 

the Part D sponsor, net of any direct or 

indirect remuneration (DIR) from any 

source. Therefore, the amount reported 

in the MLR numerator as direct drug 

costs incurred by the sponsor must be 

net of all DIR (including discounts, 

charge backs or rebates, cash discounts, 

free goods contingent on a purchase 

agreement, up-front payments, coupons, 

goods in kind, free or reduced-price 

services, grants, or other price 

concessions or similar benefits offered 

to some or all purchasers) from any 

source (including manufacturers, 

pharmacies, enrollees, or any other 

person) that would serve to decrease the 

costs incurred by the Part D sponsor. 

DIR that serves to increase the costs 

incurred by the Part D sponsor—referred 

to as negative DIR—is included in the 

MLR numerator when it meets the 

requirements at § 423.308 for amounts 

that are actually paid.221 Negative DIR 

includes incentive and bonus payments 

made to pharmacies and other Part D 

providers. Because incentive and bonus 

payments made under the Part D 

program are already accounted for as 

DIR, Part D sponsors are not subject to 

a separate requirement to include such 

payments in the MLR numerator. 

Revising the Part D MLR regulations to 

require that incentive and bonus 

payments be tied to clinical or quality 

improvement standards could 

potentially require changes to the 

definition of drug costs that are 

‘‘actually paid,’’ which, in turn, could 

affect other processes outside of the 

MLR that rely on that definition which 

is out of the scope of this provision. 

Furthermore, CMS believes that 

incentive and bonus payments made 

under the Part D program are generally 

tied to pharmacy performance metrics. 

Accordingly, we do not believe that it is 

necessary to amend the Part D MLR 

regulations at this time. However, we 

seek comments on whether interested 

parties believe there are additional 

considerations that should motivate 

CMS to consider adding 

§ 423.2420(b)(2)(x) to mirror the 

proposed change to § 422.2420(b)(2)(xi). 

We seek comment on these proposals, 

including whether any modifications to 

the credibility adjustment may be 

necessary. 

3. Proposal To Prohibit Administrative 

Costs From Being Included in Quality 

Improving Activities in the MA and Part 

D MLR Numerator (§§ 422.2430 and 

423.2430) 

Under §§ 422.2420(b)(1)(iii) and 

423.2420(b)(1)(ii), MA organizations and 

Part D sponsors must include 

expenditures under the contract for 

activities that improve health care 

quality, also known as quality 

improvement activities (QIAs), in the 

numerator for MA and Part D contract 

MLRs. QIAs are described in detail for 

both programs at §§ 422.2430 and 

423.2430, respectively. As specified at 

paragraph (a)(2) of §§ 422.2430 and 

423.2430, a QIA must be designed to 

improve health outcomes, implement 

activities to prevent hospital 

readmissions, implement activities to 

improve patient safety, implement 

wellness and health promotion 

activities, or enhance the use of health 

care data to improve quality, 

transparency, and outcomes. 


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222 https://www.federalregister.gov/d/2022- 

09438/p-1778. 

223 https://www.federalregister.gov/d/2022- 

09438/p-1779. 224 https://www.federalregister.gov/d/2024- 

08085/p-1255. 225 https://www.federalregister.gov/d/2024- 

08085/p-1297. 

226 https://www.cms.gov/medicare/health-drugplans/medical-loss-ratio. 

As specified at paragraph (a)(3) of 

§§ 422.2430 and 423.2430, a non-claims 

expense incurred by an MA 

organization or Part D sponsor may be 

accounted for as a quality improvement 

activity only if the activity falls into one 

of the categories described previously 

and meets all of the following 

requirements: 

• It must be designed to improve 

health quality. 

• It must be designed to increase the 

likelihood of desired health outcomes in 

ways that are capable of being 

objectively measured and of producing 

verifiable results and achievements. 

• It must be directed toward 

individual enrollees or incurred for the 

benefit of specified segments of 

enrollees or provide health 

improvements to the population beyond 

those enrolled in coverage as long as no 

additional costs are incurred due to the 

non-enrollees. 

• It must be grounded in evidencebased medicine, widely accepted best 

clinical practice, or criteria issued by 

recognized professional medical 

associations, accreditation bodies, 

government agencies or other nationally 

recognized health care quality 

organizations. 

In addition, under paragraph (a)(4) of 

§§ 422.2430 and 423.2430, QIAs include 

Medication Therapy Management 

Programs that meet the requirements of 

§ 423.153(d), as well as fraud reduction 

activities, including fraud prevention, 

fraud detection, and fraud recovery. 

Sections 1857(e)(4) and 1860D– 

12(b)(3)(D) of the Act require MA 

organizations and Part D sponsors to 

report to CMS the MLR for each contract 

for each contract year and meet a 

minimum MLR requirement of 85 

percent. Under §§ 422.2460(a) and 

423.2460(a), the MLR report to CMS 

must include the data needed by the 

MA organization or Part D sponsor to 

calculate and verify the MLR, including 

the incurred claims, quality improving 

activity expenditures, non-claims costs, 

taxes, licensing and regulatory fees, total 

revenue, and any remittance owed to 

CMS. However, §§ 422.2430 and 

423.2430 do not specify the types of 

expenses that may be reported as a QIA 

expense or the extent to which the 

expenses must relate to a QIA. 

The commercial MLR audit 

examinations have found QIA expenses 

to be a high-risk reporting area with 

‘‘wide discrepancies in the types of 

expenses that issuers include in QIA 

expenses and creates an unequal 

playing field among issuers.’’ 222 The 

commercial MLR examinations found 

some issuers were including only direct 

expenses such as salaries of the staff 

performing the quality improving 

functions in QIA expenses, while other 

issuers were including indirect 

expenses such as overhead, the full 

salaries of employees who were 

conducting QIA only part of the time, IT 

infrastructure that supports regular 

business functions such as billing, office 

space, marketing, lobbying, third-party 

vendor profits, and company parties and 

retreats, including catering and 

travel.223 These examinations also 

found that some issuers allocated 

indirect expenses such as overhead, 

marketing, lobbying, and third-party 

vendor profits to count as QIA expenses. 

In addition, many issuers did not have 

an accurate method to quantify the 

actual cost attributable to each QIA 

expense category and were often 

arbitrarily reporting or apportioning 

indirect expenses without adequate 

documentation or support. As discussed 

in the May 2024 Medicaid final rule, 

including such indirect expenses not 

directly related to activities that 

improve health care quality inflates the 

MLR numerator, and inconsistent MLR 

reporting undermines the integrity of 

the MLR programs.224

To clarify the types of QIA costs that 

may be included in MLR calculations, 

in the May 2022 commercial final rule, 

we amended the commercial regulations 

for QIA expenditures in 45 CFR 

158.150(a), effective July 1, 2022, to 

provide that ‘‘only expenditures directly 

related to activities that improve health 

care quality may be included in QIA 

expenses.’’ In addition, we updated the 

Medicaid and CHIP MLR QIA reporting 

requirements in the May 2024 Medicaid 

final rule to add a reference to the same 

commercial regulation that prohibits the 

inclusion of overhead or indirect 

expenses that are not directly related to 

health care quality improvement 

activity expenditures. As stated in the 

May 2024 Medicaid final rule, the 

difference in standards could have 

posed a potential administrative burden 

for managed care plans that participate 

in Medicaid, CHIP, and the commercial 

markets because managed care plans 

and issuers may include different types 

of expenses in reporting QIA.225

Given the similarities between current 

Medicare MLR rules and the 

commercial and Medicaid MLR rules in 

place when we identified discrepancies 

in the types of expenses issuers of 

commercial plans and Medicaid 

managed care plans reported in QIA, we 

believe that the concerns identified are 

also applicable to the MA and Part D 

markets. Furthermore, we believe that 

aligning our regulations with the 

commercial and Medicaid requirements 

would be consistent with our 

longstanding policy of modeling 

Medicare MLR rules on commercial 

MLR rules and would limit the burden 

on organizations that participate in 

multiple markets and promote 

comparability of commercial, Medicaid, 

and Medicare MLRs for comparison and 

evaluation purposes. For these reasons, 

we propose to amend §§ 422.2430(a) 

and 423.2430(a) to specify that only 

expenditures directly related to 

activities that improve health care 

quality may be included as quality 

improving activity expenses for 

purposes of MA and Part D MLR 

reporting. 

We seek comment on these proposals. 

4. Proposal To Codify Current 

Requirements That MA and Part D MLR 

Reports Include a Description of How 

Expenses Are Allocated Across Lines of 

Business (§§ 422.2420 and 423.2420) 

Under §§ 422.2420(d) and 

423.2420(d), MA organizations and Part 

D sponsors, respectively, must allocate 

each MLR expense under one category 

and allocation to each category must be 

based on generally accepted accounting 

methods. MA organizations and Part D 

sponsors must also report expenditures 

that benefit multiple contracts on a pro 

rata or proportional share basis. 

Current Medicare MLR reporting 

instructions require MA organizations 

and Part D sponsors to include 

descriptions of the methodologies used 

to allocate expenses included in the 

calculation of the MLR. More 

specifically, as described in the MA and 

Part D MLR reporting instructions, the 

MLR Report workbook should be ‘‘used 

by organizations to describe the 

methods used to allocate expenses, as 

reported on the MLR Report, including 

incurred claims, health care quality 

improvement expenses, Federal and 

state taxes and licensing or regulatory 

fees, and non-claims costs.’’ 226 The 

MLR reporting instructions further state 

that ‘‘a detailed description of each 

expense element should be provided, 

including how each specific expense 

meets the criteria for the type of expense 

in which it is categorized.’’ 

Commercial regulations at 45 CFR 

158.170(b) and Medicaid and CHIP 


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regulations at 42 CFR 438.8(k)(1)(vii) 

and 457.1203(f) similarly require details 

on expense allocation in MLR reporting 

around the types of expenditures that 

were allocated, how the expenses met 

the criteria for inclusion in the MLR, 

and the methods used to allocate 

expenses. Like the Medicare MLR 

regulations, the commercial and 

Medicaid and CHIP regulations further 

require that issuers and managed care 

plans that operate multiple lines of 

business must submit information on 

the types of expenditures allocated to 

each line of business. 

As noted in the April 2018 final rule 

(82 FR 56459), consistent with our 

general approach when developing the 

original Medicare MLR requirements of 

aligning those requirements with the 

commercial MLR requirements to the 

greatest extent possible, we attempted to 

model the Medicare MLR reporting 

format on the tools used to report 

commercial MLR data in order to limit 

the burden on organizations that 

participate in both markets. As a result, 

the fields in the MA and Part D MLR 

Report workbook are similar to the 

fields on the commercial MLR reporting 

form, including fields for descriptions of 

the methodologies used to allocate 

expenses included in the calculation of 

the MLR. 

We are proposing to align the 

Medicare MLR regulations with the 

commercial and Medicaid MLR 

requirements related to information on 

allocation of expenses and with current 

Medicare MLR reporting practices. 

Specifically, we propose to codify 

requirements that MA organizations and 

Part D sponsors report a detailed 

description of the methods used to 

allocate expenses, including incurred 

claims, expenditures on QIA, licensing 

and regulatory fees, and State and 

Federal taxes and assessments. 

Furthermore, we propose that the 

detailed description of each expense 

element must include how each specific 

expense meets the criteria for the type 

of expense in which it is categorized as 

well as the method by which it was 

aggregated and allocated. We propose 

adding this requirement to the Medicare 

MLR regulations at §§ 422.2420(d)(2)(i) 

and 423.2420(d)(2)(i). 

We seek comment on these proposals. 

As proposed, this provision is 

consistent with our current Medicare 

MLR reporting guidance and the 

requirements that were in place for CYs 

2014 through 2017. This provision 

codifies an existing requirement in the 

reporting instructions and makes a 

clarification that is not expected to 

place additional requirements on MA 

organizations and Part D sponsors. As 

such, the proposed regulations 

§§ 422.2420(d)(2)(i) and 

423.2420(d)(2)(i) do not create any 

additional burden for MA organizations 

or Part D sponsors. MA organizations’ 

and Part D sponsors’ compliance with 

the MLR reporting requirements is 

already evaluated through the current 

MLR desk review process described at 

§§ 422.2480 and 423.2480. In addition, 

the burden associated with the 

submission of MLR data is already 

approved under the OMB control 

number 0938–1232 (Medical Loss Ratio 

Annual Reports, MLR Notices, and 

Recordkeeping Requirements (CMS– 

10476)). We have not incorporated this 

provision in the Collection of 

Information section of this proposed 

rule, nor are we are scoring this 

provision in the Regulatory Impact 

Analysis section because MA 

organizations and Part D sponsors are 

already complying with the proposed 

regulations. 

5. Proposal To Establish Standards for 

MA and Part D MLR Audit 

Examinations (§§ 422.2401, 422.2450, 

422.2452, 422.2454, 422.2480, 423.2401, 

423.2450, 423.2452, 423.2454, and 

423.2480) 

As stated in 42 CFR 422.503(d), 

422.504(d)–(e), 422.2480, 423.504(d), 

423.505(d), and 423.2480, MA 

organizations’ and Part D sponsors’ MLR 

reports are subject to review and audit 

by CMS or by any person or 

organization that CMS designates. As 

part of the review and audit process, 

CMS or its representative may request 

additional documentation supporting 

the information contained in the MLR 

report. MA organizations and Part D 

sponsors must provide this information 

in a timely manner. 

Currently, as described at §§ 422.2480 

and 423.2480, CMS conducts desk 

reviews and analyses of the reported 

MLR data to identify omissions or 

suspected inaccuracies and 

communicate findings to MA 

organizations and Part D sponsors in 

order to resolve potential compliance 

issues. If an issue is identified during 

desk review, the MLR report may be 

corrected and resubmitted in order to 

resolve the identified issue, or the 

inquiry may be resolved by the MA 

organization or Part D sponsor 

providing additional explanation or 

supporting information sufficient to 

satisfy the inquiry and complete the 

desk review. 

With the growth of the MA and Part 

D programs, greater scrutiny to ensure 

that MA organizations and Part D 

sponsors are appropriately spending 

funds to provide care to enrollees is 

increasingly important. Given the 

findings from the commercial and 

Medicaid MLR audit examinations, such 

as for QIA reporting, as discussed 

previously, we expect there may be 

similar reporting issues in the Medicare 

MLR program. In addition to ensuring 

compliance with the applicable 

requirements for calculating and 

reporting MLR information, we believe 

that audit examinations could help 

identify areas where submitters might 

be able to reduce reporting errors. MLR 

audits will improve the accuracy of MA 

organizations’ and Part D sponsors’ 

annual MLR submissions, safeguard the 

integrity of the Medicare program, and 

ensure beneficiaries receive value from 

the MA and Part D programs. 

We propose new regulations and 

amendments to existing regulations to 

establish standards for the MA and Part 

D MLR audit examinations. These 

changes would more fully align the 

Medicare MLR regulations with 

longstanding operational practices of 

commercial and Medicaid MLR 

oversight, which consists of audit 

examinations, an appeal process for 

remittances determined to be owed as 

the result of an audit, and compliance 

actions when necessary. 

More specifically, we propose 

specifications for how CMS will 

conduct MA and Part D MLR audit 

examinations in addition to the MLR 

desk review process discussed 

previously and in regulations 

§§ 422.2480 and 423.2480. Under our 

existing authority, we propose requiring 

MA organizations and Part D sponsors 

selected for MLR audit examinations to 

provide detailed MLR data and 

underlying records that can be used to 

substantiate amounts included in the 

calculation of each contract’s MLR. We 

also propose calling audit examinations 

for only those contracts with an MLR 

greater than 85 percent. Currently, CMS 

provides MA organizations and Part D 

sponsors with opportunities to correct 

MLR data through the MLR desk review 

process or through other self-reporting 

mechanisms, such as contacting CMS 

directly. Following the completion of 

the desk review process, consistent with 

the MLR regulations at §§ 422.2460(d) 

and 423.2460(d), the MLR is considered 

to have been reported once and is not 

reopened as a result of any payment 

reconciliation process. In addition, as 

stated in the May 2013 Medicare MLR 

final rule, if an MA organization or Part 

D sponsor reports that a contract’s MLR 

for a contract year does not meet the 85 

percent standard, a remittance amount 

is collected and that MLR is considered 

final. As such, the MLR audit 

examinations would not include 


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contracts that previously paid 

remittances as the result of an MLR 

below 85 percent. As described further 

in this proposed rule, if through the 

audit process, it is determined that a 

contract did not meet the 85 percent 

threshold, we would recalculate the 

MLR based on audit examination 

findings to determine appropriate 

remittances and would not reopen MLR 

reports for submission of corrections. 

CMS may conduct Medicare MLR audit 

examinations in 2025 and the 

compliance actions that result from the 

audits and provisions in this rule would 

take effect in 2026. 

The following sections outline our 

proposal to establish regulations for an 

MA and Part D MLR audit process, an 

MLR audit remittance calculation and 

payment process if an MLR audit 

remittance is determined to be owed, 

and an appeal process for MA 

organizations and Part D sponsors to 

dispute the MLR audit remittance if 

requested. The last section outlines the 

compliance actions CMS may take as 

the result of MLR audit findings and 

proposed modifications to existing 

regulations to allow for future flexibility 

to pursue additional compliance actions 

if necessary. 

a. MA and Part D MLR Audit Process 

We propose to add §§ 422.2450 and 

423.2450 to regulations to establish the 

audit process to validate MA 

organization and Part D sponsors’ MLR 

compliance. At §§ 422.2450(a) and 

423.2450(a) we propose that CMS will 

provide at least 15 calendar days 

advance notice of its intent to conduct 

an audit of an MA organization or Part 

D sponsor. At §§ 422.2450(b) and 

423.2450(b), we propose that all audits 

would include an entrance conference 

during which the scope of the audit 

would be presented and an exit 

conference during which the initial 

audit findings would be discussed. At 

§§ 422.2450(c) and 423.2450(c), we 

propose that all requested audit 

documentation would be provided by 

MA organizations or Part D sponsors to 

CMS within 30 calendar days of the 

audit entrance conference. CMS may 

extend, at CMS’s discretion, the time for 

an MA organization or Part D sponsor to 

provide the documentation requested. 

At §§ 422.2450(d) and 423.2450(d), 

we propose that CMS would share its 

preliminary audit findings with the MA 

organization or Part D sponsor, and the 

MA organization or Part D sponsor 

would then have 30 calendar days to 

respond to such findings. CMS may 

extend, at CMS’s discretion, the time for 

an MA organization or Part D sponsor to 

submit such a response. At 

§§ 422.2450(e) and 423.2450(e), we 

propose that if the MA organization or 

Part D sponsor does not dispute the 

preliminary findings within the 30-day 

timeframe proposed at §§ 422.2450(d) 

and 423.2450(d), then the audit report 

becomes final. However, if the MA 

organization or Part D sponsor disputes 

the preliminary findings within the 30- 

day timeframe proposed at 

§§ 422.2450(d) and 423.2450(d), CMS 

would review and consider such 

response before finalizing the audit 

findings. At §§ 422.2450(f) and 

423.2450(f), we propose that CMS 

would send a copy of the final audit 

report to the MA organization or Part D 

sponsor as well as issue corrective 

actions that the MA organization or Part 

D sponsor must undertake as a result of 

the audit findings. At §§ 422.2450(g) 

and 423.2450(g), we propose that if CMS 

determines as the result of an audit that 

an MA organization or Part D sponsor 

has failed to pay remittances it is 

obligated to pay pursuant to §§ 422.2470 

and 423.2470, CMS may order the MA 

organization or Part D sponsor to pay 

those remittances in a manner 

consistent with new regulations 

§§ 422.2452 and 423.2452 described in 

the subsequent section of this proposed 

rule. 

We seek comment on these proposals. 

b. MLR Audit Remittance Process and 

Payment of MLR Audit Remittance 

We propose to add §§ 422.2452 and 

423.2452 to establish the process for 

notifying MA organizations and Part D 

sponsors of the MLR audit remittance 

and how the MLR audit remittance 

would be collected in association with 

MLR audit examinations. 

To support these new regulations, we 

propose to amend §§ 422.2401 and 

423.2401 to add two definitions relevant 

for the establishment of the MLR audit 

remittance process. 

We propose to add a definition for the 

term MLR audit remittance process, 

which is the process by which CMS 

would calculate the MLR audit 

remittance for a contract that has failed 

to meet the 85 percent minimum MLR 

requirement as the result of an MLR 

audit examination and notify the MA 

organization or Part D sponsor about the 

remittance. The process includes 

collecting the MLR audit remittance 

indicated in the final audit report issued 

by CMS, receiving responses from MA 

organizations or Part D sponsors 

requesting an appeal of the MLR audit 

remittance, and taking actions to 

adjudicate an appeal (if requested) and 

receive MLR remittances from MA 

organizations and Part D sponsors. 

Per these definitions, CMS would 

calculate and notify MA organizations 

and Part D sponsors of the MLR audit 

remittance associated with the MLR 

audit examination findings. In the new 

regulations, at paragraph (a) of 

§§ 422.2452 and 423.2452, we propose 

that CMS would send the final audit 

report to MA organizations and Part D 

sponsors with the MLR audit 

remittance, if applicable. Specifically, 

proposed paragraphs (a)(1), (a)(2), (a)(3), 

and (a)(4) state that, if applicable, the 

notice would contain the following 

information: a MLR audit remittance; 

relevant banking and financial mailing 

instructions for MA organizations and 

Part D sponsors that owe CMS an MLR 

audit remittance that would be 

transferred to the Treasury General 

Fund; relevant CMS contact 

information; and a description of the 

steps for the MA organizations or Part 

D sponsor to request an appeal of the 

MLR audit remittance calculation. 

At paragraph (b) of §§ 422.2452 and 

423.2452, we propose to establish that 

MA organizations and Part D sponsors 

would have 15 calendar days from the 

date of issuance of the final audit report 

to request an appeal. We propose at 

paragraphs (b)(1) and (b)(2) of these new 

sections that, if an MA organization or 

Part D sponsor agrees with the MLR 

audit remittance, no response from the 

MA organization and Part D sponsor for 

that part of the audit report would be 

required, and that, if an MA 

organization or Part D sponsor does not 

request an appeal within 15 calendar 

days, CMS would not consider any 

subsequent requests for appeal of the 

MLR audit remittance. 

At paragraph (c) of §§ 422.2452 and 

423.2452, we propose to establish the 

actions that would take place if an MA 

organization or Part D sponsor does not 

appeal the MLR audit remittance. At 

paragraph (c)(1), we propose that an MA 

organization or Part D sponsor that owes 

money and does not appeal would have 

to remit payment in full within 120 

calendar days from issuance of the final 

audit report. We further specify that an 

MA organization or Part D sponsor that 

does not appeal and does not remit 

payment within 120 calendar days of 

issuance of the final audit report would 

be subject to having any debts owed to 

CMS referred to the Department of the 

Treasury for collection. 

If an MA organization or Part D 

sponsor does not appeal the MLR audit 

remittance indicated in the final audit 

report within 15 calendar days of the 

issuance of the final audit report, no 

subsequent requests for appeal would be 

considered. 

We seek comment on these proposals. 


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c. Process for Appealing the MLR Audit 

Remittance 

We propose to add §§ 422.2454 and 

423.2454 to regulations to establish that 

an MA organization or Part D sponsor 

may request an appeal of the calculation 

of the MLR audit remittance amount 

and the process and requirements for 

making such a request associated with 

MLR audit examination findings. 

At paragraph (a) of §§ 422.2454 and 

423.2454, we propose to establish 

requirements that would apply to MA 

organizations’ and Part D sponsors’ 

requests for appeal of the MLR audit 

remittance calculation. 

Specifically, at paragraph (a)(1), we 

propose to establish the process under 

which an MA organization or Part D 

sponsor could request reconsideration 

of the MLR audit remittance. We 

propose to specify that the 15 calendar 

day period for filing the request would 

begin on the date the final audit report 

from CMS is issued. We believe that 

would provide organizations with 

sufficient time to request an appeal, as 

MA organizations and Part D sponsors 

would be aware of the amounts that 

factor into the MLR audit remittance at 

the time the final audit report is issued. 

Requiring a request for appeal within 

this timeframe would help ensure 

accurate and timely payment of the 

MLR audit remittance. 

CMS would not accept requests for 

appeal that are submitted more than 15 

calendar days after the date of issuance 

of the final audit report. As noted 

previously, if an MA organization or 

Part D sponsor does not reply within 15 

calendar days, they would be deemed to 

accept the MLR audit remittance 

indicated in the final audit report. 

If an MA organization or Part D 

sponsor agrees with the MLR audit 

remittance, no response to that part of 

the audit exam report would be 

required. Failure to request an appeal 

within 15 calendar days of the date of 

issuance of the final audit report would 

indicate acceptance of the MLR audit 

remittance. 

We also propose that MA 

organizations and Part D sponsors 

would have to include in their request: 

(1) the calculation with which they 

disagree and (2) evidence supporting the 

assertion that the CMS calculation of the 

MLR audit remittance is incorrect. We 

further specify that CMS would not 

consider, and MA organizations and 

Part D sponsors should not submit, new 

data or data that was submitted to CMS 

after the final audit report was issued, 

unless requested by CMS. 

In addition, to establish a review 

process under which MA organizations 

and Part D sponsors may request a 

reconsideration of CMS’s MLR audit 

remittance calculation, we propose to 

add two additional levels of appeal: (1) 

an informal hearing conducted by the 

CMS Office of Hearings to review CMS’s 

determination, following a request for 

appeal of the reconsideration of CMS’s 

determination, and (2) a review by the 

CMS Administrator of the hearing 

officer’s determination if there is an 

appeal of the CMS hearing officer’s 

determination. We believe that these 

levels of appeal would afford MA 

organizations and Part D sponsors 

sufficient opportunities to present 

objections to the calculation of the MLR 

audit remittance in MLR audit 

examinations. 

At paragraph (a)(1)(iii), we propose to 

establish that the CMS reconsideration 

official would review the MLR audit 

remittance calculation and evidence 

timely submitted by the MA 

organization or Part D sponsor 

supporting the assertion that the CMS 

calculation of the MLR audit remittance 

is incorrect. We further propose to 

establish that the CMS reconsideration 

official would inform the MA 

organization or Part D sponsor of their 

decision on the reconsideration in 

writing and that their decision would be 

final and binding unless the MA 

organization or Part D sponsor requests 

a hearing officer review. 

At paragraph (a)(2), we propose to 

establish that MA organizations and Part 

D sponsors that disagree with CMS’s 

reconsideration decision under 

paragraph (a)(1) of this section would be 

able to request an informal hearing by 

a CMS hearing officer. 

Specifically, at paragraph (a)(2)(i), we 

propose that MA organizations and Part 

D sponsors would have to submit their 

requests for an informal hearing within 

15 calendar days from the date of 

issuance of the reconsideration 

decision. At paragraph (a)(2)(ii), we 

propose that MA organizations and Part 

D sponsors would have to include in 

their request a copy of CMS’s 

reconsideration decision, the specific 

findings or issues with which they 

disagree, and the reasons for which they 

disagree. At paragraph (a)(2)(iii), we 

propose to establish the informal 

hearing procedures. Specifically, we 

propose that the CMS hearing officer 

would provide written notice of the 

time and place of the informal hearing 

at least 30 calendar days before the 

scheduled date and the CMS 

reconsideration official would provide a 

copy of the record of the reconsideration 

decision to the hearing officer. We 

further propose that the hearing would 

be conducted by a hearing officer who 

would neither receive testimony nor 

accept new evidence. We finally 

propose that the hearing officer would 

be limited to the review of the record 

that the CMS reconsideration official 

had when making the reconsideration 

decision. At paragraph (a)(2)(iv), we 

propose that the CMS hearing officer 

would send a written decision to the 

MA organization or Part D sponsor 

explaining the basis for the decision. At 

paragraph (a)(2)(v), we propose to 

establish that the hearing officer’s 

decision would be final and binding, 

unless the decision is reversed or 

modified by the CMS Administrator. 

We further propose to establish at 

paragraph (a)(3) that MA organizations 

and Part D sponsors that disagree with 

the hearing officer’s decision would be 

able to request a review by the CMS 

Administrator. 

At paragraph (a)(3)(i), we propose that 

MA organizations and Part D sponsors 

would have to submit their requests for 

a review by the Administrator within 15 

calendar days of the date of the decision 

and may submit written arguments to 

the Administrator for review but would 

not be able to submit evidence in 

addition to the evidence submitted 

during CMS’s reconsideration. At 

paragraph (a)(3)(ii), we propose that the 

CMS Administrator would have the 

discretion to elect or decline to review 

the hearing officer’s decision within 30 

calendar days of receiving the request 

for review. We further propose that if 

the Administrator declines to review the 

hearing officer’s decision, the hearing 

officer’s decision would be final and 

binding. 

We propose at paragraph (a)(3)(iii) 

that, if the Administrator elects to 

review the hearing officer’s decision 

within 30 calendar days of receiving the 

request, the Administrator would 

review the hearing officer’s decision, as 

well as any information included in the 

record of the hearing officer’s decision 

and any written arguments submitted by 

the MA organization or Part D sponsor, 

and determine whether to uphold, 

reverse, or modify the decision. At 

paragraph (a)(3)(iv), we propose that the 

Administrator’s determination would be 

final and binding and no other requests 

for review would be considered. 

At paragraph (b), we propose to 

establish the matters subject to appeal 

and that an MA organization or Part D 

sponsor bears the burden of proof. At 

paragraph (b)(1), we propose to establish 

that the MA organization or Part D 

sponsor appeal would be limited to 

CMS’s calculation of the MLR audit 

remittance. At paragraph (b)(2), we 

propose that the MA organization or 

Part D sponsor would bear the burden 


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of proof by providing evidence 

demonstrating that CMS’s audit 

examination findings for the MLR audit 

remittance are incorrect. 

At paragraph (b), we propose to 

establish the matters subject to appeal 

and that an MA organization or Part D 

sponsor bears the burden of proof. At 

paragraph (b)(1), we propose to establish 

that the MA organization or Part D 

sponsor appeal would be limited to 

CMS’s calculation of the MLR audit 

remittance. At paragraph (b)(2), we 

propose that the MA organization or 

Part D sponsor would bear the burden 

of proof by providing evidence 

demonstrating that CMS’s audit 

examination results for the MLR audit 

remittance require further review. The 

MA organizations and Part D sponsors 

may not challenge the underlying 

methodology for the MLR audit 

remittance calculation. 

Proposed paragraph (d) would clarify 

that nothing in this section would limit 

an MA organization or Part D sponsor’s 

responsibility to comply with any other 

applicable statute or regulation. 

We seek comment on these proposals. 

d. MLR Audit Compliance Actions 

To address issues of noncompliance 

as identified through an MLR audit, 

CMS would pursue certain actions 

depending on the audit results. If an 

audit examination finds inaccurate MLR 

data was reported and that the 

recalculated MLR (based on the audit 

finding(s)) is less than 85 percent, CMS 

proposes to determine remittances 

owed, send a remittance notice, issue a 

Corrective Action Plan (CAP) consistent 

with regulations §§ 422.504 and 

423.505, and require a detailed response 

from the MA organization or Part D 

sponsor outlining how the plan would 

address the audit finding(s). 

If an audit examination finds 

inaccurate MLR data was reported but 

the MLR remains greater than 85 

percent when recalculated based on the 

audit finding(s), CMS proposes to issue 

progressive noncompliance actions 

consistent with the regulations at 

§§ 422.504(m) and 423.505(n), 

depending on the plan’s previous record 

of compliance and the gravity of the 

violation (for example, violation 

frequency, level of financial impact). 

CMS also proposes to require the MA 

organization or Part D sponsor to 

address the audit finding(s) and explain 

the corrective actions they have taken or 

plan to take. CMS reserves the right to 

review the actual implementation of the 

MA organization’s or Part D sponsor’s 

plan to provide correct MLR data in 

future MLR annual reporting forms, 

examinations, or as otherwise may be 

appropriate, to ensure noncompliance 

issues are being or have been addressed. 

Finally, we propose to amend 

§§ 422.2480(d) and 423.2480(d) to 

establish that if CMS finds MLR data to 

be reported in an untimely and 

inaccurate manner, we may pursue 

intermediate sanctions in accordance 

with 42 CFR part 422, subpart O and 42 

CFR part 423, subpart O. This 

amendment will provide us with 

flexibility in the future to take 

additional actions if audit examinations 

uncover instances where MLR data is 

not reported in a timely and accurate 

manner in compliance with 42 CFR part 

422, subpart X and part 423, subpart X. 

It will also encourage MA organizations 

and Part D sponsors to approach their 

MLR calculations with greater precision. 

We seek comment on this proposal. 

6. Proposal To Change Medicare MLR 

Regulations Authorizing Release of Part 

C and Part D MLR Data (§§ 422.2490 and 

423.2490) 

Part C MLR data defined at 

§ 422.2490(a) and Part D MLR data 

defined at § 423.2490(a) refers to the 

data the MA organizations and Part D 

sponsors submit to CMS in their annual 

MLR Reports, as required under existing 

§§ 422.2460 and 423.2460. For the 

purpose of the data release under 

§§ 422.2490 and 423.2490, we currently 

exclude certain categories of 

information from the release of Part C 

and Part D MLR data, as described at 

§§ 422.2490(b) and 423.2490(b). 

Specifically, CMS excludes four 

categories of information from the 

release of Part C and Part D MLR data. 

First, at §§ 422.2490(b)(1) and 

423.2490(b)(1), we exclude from release 

any narrative information that MA 

organizations and Part D sponsors 

submit to support the amounts that they 

include in their MLR Reports, such as 

descriptions of the methods used to 

allocate expenses. Second, at 

§§ 422.2490(b)(2) and 423.2490(b)(2), we 

exclude from release any plan-level 

information that MA organizations and 

Part D sponsors submit in their MLR 

Reports. Third, at §§ 422.2490(b)(3) and 

423.2490(b)(3), we exclude from release 

any information that could be used to 

identify Medicare beneficiaries or other 

individuals. Fourth, at §§ 422.2490(b)(4) 

and 423.2490(b)(4), we exclude from 

release any MLR review 

correspondence. 

At §§ 422.2490(b)(6) and 

423.2490(b)(6), we propose to add an 

exclusion to the data release, to exclude 

from release the DIR information 

reported within the MLR data as part of 

incurred claims. We are proposing this 

exclusion to align with the disclosure 

requirements regarding DIR data as 

required by section 1860D–15(f) of the 

Act. 

7. Proposal To Exclude Medicare 

Prescription Payment Plan Unsettled 

Balances From the MLR (§§ 422.2420 

and 423.2420) 

The Inflation Reduction Act of 2022 

(IRA) (Pub. L. 117–169) made several 

additions and amendments to the Act 

that affect the structure of the defined 

standard Part D drug benefit. Section 

11202 of the IRA (Maximum Monthly 

Cap on Cost-Sharing Payments under 

Prescription Drug Plans and MA–PD 

Plans) added a new section 1860D– 

2(b)(2)(E) to the Act requiring all 

Medicare prescription drug plans to 

offer their Part D enrollees the option to 

pay out-of-pocket (OOP) Part D drug 

costs through monthly payments over 

the course of the plan year instead of at 

the pharmacy point of sale (POS) 

beginning January 1, 2025. Section 

1860D–2(b)(2)(E)(v)(VI) of the Act 

specifies that any unsettled balances 

with respect to amounts owed under the 

Medicare Prescription Payment Plan 

‘‘shall be treated as plan losses and the 

Secretary shall not be liable for any such 

balances outside of those assumed as 

losses estimated in plan bids.’’ 

Section 11202(c) of the IRA directs 

the Secretary to implement the 

Medicare Prescription Payment Plan for 

2025 by program instruction or other 

forms of program guidance. In 

accordance with the law, CMS released 

guidance establishing critical 

operational and technical, and 

communication requirements for the 

Medicare Prescription Payment Plan for 

2025. In the Medicare Prescription 

Payment Plan: Final Part Two Guidance 

on Select Topics, Implementation of 

section 1860D–2 of the Social Security 

Act for 2025, and Response to Relevant 

Comments, CMS established that, 

consistent with the inclusion of plan 

losses in the administrative expense 

portion of the Part D bid, unsettled 

balances from the Medicare Prescription 

Payment Plan will be considered 

administrative costs for purposes of the 

MLR calculation and therefore be 

excluded from the MLR numerator. 

CMS does not have program 

instruction authority to implement the 

Medicare Prescription Payment Plan 

beyond 2025, so we are pursuing 

rulemaking to codify the requirements 

of the program for 2026 and subsequent 

years. In this proposed rule, with 

respect to the treatment of unsettled 

balances from the Medicare Prescription 

Payment Plan, we propose to exclude 

unsettled balances from the Medicare 

Prescription Payment Plan from the 


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227 https://www.cms.gov/newsroom/fact-sheets/ 

cms-letter-plans-and-pharmacy-benefit-managers. 228 www.ftc.gov/system/files/ftc_gov/pdf/ 

pharmacy-benefit-managers-staff-report.pdf, page 

45. 229 https://www.medpac.gov/wp-content/ 

uploads/2023/06/Jun23_MedPAC_Report_To_

Congress_SEC.pdf, page 17. 

230 https://www.medpac.gov/wp-content/ 

uploads/2024/03/Mar24_MedPAC_Report_To_

Congress_SEC.pdf, page 365. 

231 https://www.techtarget.com/ 

revcyclemanagement/answer/Value-BasedReimbursement-Grows-as-Providers-Take-on-MoreRisk. 

232 https://hcp-lan.org/workproducts/apmmethodology-2023.pdf. 

233 https://www.cms.gov/medicare/quality/valuebased-programs. 

234https://www.cms.gov/priorities/innovation/

about#:∼:text=The%20CMS%20Innovation%

20Center’s%20models,Advantage%20

or%20Medicare%20Part%20D. 

235 https://qpp.cms.gov/apms/overview. 

236 https://www.ajmc.com/view/all-payer-valuebased-contracting-in-organizations-with-medicareacos. 

237 https://www.regulations.gov/document/CMS2024-0008-0001/comment. 

238 https://www.brookings.edu/articles/medicareadvantage-spending-medical-loss-ratios-andrelated-businesses-an-initial-investigation/. 

239 https://www.govinfo.gov/content/pkg/FR2024-01-30/pdf/2024-01832.pdf. 

240 https://www.ecfr.gov/current/title-42/chapterIV/subchapter-B/part-422/subpart-X/section422.2420. 

241 https://www.cms.gov/files/document/cy2024- 

part-c-reporting-requirements.pdf. 

MLR numerator at 

§§ 422.2420(b)(4)(i)(D) and 

423.2420(b)(4)(i)(D). 

8. Request for Information on MLR and 

Vertical Integration 

MLR reporting may be less 

transparent for integrated medical 

systems where the MA organization or 

Part D sponsor is a subsidiary, owner, or 

affiliate in such a system. In these 

situations, there may be reduced 

transparency when an MA organization 

or Part D sponsor reports an MLR based 

only on their own direct expenditures 

due to the relationships between these 

related entities and the potential that 

payments made to related parties may, 

in some cases, be inflated to ensure the 

MA organization or Part D sponsor 

meets its MLR reporting requirements, 

obscuring the actual MA and Part Drelated profits made by the integrated 

system as a whole. Policymakers, 

MedPAC, and other researchers have 

raised concerns that large MA 

organizations are becoming more 

vertically integrated by acquiring 

hospitals, physician practices, 

pharmacy benefit managers, specialty 

pharmacies, and other related health 

care businesses.227 228 Furthermore, 

there is evidence that this vertical 

integration is associated with higher 

health and prescription drug 

expenditures.229 230

In addition to the proposed regulatory 

changes, we are issuing a request for 

information seeking comment from the 

public on whether CMS could and 

should adopt policies, and if so, what 

potential policies it could or should 

adopt, regarding how the MA and Part 

D MLRs are calculated to help enable 

policymakers to address concerns 

surrounding vertical integration in MA 

and Part D. Based on the information we 

receive, CMS will consider additional 

rulemaking or guidance for future 

contract year rulemaking. Specifically, 

we are requesting comment, data, and 

examples regarding the following 

potential policies: 

• Establish parameters in MLR 

reporting that limit the amount of 

transfer payments that are incurred 

between related parties that can be 

included in the numerator, such as by 

limiting the amount for any service 

included in the numerator to be under 

a relative benchmark. 

• Revise definition of incurred claims 

to include profits earned by related 

parties as indirect remuneration to a 

Part D sponsor or MA organization and 

not allowable for inclusion in the MLR 

numerator. 

• Revise definition of incurred claims 

to include payments that are net of 

direct or indirect remuneration by or to 

the Parent Organization, in addition to 

the Part D sponsor. 

• Establish a framework for assessing 

transfer payments made to or by related 

parties by expanding related-party 

reporting requirements in the MLR. 

CMS specifically invites comment on 

the kind of information CMS could 

collect about transfer payments to be 

able to assess what portions of such 

payments should be reported in the 

MLR numerator. 

• We also request comment on the 

type of information we could collect to 

better define types of vertical integration 

or related party relationships that exist 

in the health insurance market. 

• Other frameworks or policies not 

enumerated here. 

Please note that this is a request for 

information only and is issued solely for 

information and planning purposes. 

9. Technical Correction (§ 422.2420) 

In the course of this rulemaking, we 

noticed the need for a technical 

correction at regulation 

§ 422.2420(c)(2)(iv), which specifies that 

Federal income tax-exempt MA 

organization community benefit 

expenditure payments may be deducted 

up to a specific limit when calculating 

the MLR. The regulation text currently 

refers to Part D sponsors in two places 

when it should refer to MA 

organizations, and thus we propose to 

make the correction. 

10. Proposal To Add Provider Payment 

Arrangement Reporting in the Medicare 

MLR Reporting Regulations 

(§§ 422.2460 and 422.2490) 

Alternative payment models (APMs) 

have become increasingly prevalent in 

the health care system.231 In addition, 

CMS continues to test different valuebased programs to pay providers based 

on quality, rather than quantity of 

care.232 233 234 APMs are arrangements 

under which providers have added 

incentives to provide high-quality and 

cost-effective care, which can apply to 

a clinical condition, episode of care, or 

patient population.235 Researchers and 

stakeholders, through the Request for 

Information on MA data, have raised 

concerns that there is limited public 

information available about APMs 

outside of Traditional Medicare.236 237 In 

addition, researchers have raised 

concerns that these payment 

arrangements may not be transparent 

and could lead to increases in reported 

claims spending in the Medicare MLR, 

particularly when the insurer and 

provider are the same business entity or 

very closely tied together.238

Furthermore, stakeholders have called 

on CMS to collect more data on valuebased payment arrangements between 

providers and plans. 239

Therefore, to improve transparency 

and oversight of the use of Medicare 

Trust Fund dollars, we are proposing to 

collect additional details regarding plan 

expenditures categorized by different 

provider payment arrangements.240

Building on the existing Medicare Part 

C reporting requirements, we propose 

simplified provider payment 

arrangement categories for ease of 

reporting as we believe the streamlined 

categories will provide sufficient 

information to help inform the accuracy 

of MLR submissions, and value of 

services provided to MA enrollees.241

Specifically, we propose to amend 

§ 422.2460(a) so the regulation text 

explicitly provides that the MLR report 

submitted to CMS includes aggregate 

expenditures by provider payment 

arrangement type in MA. Under our 

proposed amendment, paragraph (a) of 

§ 422.2460 would state that, except as 

provided in paragraph (b), for each 

contract year, each MA organization 

must submit to CMS, in a timeframe and 

manner we specify, a report that 

includes the data needed to calculate 

and verify the MLR and remittance 

amount, if any, for each contract, 


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242 https://www.cms.gov/priorities/innovation/ 

innovation-models/health-care-payment-learningand-action-network. 

243 https://hcp-lan.org/workproducts/apmmethodology-2023.pdf. 

244 https://hcp-lan.org/workproducts/apmrefresh-whitepaper-final.pdf. 

245 88 FR 22189. 

246 88 FR 22187. 

including the amount of incurred claims 

for Medicare-covered benefits, 

supplemental benefits, provider 

payment arrangements, and prescription 

drugs; expenditures on quality 

improving activities; non-claims costs; 

taxes; licensing and regulatory fees; total 

revenue; and any remittance owed to 

CMS under § 422.2410. 

If our proposal to amend our 

regulations to require additional MLR 

data is finalized, we intend to make 

changes to the MLR Reporting Tool. We 

will revise the MLR Reporting Tool to 

add separate fields to capture various 

categories of expenditures for provider 

payment arrangements. Specifically, we 

propose to collect the following sample 

list of three categories of provider 

payment arrangements ordered from 

lowest to highest financial 

accountability for providers: FFS, 

APMs, and population-based payments. 

These proposed categories of provider 

payment arrangements are based on the 

Health Care Payment Learning & Action 

Network (HCPLAN) APM framework 

and ongoing measurement effort in 

order to reduce the reporting burden on 

stakeholders.242 FFS payment 

arrangements are typically based on FFS 

payments in which providers are paid 

for each service that is billed by the 

patient’s insurer and may or may not be 

linked to pay-for-performance or quality 

payments to improve quality 

performance such as care coordination 

fees or bonuses for reporting data. APMs 

may include upside and/or downside 

risk such as shared-savings linked to 

utilization, a clinical episode, or 

procedure-based bundled payments. 

Providers who meet quality, and cost or 

utilization targets may receive shared 

savings, and/or be held financially 

accountable for missing performance 

measures designed to deliver care to 

patients at the right time, place, and 

level of intensity. Finally, in population 

based payments providers are paid 

through capitated payments for 

comprehensive treatment of specific 

conditions, bundled services such as 

oncology care, or a global budget that is 

not condition specific, but is linked to 

quality. These comprehensive payment 

arrangements are designed to pay 

providers a percentage of, or the full 

premium. Providers are then fully 

financially accountable for the delivery 

of person-centered care through 

coordinated preventive health, health 

improvement, acute and chronic care 

services.243 244

We believe it is appropriate for CMS 

to retain flexibility to modify the scope 

of the data fields and the specific list of 

provider payment arrangements 

required to be reported on the MLR 

Reporting Template. Maintaining this 

flexibility will allow CMS to collect data 

that is sufficiently detailed to enable us 

to understand benefit expenditures and 

verify and increase accountability for 

the accuracy of MLR calculation. We 

believe the proposed amendment to 

§ 422.2460(a) will provide us with the 

flexibility to modify the scope of data 

fields and categories required for 

expenditures under various provider 

payment arrangements. The intent of 

this proposed rule is not to create a 

static MLR report; rather this rule is 

intended to enable reporting 

requirements that support the program 

needs, such as supporting MLR 

calculation, verifying data reporting 

accuracy, gaining insight into 

expenditures under various provider 

payment arrangements, and providing 

transparency into program 

expenditures. 

Modifications to the MLR data 

requirements for expenditures under 

provider payment arrangements will be 

set forth in a revision to the MLR 

Paperwork Reduction Act package 

(CMS–10476, OMB 0938–1232) and 

made available to the public for review 

and comment under the standard PRA 

process which includes the publication 

of 60- and 30- day Federal Register 

notices and the posting of the collection 

of information documents on our PRA 

website. The sample list of provider 

payment arrangements in the proposed 

rule should be viewed as examples of 

the types of categories CMS is interested 

in collecting based on the APM 

framework described above. We will set 

forth data reporting requirements in a 

revised package as required by the PRA. 

This package will be published in the 

Federal Register and be available for 

public comment. 

We solicit comment on whether the 

sample list of categories of provider 

payment arrangements include the 

appropriate breakouts for separating out 

incurred claims in the MLR Reporting 

Tool. We are interested in feedback that 

addresses whether we should increase 

or decrease the number of categories, as 

well as suggestions for clarifications, 

alternative categories, or for 

consolidating categories. Given the 

differences in provider payment 

arrangements between MA and Part D, 

CMS is not proposing to add these 

requirements to the Medicare MLR 

reporting for the Part D portion of MA– 

PD plans or standalone Part D plans at 

this time at § 423.2460(a). We are 

interested in the extent to which the 

proposed payment arrangement 

reporting in the Medicare MLR report 

applies to Part D and potential provider 

payment arrangements for Part D. 

Finally, we do not intend to release 

the provider payment arrangements data 

we collect publicly unless it is 

deidentified and reported as aggregate 

totals. Specifically, we propose to add 

an exclusion to the data release at 

§ 422.2490(b)(7) to exclude any provider 

payment arrangement data that is not 

reported on a deidentified basis and that 

is not reported on an aggregate total 

basis. We solicit comment on whether 

there is additional sensitivity around 

expenditures under provider payment 

arrangements, such that public release 

of data concerning those expenditures 

would be harmful. 

U. Enhancing Rules on Internal 

Coverage Criteria § 422.101 

In the final rule titled ‘‘Medicare 

Program; Contract Year 2024 Policy and 

Technical Changes to the Medicare 

Advantage Program, Medicare 

Prescription Drug Benefit Program, 

Medicare Cost Plan Program, and 

Programs of All-Inclusive Care for the 

Elderly,’’ which appeared in the Federal 

Register on April 12, 2023 (88 FR 

22120) (hereinafter referred to as the 

‘‘April 2023 final rule’’), we codified 

regulations that clarified the obligations 

and responsibilities for MA 

organizations in covering basic benefits 

and established guardrails for when MA 

organizations may develop and use 

coverage criteria to achieve better 

alignment with Traditional Medicare.245

We clarified at § 422.101(b)(2) that 

statutes and regulations that set the 

scope of coverage in the Traditional 

Medicare program are applicable to MA 

organizations in setting the scope of 

basic benefits that must be covered by 

MA plans.246 We codified requirements 

for making medical necessity 

determinations at § 422.101(c)(1), which 

includes using applicable coverage 

criteria in Traditional Medicare laws, 

CMS’s national coverage determinations 

(NCDs), applicable local coverage 

determinations (LCDs), and—when 

Traditional Medicare coverage criteria 

are not fully established—internal 

coverage criteria. We also codified 


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247 CMS National Coverage Analysis Evidence 

Review Guidance Document (August 7, 2024) 

available at https://www.cms.gov/files/document/ 

cms-evidence-review2024pdf.pdf;; Revised Process 

for Making National Coverage Determinations 78 FR 

48164 (August 7, 2013) available at https://

www.cms.gov/medicare/coverage/determination

process/downloads/fr08072013.pdf; and Medicare 

Program Integrity Manual Chapter 13-Local 

Coverage Determinations (February 2, 2019) 

available at: https://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/Downloads/ 

pim83c13.pdf. 

specific requirements at § 422.101(b)(6) 

that determine when MA organizations 

may use internal coverage criteria, what 

the criteria must be based on, and rules 

for making the internal coverage criteria 

publicly accessible. Finally, we codified 

enrollee protections related to the use of 

prior authorization (at § 422.112(b)(8)) 

and required MA organizations to 

establish a utilization management 

committee that reviews and approves all 

plan utilization management policies (at 

§ 422.137). These rules were applicable 

to coverage for MA organizations 

beginning January 1, 2024. 

Since the issuance of the April 2023 

final rule, CMS has received numerous 

questions about the application of these 

rules. As a result, we issued a memo 

titled ‘‘Frequently Asked Questions 

related to Coverage Criteria and 

Utilization Management Requirements 

in CMS Final Rule (CMS–4201–F),’’ on 

February 6, 2024 (hereinafter referred to 

as the ‘‘February 2024 HPMS memo’’) to 

provide answers to commonly asked 

questions and provide additional 

clarifying information to MA 

organizations about how these new 

rules apply to basic benefits. 

Additionally, through CMS account 

manager engagement with MA 

organizations, incoming inquiries from 

industry stakeholders, and our ongoing 

2024 program audits, we have learned a 

great deal about common 

misunderstandings related to these new 

rules and where these new policies 

could be further clarified with 

additional rulemaking to achieve the 

intended goal of ensuring access to 

medically necessary care for MA 

enrollees. Therefore, we are proposing 

here to build upon and enhance the 

regulations from the April 2023 final 

rule, specifically those related to the use 

of internal coverage criteria, by defining 

the phrase ‘‘internal coverage criteria,’’ 

establishing policy guardrails to 

preserve access to basic benefits, and 

adding more specific rules about 

publicly posting internal coverage 

criteria content on MA organization 

websites. MA organizations’ coverage of 

and responsibility to provide basic 

benefits is subject to the mandate in 

section 1852(a)(1) of the Act that MA 

plans cover Medicare Part A and Part B 

benefits (subject to specific, limited 

statutory exclusions) and, thus, to 

CMS’s authority under section 1856(b) 

of the Act to adopt standards to carry 

out the MA provisions. These proposals 

will further implement the requirements 

set forth in section 1852 of the Act and 

§§ 422.100 and 422.101, which require 

MA organizations to furnish all 

reasonable and necessary Part A and B 

benefits and are therefore proposed 

pursuant to CMS’s authority under 

section 1856(b) of the Act. 

1. Using Internal Coverage Criteria To 

Interpret or Supplement General 

Provisions 

In the April 2023 final rule, we 

codified at § 422.101(b)(6)(i) that MA 

organizations may apply internal 

coverage criteria when coverage criteria 

under Traditional Medicare are not fully 

established in three specific 

circumstances. In § 422.101(b)(6)(i)(A), 

we explained that one circumstance 

when it is appropriate to use internal 

coverage criteria is when additional, 

unspecified criteria are needed to 

interpret or supplement general 

provisions in order to determine 

medical necessity consistently. We 

required that MA organizations must 

demonstrate that the additional criteria 

the MA organizations apply provide 

clinical benefits that are highly likely to 

outweigh any clinical harms, including 

from delayed or decreased access to 

items or services. The NCDs and LCDs 

that MA plans must follow are 

developed through rigorous evidence 

review processes 247 with public input 

to identify gaps or lack of clarity in a 

proposed policy; as a result, the 

evidence-based coverage criteria are as 

specific as possible upon finalization. It 

is only in the rare instance when an 

NCD or LCD is lacking in specificity or 

clarity, that we would consider internal 

coverage criteria to be permissible to 

interpret or supplement general 

provisions under 422.101(b)(6)(i)(A). 

Our intent with this requirement was to 

allow MA organizations to interpret or 

supplement the plain language of 

existing and applicable Medicare 

coverage and benefit criteria (as stated 

in applicable Medicare statutes, 

regulations, NCDs, or applicable LCDs) 

when needed, but also only when the 

additional criteria protect patient safety 

and outweigh any risks of harm or 

decreased access to the items or 

services. However, we believe this 

regulatory text needs to be refined to 

more clearly state our intent about 

interpreting existing policies and to 

achieve our goal of protecting patients 

without decreasing access to medically 

necessary care. 

First, we propose to replace the term 

‘‘general provisions’’ at 

§ 422.101(b)(6)(i)(A) with ‘‘the plain 

language of applicable Medicare 

coverage and benefit criteria.’’ The term 

‘‘general provisions’’ was meant to 

encapsulate all forms of applicable 

Medicare coverage and benefit rules that 

exist in statute, regulation, NCD, or 

applicable LCD. These general 

provisions already exist as Medicare 

coverage policies at the time that the 

MA organization is required to apply 

them to make a determination about 

coverage. We propose to add the term 

‘‘plain language’’ in regulation text to 

make it explicitly evident that internal 

coverage criteria may only be used to 

supplement or interpret already existing 

content within these Medicare coverage 

and benefit rules. In other words, 

internal coverage criteria cannot be used 

to add new, unrelated (that is, without 

supplementary or interpretive value) 

coverage criteria for an item or service 

that already has existing, but not fully 

established, coverage policies. This also 

supports the current requirement at 

§ 422.101(b)(6)(ii)(C) that MA 

organizations must ‘‘identify the general 

provisions that are being supplemented 

or interpreted’’ in the publicly 

accessible material. It was our intent 

that the MA organization identify the 

plain language of the applicable 

Medicare coverage and benefit criteria 

that they are interpreting or 

supplementing in the publicly available 

material and provide an explanation of 

the rationale that supports the adoption 

and application of the internal coverage 

criteria. Therefore, we also propose to 

make conforming edits to the ‘‘publicly 

accessible’’ requirements at 

§ 422.101(b)(6)(ii)(C) to replace the term 

‘‘general provisions’’ with ‘‘the plain 

language of applicable Medicare 

coverage and benefit criteria.’’ 

Second, we propose to remove the 

existing requirement at 

§ 422.101(b)(6)(i)(A) that the MA 

organization must demonstrate that the 

additional criteria provide clinical 

benefits that are highly likely to 

outweigh any clinical harms, including 

from delayed or decreased access to 

items or services. In our examination of 

publicly available internal coverage 

criteria since the rule became effective 

on January 1, 2024, we have found that 

an assessment about whether the criteria 

provide clinical benefits that are highly 

likely to outweigh any clinical harms is 

difficult to definitively prove through 

evidence and, as a result, enforce as a 

policy. We have observed numerous 

instances of MA organizations simply 


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and baldly stating that their internal 

coverage criteria provide clinical 

benefits that are highly likely to 

outweigh any clinical harms, but we 

have not seen much in the way of 

evidence in the information provided by 

the MA organizations that definitively 

proves this to be true. Often, the clinical 

benefits that are cited by the MA 

organizations are simply the avoidance 

of potential risks or harms associated 

with the relevant healthcare item or 

service at issue. We have found that it 

is difficult to measure the probability 

that the criteria cited and applied by the 

MA organizations will (or may) have a 

net positive effect over the potential 

risks of not applying the criteria. 

Further, the qualitative explanations 

that the MA organizations have asserted 

as to why the benefits of the criteria 

used are highly likely to outweigh any 

harms are not often supported with 

reliable evidence. For these reasons, we 

propose to remove the ‘‘clinical benefits 

that are highly likely to outweigh any 

clinical harms’’ requirement in both 

§ 422.101(b)(6)(i)(A) and (ii)(C), and 

replace it with two important policy 

guardrails in new paragraph (iv) that 

will apply to all internal coverage 

criteria adopted under paragraph 

(b)(6)(i)—not just internal coverage 

criteria that are authorized under 

§ 422.101(b)(6)(i)(A). 

As a possible alternative, we solicit 

comment on replacing the existing 

requirement at § 422.101(b)(6)(i)(A) that 

the MA organization must demonstrate 

that the additional criteria provide 

clinical benefits that are highly likely to 

outweigh any clinical harms with a 

requirement that the MA organization 

must demonstrate through evidence that 

the additional criteria explicitly support 

patient safety. We solicit comment on 

whether this approach is clearer than 

the current standard and how we could 

define patient safety in a way that MA 

organizations understand how to 

comply with the rule. 

Finally, unrelated to our policy 

proposal to modify paragraph (A), we 

propose to make a minor change at 

§ 422.101(b)(6)(i)(B) to state that NCDs 

or applicable LCDs include flexibility 

that explicitly allows for discretionary 

coverage by the MA organization in 

circumstances beyond the specific 

indications that are listed in an NCD or 

applicable LCD. The addition of the 

word ‘‘discretionary’’ is meant to make 

clear that when an NCD or applicable 

LCD provides flexibility for the 

Medicare Administrative Contractor 

(MAC) to cover or not cover the item or 

service beyond the specific indications 

listed, the coverage or non-coverage of 

the item or service by the MA 

organization is purely discretionary and 

is not guaranteed. 

2. Definition of Internal Coverage 

Criteria 

In the April 2023 final rule, we 

codified at § 422.101(b)(6) that MA 

organizations may create publicly 

accessible internal coverage criteria that 

are based on current evidence in widely 

used treatment guidelines or clinical 

literature when coverage criteria are not 

fully established in applicable Medicare 

statutes, regulations, NCDs or LCDs. We 

further defined what we meant by 

‘‘coverage criteria are not fully 

established’’ and ‘‘publicly accessible’’ 

at § 422.101(b)(6)(i) and (ii), 

respectively, but we did not provide a 

definition of ‘‘internal coverage 

criteria.’’ Over the past year, through 

engagements with stakeholders, we have 

found that various MA organizations 

have interpreted the meaning of 

‘‘internal coverage criteria’’ differently. 

For example, some MA organizations 

are not aware that coverage criteria from 

third parties (entities other than CMS or 

the MA organization) can be considered 

internal coverage criteria of the MA 

organization when the organization 

adopts the criteria (or criterion) that 

contain policies or measures that cannot 

be found in Medicare laws, NCDs, or 

LCDs. Another MA organization 

believed that evidence found in articles 

or studies cited in the bibliography 

section of an LCD, but not discussed or 

listed in the coverage guidance section, 

could be applied as part of the LCD and 

not considered internal coverage criteria 

of the MA plan. A different MA 

organization wondered whether criteria 

and policies found in CMS manual 

guidance should be considered internal 

coverage criteria. Finally, some 

organizations are just not aware that 

their long-established coverage policies 

contain internal coverage criteria 

because they have been supplementing 

existing Traditional Medicare policies 

for years to fill in gaps where coverage 

criteria do not specify all possible 

circumstances where coverage of a Part 

A or Part B item or service may be 

available for a beneficiary. These are 

just some of the examples that we have 

been made aware of, and we believe 

there are other misunderstandings 

throughout the plan community. 

Therefore, we are proposing additional 

rules to define the term and clarify what 

CMS considers ‘‘internal coverage 

criteria.’’ 

We propose new regulatory text at 

§ 422.101(b)(6)(iii) to provide clarity on 

these topics for MA organizations and to 

further protect beneficiaries by ensuring 

equal access to these basic benefits. 

More specifically, we propose to define 

internal coverage criteria as any 

policies, measures, tools, or guidelines, 

whether developed by an MA 

organization or a third party, that are 

not expressly stated in applicable 

statutes, regulations, NCDs, LCDs, or 

CMS manuals and are adopted or relied 

upon by an MA organization for 

purposes of making a medical necessity 

determination at § 422.101(c)(1). We 

explain in regulation text that this 

includes any coverage criteria that 

restrict access to, or payment for, 

medically necessary Part A or Part B 

items or services based on the duration 

or frequency, setting or level of care, or 

clinical effectiveness of the care. 

First and foremost, we find it 

important to reiterate that internal 

coverage criteria are inherently 

‘‘internal’’ to the MA plan that utilizes 

them because they are a policy, 

measure, tool, or guideline that does not 

exist in applicable Medicare coverage or 

benefit rules. Further, other MA plans 

are not required to use the criteria and 

therefore it would be an element of 

coverage specific to the MA plan. This 

includes criteria used to further 

interpret or supplement the plain 

language of applicable Medicare 

coverage and benefit criteria because 

any coverage criteria or guidelines that 

are not contained in the actual statutes, 

regulations, NCDs, or applicable LCDs, 

or addressed in CMS manual guidance 

interpreting or explaining such criteria 

or guidelines would be considered nonMedicare criteria. For example, using 

information or evidence to form 

coverage criteria not found in the plain 

language of an LCD, but found in an 

article or study cited in the bibliography 

of an LCD, would be an example of an 

MA plan using internal coverage 

criteria. Only coverage criteria and 

policies found in the NCD, applicable 

LCD, related statutes or regulations, or 

addressed in CMS manual guidance 

interpreting related statutes or 

regulations, are not subject to the rules 

at § 422.101(b)(6); all other coverage 

criteria applied by an MA organization 

would be considered internal coverage 

criteria. 

Based on this proposed definition, we 

do not consider content and information 

found in CMS published manuals (e.g., 

Medicare Managed Care Manual, 

Medicare Program Integrity Manual, 

Medicare Benefit Policy Manual) to be 

internal coverage criteria under 

§ 422.101(b)(6). As we explained in the 

April 2023 final rule, these manuals 

contain significant explanations and 

interpretations of Traditional Medicare 

laws governing Part A and Part B 

benefits, most of it longstanding, to 


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248February 2024 HPMS memo, page 2. 

provide instructions and procedures for 

day-to-day operations for those 

responsible for administering the 

Medicare program and making coverage 

decisions on individual claims. We 

expect that MA plans will consult these 

manuals without the burden of having 

to justify their clinical or evidentiary 

value as required for internal coverage 

criteria under § 422.101(b)(6) (both 

currently and under the revisions we are 

proposing). 

We have also received questions from 

MA organizations about whether 

information in Referenced Local 

Coverage Determination articles are 

considered internal coverage criteria 

when used to make coverage decisions. 

Referenced Local Coverage 

Determination articles are issued by 

Medicare Administrative Contractors 

(MACs) to provide coding/billing 

guidelines and instructions for a 

particular LCD and do not contain 

coverage criteria; that is the role of the 

LCD. We have observed that MA 

organizations sometimes use these 

articles to see if specific item or service 

codes are contained in the article, and 

when the code is not listed, use the 

article as a basis to deny coverage. This 

is inappropriate because the LCD 

provides the criteria that must be 

satisfied for Medicare coverage; not the 

Referenced Local Coverage 

Determination article. Simply because 

an item or service code is not listed in 

the Referenced Local Coverage 

Determination article does not mean the 

item or service is not covered by the 

LCD. Additionally, Referenced Local 

Coverage Determination articles do not 

meet the standard of ‘‘current evidence 

in widely used treatment guidelines or 

clinical literature’’ because they do not 

exist to provide any clinical value. As 

a result, we clarify here that information 

contained in Referenced Local Coverage 

Determination articles may not be used 

as internal coverage criteria when 

making coverage decisions on basic 

benefits. 

We clarify in the proposed regulation 

text at § 422.101(b)(6)(iii) that criteria 

developed by a third-party may be 

considered internal coverage criteria 

when used by an MA organization in 

making medical necessity 

determinations. If the third-party 

coverage criteria contain additional 

policies, measures, tools or guidelines 

that do not exist in Medicare statute, 

regulation, manual, NCD or LCD, it 

would be internal coverage criteria of 

the MA organization when used or 

relied upon for the purpose of making 

a medical necessity decision regardless 

of who developed or created the 

coverage criteria. We note that many 

third-party developers of coverage 

criteria have synthesized existing 

Medicare coverage criteria found in 

statute, regulation, or NCD/LCD into 

proprietary workflows or tools and have 

filled in gaps or supplemented the 

Medicare coverage policies with 

additional measures, parameters, or 

policies in an attempt to more clearly 

identify and specify when the item or 

services should be covered. We clarify 

in this proposal that the application of 

additional measures or policies or more 

specific parameters that further define 

Medicare coverage policies are the 

application of internal coverage criteria 

under § 422.101(b)(6)(i)(A) and, 

therefore, must meet all regulatory 

requirements at § 422.101(b)(6). In some 

circumstances, there may be multiple 

parts of an NCD or applicable LCD that 

are being supplemented or interpreted 

with internal coverage criteria by an MA 

plan. Every instance where the plain 

language of a Medicare coverage rule is 

interpreted or supplemented is 

considered internal coverage criteria, 

and each instance must be based on 

current evidence in widely used 

treatment guidelines or clinical 

literature and must be publicly 

accessible. Therefore, we expect MA 

organizations to work closely with these 

third parties to understand whether the 

proprietary third-party criteria contain 

any standards or requirements that go 

beyond what is found in existing 

Medicare coverage criteria. Later in this 

preamble, we will discuss proposed 

requirements for how MA organizations 

should identify items and services that 

contain internal coverage criteria by 

listing them on their internal websites. 

One of the ways that internal coverage 

criteria can go undetected, and therefore 

would fail to be made publicly available 

by the MA organization as required by 

§ 422.101(b)(6), is when the criteria are 

built into an algorithm or software tool 

that generates a decision without an 

explicit understanding by the MA 

organization of the underlying factors 

that were considered by that algorithm 

or software tool in the making of the 

decision. As mentioned in the February 

2024 HPMS memo, an algorithm, 

artificial intelligence, or software tool 

can be used to assist MA plans in 

making coverage determinations, but it 

is the responsibility of the MA 

organization to ensure that the 

algorithm or artificial intelligence 

complies with all applicable rules for 

how coverage determinations by MA 

organizations are made.248 In section K 

of this proposed rule, we propose to 

define ‘‘automated system’’ as any 

system, software, or process that uses 

computation as whole or part of a 

system to determine outcomes, make or 

aid decisions, inform policy 

implementation, collect data or 

observations, or otherwise interact with 

individuals or communities or both. 

Automated systems include, but are not 

limited to, systems derived from 

machine learning, statistics, or other 

data processing or artificial intelligence 

techniques, and exclude passive 

computing infrastructure. Considering 

this definition of automated system in 

the context of the February 2024 HPMS 

memo, the MA organization must 

understand whether any internal 

coverage criteria have been built into an 

automated system, and if so, the specific 

details of the criteria that are built into 

the tool must be publicly accessible and 

meet our evidentiary standards at 

§ 422.101(b)(6). Furthermore, we are 

concerned that many automated systems 

can exacerbate discrimination and bias. 

An MA organization cannot avoid or 

evade responsibility for compliance 

with MA regulations and the MA 

contract by using these automated 

systems and the MA organization 

maintains ultimate responsibility for 

adhering to and otherwise fully 

complying with all regulations and 

terms and conditions of the MA 

organization’s contract with CMS. 

In the proposed definition of internal 

coverage criteria to be added at 

§ 422.101(b)(6)(iii), we use a nonexhaustive list of types of internal 

coverage criteria—called policies, 

measures, tools, or guidelines—that we 

have seen MA organizations use when 

making medical necessity 

determinations. Use of other terms to 

describe the internal coverage criteria 

would not change their underlying 

function and how they are used by MA 

organizations. Under the proposed 

definition at § 422.101(b)(6)(iii), internal 

coverage criteria include any coverage 

policies that restrict access to, or 

payment for, medically necessary Part A 

or Part B items or services based on the 

duration or frequency, setting or level of 

care, or clinical effectiveness of the care. 

Again, these types of policies are only 

considered internal when they are not 

articulated in applicable Medicare 

coverage and benefit criteria. It is 

common that MA organizations have 

policies such as these for health care 

items or services that are not covered by 

applicable Medicare statutes, 

regulations, NCDs, or LCDs. These types 

of policies are often used to comply 

with section 1862(a)(1)(A) of the Act, 

which requires that Part A and Part B 

benefits be reasonable and necessary for 


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249 42 CFR 422.503(b)(4)(vi). 

250https://www.ncbi.nlm.nih.gov/books/ 

NBK560806/. 

the diagnosis or treatment of illness, or 

injury, or to improve the functioning of 

a malformed body member. 

Additionally, MA organizations are 

required to have measures that prevent, 

detect, and correct fraud, waste, and 

abuse.249 Since internal coverage 

criteria may be used to assess the 

appropriateness of the health care 

service and could result in the denial of 

a medical necessity decision, it is 

important that they be based on current 

evidence in widely used treatment 

guidelines or clinical literature and 

made publicly available. 

It is important that we distinguish 

aspects of MA plan coverage that do not 

qualify as internal coverage criteria 

under the proposed definition. 

Utilization management processes and 

procedures are interventions that take 

place before, during, and after the 

clinical encounter 250 and include prior 

authorization (or pre-authorization), 

concurrent review, retrospective review, 

and claim review. MA organizations are 

required by section 1852(g)(1)(a) of the 

Act to have procedures for making 

determinations regarding whether an 

individual enrolled in the plan is 

entitled to receive a health service. 

Unless expressly prohibited by statute 

or regulation (for example, prior 

authorization for emergency services), 

MA organizations can decide which 

utilization management processes they 

wish to employ and are not required to 

follow or practice the same utilization 

management processes conducted by 

MACs in Traditional Medicare. These 

types of utilization management 

decisions about when to apply these 

interventions are not considered 

internal coverage criteria under 

§ 422.101(b)(6); but internal coverage 

criteria applied during one of these 

interventions (i.e., prior authorization) 

are subject to the rules at 

§ 422.101(b)(6). For example, 

Traditional Medicare may not require 

prior authorization for a specific 

healthcare service, but an MA 

organization may require prior 

authorization to confirm the presence of 

diagnoses and ensure the service is 

medically necessary. (See § 422.138.) In 

this case, any internal coverage criteria 

applied as part of the prior 

authorization process will be subject to 

rules related to internal coverage 

criteria, but the ability of the MA 

organization to decide which items and 

services are subject to prior 

authorization is not subject to rules on 

internal coverage criteria at 

§ 422.101(b)(6). Utilization management 

programs are necessary for MA 

organizations to manage the utilization 

of covered item and services and ensure 

that benefits are medically necessary in 

accordance with the statute and 

applicable regulations. 

Another example of coverage policies 

that fall outside the scope of internal 

coverage criteria are coverage 

requirements that are based on whether 

a provider is in-network or out-ofnetwork. An MA organization that offers 

an MA coordinated care plan may 

specify the networks of providers from 

whom enrollees may obtain services if 

the MA organization ensures that all 

covered services, including 

supplemental services, are available and 

accessible under the plan. In other 

words, network-based MA plans may 

limit access to Medicare-covered items 

and services via networks, as long as 

those networks provide adequate 

enrollee access (see for example, 

§§ 422.112(a)(1) and 422.114(a)) to 

services consistent with standards 

required by section 1852 of the Act (and 

other applicable laws) and established 

by CMS. Therefore, if an enrollee 

obtains a health care service outside of 

the plan’s specified network, it may be 

subject to non-coverage depending on 

the type of plan being offered (that is, 

Health Maintenance Organization, 

Preferred Provider Organization) and 

the MA plan’s written policies on 

provider network coverage. Coverage 

limitations based on network status are 

not internal coverage criteria under the 

proposed definition. 

3. Prohibitions 

CMS understands that MA 

organizations need to have coverage 

policies to make consistent medical 

necessity decisions and that appropriate 

limitations on the use of these policies 

is necessary, so we are relying on our 

authority under sections 1856(b) and 

1857(e)(1) of the Act to adopt regulatory 

limitations designed to implement and 

carry out the obligations of MA plans to 

cover benefits while protecting 

beneficiaries and ensuring their access 

to medically necessary covered benefits. 

Section 1852(a) of the Act requires MA 

plans to cover basic benefits and 

authorizes coverage of supplemental 

benefits. Ensuring access to covered 

benefits is an important policy goal for 

CMS in administering the MA program 

and we have concluded that it is 

necessary and appropriate to adopt 

specific requirements for how basic 

benefits are covered to ensure that MA 

enrollees receive the items and services 

for which benefits are available under 

Parts A and B. Therefore, based on these 

authorities, we are proposing two 

requirements that prohibit the use of all 

internal coverage criteria. 

First, we propose at 

§ 422.101(b)(6)(iv)(A) that a coverage 

criterion is prohibited when it does not 

have any clinical benefit, and therefore, 

exists to reduce utilization of the item 

or service. Section 1862(a)(1)(A) of the 

Act requires Traditional Medicare 

benefits to be reasonable and necessary 

for the diagnosis or treatment of illness 

or injury or to improve the functioning 

of a malformed body member. In the 

absence of an NCD or LCD, these 

decisions are made on a case-by-case 

basis after considering the individual’s 

particular factual situation. MA plans 

must consider clinical circumstances in 

making a decision as to whether Part A 

and Part B items and services are 

reasonable and necessary as well. Under 

this proposed requirement that the 

criterion must have a clinical benefit, 

the internal criterion must have a value 

that contributes to a determination of 

whether the benefit is reasonable and 

necessary under the statute. For 

example, if the evidence supporting use 

of an internal coverage criterion is 

rooted in managing care to reduce 

utilization of an item or service to a less 

costly alternative without any clinical 

value to the patient, the internal 

coverage criterion would be a violation 

of this proposed rule. 

Secondly, we propose at 

§ 422.101(b)(6)(iv)(B) that internal 

coverage criterion is prohibited when 

the criterion is used to automatically 

deny coverage of basic benefits without 

the MA organization making an 

individual medical necessity 

determination as required at 

§ 422.101(c)(1)(i). Internal coverage 

criteria that neither considers the 

individual medical necessity of the 

patient nor the clinical effectiveness of 

the care would be inconsistent with 

sections 1862 and 1852(g)(1)(A) of the 

Act. For instance, a coverage criterion 

that establishes a blanket policy to 

automatically deny access to a covered 

benefit in every circumstance without 

consideration of the enrollee’s medical 

history, physician’s recommendations, 

clinical notes, and when appropriate, 

involvement of the organization’s 

medical director would be a violation of 

this rule. Unless there is current 

evidence as described at § 422.101(b)(6) 

that the health care item or service is 

experimental or investigational, we 

would view this blanket policy as being 

designed to reduce the utilization of the 

item or service, establishing a barrier to 

potentially medically necessary care 

without the MA organization making an 

individual medical necessity 


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determination as required by law. This 

proposed rule is intended to ensure that 

MA enrollees have equal access to Part 

A and Part B benefits as other Medicare 

beneficiaries and that any coverage 

criteria used by the MA plan is done so 

in accordance with principles that 

support the reasonable and necessary 

standard under the Act. 

Both prohibitions being proposed 

herein at 422.101(b)(6)(iv), which apply 

to all internal coverage criteria used by 

an MA organization, provide important 

guardrails to ensure appropriate access 

to benefits in a way that CMS can 

objectively measure with evidence. We 

solicit comment on whether there are 

other prohibitions on internal coverage 

criteria that CMS should consider that 

support and promote access to 

medically necessary care in the MA 

program. We remind MA organizations 

that section 1852(b) of the Act and 

§ 422.110(a) prohibit an MA 

organization from denying, limiting, or 

conditioning the coverage or furnishing 

of benefits to individuals eligible to 

enroll in an MA plan offered by the 

organization on the basis of any factor 

that is related to health status. 

Additionally, § 422.100(f)(2) provides 

that plan designs and benefits may not 

discriminate against beneficiaries, 

promote discrimination, discourage 

enrollment, encourage disenrollment, 

steer subsets of Medicare beneficiaries 

to particular MA plans, or inhibit access 

to services. As a result, an MA 

organization that uses internal coverage 

criteria must comply with section 

1852(b) of the Act, § 422.110(a), and 

§ 422.100(f)(2) and may not discriminate 

on the basis of any factor that is related 

to the enrollee’s health status. CMS will 

continue to conduct routine monitoring 

and auditing of MA organizations, and 

through these processes, may discover 

that internal coverage criteria are being 

used that do not comply with rules at 

§ 422.101(b)(6) or the antidiscrimination rules mentioned herein. 

In these circumstances, CMS will utilize 

its current compliance and enforcement 

processes to determine if any action 

should be taken for the non-compliance 

and to remediate the issue. We have 

strengthened our audit processes and 

will consider new compliance and 

reporting activities to examine MA 

organization’s compliance with these 

proposed rules. 

4. Public Availability 

In the April 2023 final rule, we 

codified at § 422.101(b)(6)(ii) that when 

MA organizations use internal coverage 

policies, they must provide the internal 

coverage criteria in use, a summary of 

evidence that was considered during the 

development of the criteria, a list of 

sources of such evidence, and an 

explanation of the rationale that 

supports the adoption of the coverage 

criteria in a publicly accessible way. We 

did not require specific mechanisms for 

how the information must be made 

publicly accessible in an effort to 

provide MA organizations flexibility in 

complying with these new 

requirements. We further explained in 

the February 2024 HPMS memo that 

MA organizations are required to have 

a website under § 422.111(h)(2) and that 

use of that website for purposes of 

posting this information is appropriate. 

We further elaborated in the memo that 

publicly accessible means generally 

accessible to CMS, enrollees, providers, 

researchers, and other stakeholders 

without undue burden. Transparency in 

this area provides a measure of 

protection for enrollees and assurances 

that the coverage criteria are rational 

and supportable by current, widely used 

treatment guidelines and clinical 

literature. 

With the importance of this protection 

in mind, we propose to add more 

structure and detail to the public 

accessibility requirements to ensure that 

MA organizations are making this 

information available in a manner that 

is routinized and easy to follow. 

However, before we discuss the details 

of newly proposed requirements, first 

we propose to make an update to the 

terminology used in § 422.101(b)(6) to 

change the term ‘‘accessible’’ to 

‘‘available.’’ We understand that 

‘‘accessible’’ has other meanings and 

there are specific requirements for 

accessibility of online materials under 

section 504 that could make the term 

particularly confusing in this context. 

We believe that ‘‘available’’ more 

accurately describes our intent, which is 

that the information is publicly 

available to the people who need it. 

Therefore, we propose to update 

§ 422.101(b)(6) and § 422.101(b)(6)(ii) by 

replacing the word ‘‘accessible’’ with 

‘‘available.’’ This change does not 

negate or alter the obligations of MA 

organizations to ensure accessibility of 

online materials in accordance with 

section 504 or other laws. 

Over the course of the past year, we 

have reviewed numerous MA 

organization websites to observe how 

they are posting the currently required 

content. We have seen a variety of 

different approaches; some with 

dedicated web pages that organize the 

Medicare item or service by vendor, and 

others that build the required content 

into very detailed coverage policy 

documents. Both approaches often 

include hyperlinks to vendor criteria 

that contain the content required under 

§ 422.101(b)(6)(ii). In total, we have 

found that the average person faces 

difficulty accessing an MA 

organization’s website for the purpose of 

determining whether or not the MA 

plan applies internal coverage criteria to 

the particular Medicare item or service. 

Therefore, we are proposing 

requirements to make this required 

information more understandable, 

readable, and easier to locate. 

First, for consistency in terminology, 

we propose to update § 422.101(b)(6)(ii) 

which currently states, ‘‘For internal 

coverage policies . . .’’ to read ‘‘For 

internal coverage criteria.’’ Second, we 

are proposing to update the 

requirements in paragraphs (b)(6)(ii)(A)– 

(C) to be more specific about the 

information that must be publicly 

accessible. In paragraph (A), which 

requires posting each internal coverage 

criterion in use, we are adding that each 

internal coverage criterion used by the 

MA organization in making medical 

necessity decisions on Part A and Part 

B benefits must be clearly identified and 

marked as internal coverage criterion of 

the MA plan within coverage policies. 

We often see internal coverage criteria 

that are intertwined with, or that 

expand upon, NCD or applicable LCD 

coverage policies without any 

acknowledgement that the MA plan is 

applying additional criteria beyond 

what is found in the applicable NCD or 

LCD. Therefore, we are requiring that 

MA organizations examine and identify 

each internal coverage criterion being 

used and mark or label it as such within 

their policy documents for readers to 

understand that the specific internal 

criterion noted is being applied and may 

be specific to the MA plan. We are 

updating the word ‘‘criteria’’ to 

‘‘criterion’’ to make it clear that we 

expect each single coverage criterion 

used to be listed and identified, noting 

that there may be more than one 

criterion that is applied to a given 

regulation, NCD, or applicable LCD. In 

paragraph (B), we are proposing to add 

to the list of evidence that supports the 

coverage criterion by requiring that the 

evidence be connected to the internal 

coverage criterion with a corresponding 

footnote. This will allow readers to 

understand which evidence supports 

the use of which internal coverage 

criterion within the coverage policies. In 

paragraph (C), we are making 

corresponding edits to mirror the 

proposed changes previously discussed 

in § 422.101(b)(6)(i)(A) by replacing 

‘‘general provisions’’ with ‘‘the plain 

language of applicable Medicare 

coverage and benefit criteria’’ and 


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251We also note that the requirements for 

accessibility of online materials under Section 504 

of the Rehabilitation Act apply to this information 

as well. See 29 U.S.C. 794; 45 CFR pt. 84. 

removing the ‘‘clinical benefits that are 

highly likely to outweigh any clinical 

harms’’ requirement. Additionally, we 

are changing ‘‘criteria’’ to ‘‘criterion’’ in 

§ 422.101(b)(6)(ii)(C) to make it clear 

that we require an explanation of the 

rationale that supports adoption of each 

individual internal coverage criterion in 

use. 

In new paragraph (D), we are 

proposing that by January 1, 2026, MA 

organizations must publicly display on 

the MA organization’s website a list of 

all items and services for which there 

are benefits available under Part A or 

Part B where the MA organization uses 

internal coverage criteria when making 

medical necessity decisions. The list of 

items and services on the website must 

include the information in paragraph 

(b)(6)(ii)(A) through (C) (explicitly or by 

connecting directly to that information 

through a hyperlink) and include the 

vendor’s name when using a third-party 

vendor’s criteria. The MA organization’s 

internal coverage criteria web page must 

be displayed in a prominent manner 

and clearly identified in the footer of the 

website. The web page must be easily 

available to the public, without barriers, 

including but not limited to ensuring 

the information is available free of 

charge, without having to establish a 

user account or password, without 

having to submit personal identifying 

information, in a machine-readable 

format with the data contained within 

that file being digitally searchable and 

downloadable, and include a txt file in 

the root directory of the website domain 

that includes a direct link to the 

machine-readable file to establish and 

maintain automated access. We believe 

that by making this information more 

easily available to automated searches 

and data pulls, it will help third-parties 

and researchers conduct studies to 

examine the clinical value of the 

internal coverage criteria being used by 

MA plans.251

In addition to the public posting of 

this content, we are considering an 

annual reporting to CMS of the 

information in § 422.101(b)(6)(ii)(A)–(D) 

under our reporting requirements listed 

at § 422.516(a). We believe this 

information is critical to ensuring 

appropriate access to Part A and Part B 

benefits in the MA program and there is 

value in comparing use of internal 

coverage criteria across all MA 

organizations. CMS would specify the 

format and collection of this 

information through the normal 

Paperwork Reduction Act (PRA) 

process. Further, we solicit comment on 

whether CMS should require a specific 

format for the information posted on the 

MA organization website and whether a 

standard template for the posted 

information would be helpful. 

Finally, we do not expect that any of 

the regulatory changes proposed in this 

section will have an impact on the 

Medicare Trust Fund. Use of internal 

coverage criteria by MA organizations is 

optional, and when used, helps MA 

organizations make consistent medical 

necessity decisions that are aligned with 

coverage rules in Traditional Medicare. 

We believe that most MA organizations 

are using internal coverage criteria that 

are supported by current evidence in 

widely used treatment guidelines or 

clinical literature, and therefore we do 

not believe that these regulatory 

proposals will significantly change 

utilization patterns of Part A or Part B 

items or services. These changes and 

protections promote transparency across 

MA organizations so enrollees can make 

informed choices on plan selection and 

know when to appeal an adverse 

coverage decision, and providers can be 

informed about the criteria they must 

satisfy when seeking coverage of items 

and services on behalf of their patients. 

If finalized, these proposed rules 

would be applicable beginning January 

1, 2026. We solicit comments on all 

aspects of these proposals. 

V. Clarifying MA Organization 

Determinations To Enhance Enrollee 

Protections in Inpatient Settings 

(§§ 422.138, 422.562, 422.566, 422.568, 

422.572, 422.616, and 422.631) 

We are proposing four modifications 

to existing regulations at 42 CFR part 

422, subpart M, to clarify and strengthen 

existing rules related to organization 

determinations. First, we are proposing 

to clarify the rule that if an enrollee has 

no further liability to pay for services 

furnished by a Medicare Advantage 

(MA) organization, a determination 

regarding these services is not subject to 

appeal. Specifically, we are clarifying 

that an enrollee’s further liability to pay 

for services cannot be determined until 

an MA organization has made a 

determination on a request for payment. 

Second, we are proposing to modify the 

definition of an organization 

determination to clarify that a coverage 

decision made by an MA organization 

contemporaneously to when an enrollee 

is receiving such services, including 

level of care decisions (such as inpatient 

or outpatient coverage), is an 

organization determination subject to 

appeal and other existing requirements. 

Third, we are proposing to strengthen 

the notice requirements to ensure that a 

provider who has made a standard 

organization determination or integrated 

organization determination request on 

an enrollee’s behalf, or when it is 

otherwise appropriate, receives notice of 

the MA organization’s decision. Finally, 

we are proposing a change to the 

reopening rules to curtail an MA 

organization’s authority to reopen and 

modify an approved authorization for an 

inpatient hospital admission on the 

basis of good cause for new and material 

evidence. We address each of these 

proposals in detail below. 

1. Clarifying When a Determination 

Results in No Further Financial Liability 

for the Enrollee (§ 422.562) 

Section 1852(g)(1)(A) of the Social 

Security Act (the Act) requires an MA 

organization to have a procedure for 

making determinations regarding 

whether an enrollee is entitled to 

receive a health service and the amount 

(if any) that the individual is required 

to pay with respect to such service. 

Under section 1852(g)(2) of the Act, an 

MA organization must provide for 

reconsideration of an adverse 

determination upon an enrollee’s 

request. The existing regulations at part 

422, subpart M set forth the 

administrative appeals process available 

to enrollees who wish to dispute an 

organization determination made by an 

MA organization. Section 422.562(c) 

describes limits on the applicability of 

the administrative appeals process in 

part 422, subpart M. The limitation in 

§ 422.562(c)(1) states that if an enrollee 

receives immediate QIO review (as 

provided in § 422.622) of a 

determination of noncoverage of 

inpatient hospital care, then the enrollee 

is not entitled to review of that issue by 

the MA organization. The second 

limitation at § 422.562(c)(2) states that if 

an enrollee has no further liability to 

pay for services that were furnished by 

an MA organization, a determination 

regarding these services is not subject to 

appeal. 

The organization determination and 

reconsideration regulations of part 422, 

subpart M broadly distinguish between 

two categories of decisions: coverage 

decisions (that is, a decision on whether 

the MA organization will furnish, 

authorize, or arrange for an item, 

service, or Part B drug) and payment 

decisions (that is, a decision whether to 

pay or deny payment for services 

furnished to an enrollee). These 

divergent categories of organization 

determinations have distinct 

requirements related to processing 

timeframes (including the applicability 

of processing timeframe extensions), the 


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252We note that a state Medicaid agency has a 

specific right to appeal an adverse payment 

decision for a qualified Medicare beneficiary (QMB) 

or other full-benefit dually eligible individual for 

services in which the state Medicaid agency has 

made payment or may be liable, pursuant to 

§ 405.908 and incorporated into part 422, subpart M 

through § 422.562(d)(1). The right for a state 

Medicaid agency to appeal an adverse payment 

decision may exist even when § 422.562(c)(2) 

would otherwise preclude the right to appeal. 

253We note that the provision at § 422.562(c)(2) 

only applies to services ‘‘furnished by an MA 

organization’’ which, as we have explained, 

generally occurs when a contracted provider, as an 

agent of the MA organization, renders covered 

services to an MA organization’s enrollee. Section 

422.562(c)(2) does not limit the right for parties to 

appeal adverse payment determinations related to 

services provided by a non-contracted provider as 

non-contracted providers are not considered agents 

of an MA organization due to the lack of a mutual 

contractual relationship. Instead, non-contracted 

providers may become assignees of an enrollee by 

formally agreeing to waive any right to payment 

from the enrollee, in accordance with § 422.574(b), 

and then may utilize the administrative appeals 

process established at §§ 422.578 through 422.616 

to appeal adverse payment determinations in their 

capacity as an assignee of the enrollee. 

parties eligible to submit an 

organization determination or 

reconsideration request, notice 

requirements, and whether an MA 

organization must expeditiously process 

an organization determination or 

reconsideration request upon receiving 

a valid request. 

When a coverage request is received, 

or when the MA organization issues an 

unsolicited coverage decision related to 

ongoing services, the MA organization 

will apply applicable coverage criteria 

and either approve, furnish, arrange for, 

or deny coverage for the services at 

issue. An approved coverage decision 

should result in the enrollee receiving 

the services at issue and the MA 

organization making payment to the 

treating provider when a request for 

payment is eventually submitted. When 

a request for payment for furnished 

services is received without a 

previously approved coverage decision, 

the MA organization will apply 

coverage criteria and must either make 

payment or deny the request within the 

timeframes specified in the ‘‘prompt 

payment’’ provisions of § 422.520. In 

addition, the MA organization must 

calculate the enrollee’s applicable costsharing and/or financial liability for the 

furnished service (when issuing a 

partially or fully adverse decision) 

including considering applicable 

beneficiary protections related to plandirected care. ‘‘Plan-directed care’’ 

occurs when a contracted provider 

furnishes a service or refers an enrollee 

for a service that an enrollee reasonably 

believes is a plan-covered service. Upon 

receiving plan-directed care, an enrollee 

cannot be financially liable for more 

than the applicable cost-sharing for that 

service (see § 422.105). Accordingly, 

under existing § 422.562(c)(2), if a 

payment determination related to 

services furnished by a MA organization 

results in no remaining financial 

liability for the enrollee, including 

adverse decisions that fall within the 

plan-directed care beneficiary 

protections, the decision is not subject 

to the appeal requirements of part 422, 

subpart M.252 This means that neither 

the enrollee nor any other party may 

appeal an adverse payment decision 

under subpart M after an MA 

organization determines the enrollee is 

not financially liable for more than the 

applicable cost-sharing of the services 

for which payment was requested.253

CMS has historically interpreted the 

limitations of § 422.562(c)(2) to apply to 

payment determinations, not coverage 

decisions (that is, those addressed under 

§ 422.566(b)(3) and (4)). From a practical 

perspective, a coverage decision will 

affect the care an enrollee is to receive 

or is receiving in addition to the 

enrollee’s cost-sharing liability. 

Nevertheless, we have identified that 

some MA organizations misapply the 

appeal limitation provision of 

§ 422.562(c)(2) to certain coverage 

decisions, specifically those related to 

an enrollee’s inpatient admission or 

level of care. These MA organizations 

often improperly label these adverse 

coverage decisions as ‘‘contractual 

denials’’ or ‘‘payment decisions’’ even 

though no request for payment has been 

submitted and, oftentimes, the services 

are still being rendered at the time of the 

MA organization’s decision. We have 

seen instances, for example, where an 

MA organization will deny an enrollee 

coverage for ongoing inpatient services 

being received in a contracted hospital 

and take the position that because MA 

beneficiary protection policies on plandirected care prevent the enrollee from 

being financially liable for more than 

their applicable cost-sharing, when a 

request for payment is ultimately 

submitted, § 422.562(c)(2) prevents the 

enrollee from appealing the coverage 

denial. Consequently, these enrollees 

are left without an avenue to appeal 

decisions that directly affect their 

immediate medical care and may also 

alter the amount of their applicable costsharing if the enrollee’s level of care is 

changed from inpatient to outpatient 

during their hospital stay. Further, the 

application of § 422.562(c)(2) in this 

manner may also contravene section 

1852(g)(2) of the Act which requires MA 

organizations provide reconsideration of 

denials of enrollee coverage, in whole or 

in part, upon request by the enrollee 

involved. 

To eliminate potential confusion 

related to identifying when organization 

determinations may not be appealable 

due to the lack of enrollee financial 

liability, we propose modifying 

§ 422.562(c)(2) to clarify that the 

provision is only applicable to 

contracted provider payment disputes 

arising from a claim payment decision 

in which the enrollee has no additional 

financial liability. The reference to ‘‘no 

further liability to pay’’ in 422.562(c)(2) 

means the enrollee’s financial liability 

will not be affected by whether the 

payment determination is upheld or 

overturned. In scenarios where an 

enrollee may still have a balance due for 

their cost sharing amount, this amount 

would not be considered ‘‘further 

liability to pay’’ if this amount would 

not be affected by resolution of the 

payment dispute. 

Specifically, we are proposing to 

modify this paragraph to state that, 

based on an MA organization’s 

determination on a request for payment, 

if an enrollee has no further liability to 

pay for services that were furnished by 

an MA organization, a determination 

regarding these services is not subject to 

appeal. In other words, we are 

proposing to clarify that this limitation 

is only applicable if there’s been a claim 

payment determination, which 

necessarily requires a submission of a 

claim or other request for payment from 

a contracted provider or enrollee. 

Coverage decisions, whether approved 

or denied, will continue to be subject to 

the subpart M appeals process. Under 

our proposal, an enrollee would be 

considered potentially liable to pay for 

a service until the MA organization 

makes a determination in response to a 

request for payment, including the 

submission of a provider’s claim for the 

furnished service. 

We believe the proposed clarification 

to § 422.562(c)(2) properly reestablishes 

the intent to exclude contracted 

provider payment appeals from the 

subpart M administrative appeals 

process when the enrollee no longer has 

any interest in the dispute because the 

enrollee has received the services in 

question and has no further liability to 

pay for those services. In addition, the 

proposed clarification would safeguard 

enrollees’ right to appeal adverse 

coverage decisions that may affect the 

type, duration, or level of services to be, 

or being, furnished. However, simply 

because a payment decision does not 

implicate the subpart M administrative 

appeals process, an MA organization is 

not discharged of its obligation to pay 

its contracted providers for services 


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rendered. Section 1852(a)(1) of the Act 

and CMS regulations at § 422.101(a) and 

(b) require all MA organizations to 

provide coverage of, by furnishing, 

arranging for, or making payment for 

(emphasis added), all items and services 

that are covered by Part A and Part B of 

Medicare and that are available to 

beneficiaries residing in the plan’s 

service area. We expect MA 

organizations to establish networks of 

providers to deliver plan-covered 

benefits and pay them in accordance 

with terms of the contracts established. 

Failure to abide by contract terms and 

contract disputes can have a negative 

impact on providers, their ability to 

properly deliver benefits, and ultimately 

adversely impact patients in the health 

care system. 

2. Clarifying the Definition of an 

Organization Determination To Enhance 

Enrollee Protections in Inpatient 

Settings (§§ 422.138 and 422.566) 

Section 1852(g)(1)(A) of the Act 

requires MA organizations to have a 

procedure for making determinations 

regarding whether an enrollee is entitled 

to receive health services or payment 

under the program. In accordance with 

section 1852(g)(1)(A) of the Act, 

§§ 422.566 through 422.572 establish 

the requirements related to organization 

determinations. Existing § 422.566(b) 

defines an organization determination 

as any determination made by an MA 

organization that falls within a 

prescribed set of discrete actions. These 

include, at subsection (b)(3), an ‘‘MA 

organization’s refusal to provide or pay 

for services, in whole or in part, 

including the type or level of services, 

that the enrollee believes should be 

furnished or arranged for by the MA 

organization’’ and, at subsection (b)(4), 

the ‘‘[r]eduction, or premature 

discontinuation, of a previously 

authorized ongoing course of 

treatment.’’ Taken collectively, this 

means an organization determination 

may be made prior to the receipt of 

services (for example, prior 

authorization), after the receipt of 

services (for example, payment 

requests), or during receipt of services 

(for example, continuation or 

termination of services) the enrollee 

receives from either contracted or noncontracted providers. 

An ‘‘organization determination,’’ as 

defined by § 422.566, is a decision 

‘‘regarding the benefits an enrollee is 

entitled to receive under an MA plan 

. . . and the amount, if any, that the 

enrollee is required to pay for a health 

services’’ to include, among other 

actions, ‘‘the MA organization’s refusal 

to provide or pay for services, in whole 

or in part, including the type or level of 

services, that the enrollee believes 

should be furnished or arranged for by 

the MA organization.’’ When an MA 

organization makes an adverse 

organization determination (for 

example, denying coverage for a 

service), it must adhere to certain 

requirements that include providing 

notice of the decision to the enrollee in 

a format prescribed by CMS (see 

§ 422.568(e)), within designated 

timeframes (see §§ 422.568 and 

422.572), and, if the adverse decision 

was based on medical necessity, 

ensuring the decision was reviewed by 

a physician or other appropriate heath 

care professional with expertise in the 

field of medicine appropriate for the 

services at issue (see § 422.566(d)). In 

accordance with § 422.576, an 

‘‘organization determination is binding 

on all parties unless it is reconsidered 

under §§ 422.578 through 422.596 or is 

reopened and revised under § 422.616.’’ 

An enrollee or physician who is acting 

on behalf of the enrollee (regardless of 

their affiliation with an MA 

organization) may request an expedited 

reconsideration of an adverse 

organization determination concerning 

the type or level of services that the 

enrollee believes they should receive 

(see §§ 422.578 and 422.584(a)). 

However, pursuant to § 422.562(c)(2), if 

an ‘‘enrollee has no further liability to 

pay for services that were furnished by 

the MAO, a determination regarding 

these services is not subject to appeal.’’ 

Historically, we have interpreted the 

definition of an organization 

determination to include when an MA 

organization makes a coverage decision 

on the appropriateness of an inpatient 

admission, or the appropriateness of 

inpatient services (that is, a level of care 

determination), contemporaneously 

with an enrollee’s receipt of the services 

at issue. This would be true whether the 

MA organization ultimately approved 

the enrollee’s admission to a facility, 

determined that the enrollee’s level of 

care in the same facility should be 

reduced, or determined that the enrollee 

should be discharged (see §§ 422.620 

through 422.624). Accordingly, these 

decisions would have to comply with 

all applicable notice and appeal 

requirements for organization 

determinations and would be binding 

on all parties unless they are 

reconsidered under §§ 422.578 through 

422.596 or are reopened and revised 

under § 422.616. 

We acknowledge that many MA 

organizations understand these 

decisions are organization 

determinations subject to the existing 

rules in subpart M including, but not 

limited to, timely notice of the decision. 

However, through routine audits, 

feedback from the provider community, 

and discussions with MA organizations, 

CMS has identified circumstances 

where some MA organizations have 

misinterpreted the organization 

determination provisions to exclude 

decisions that rescind a previously 

authorized inpatient admission, deny 

coverage for inpatient services, or 

downgrade an enrollee’s hospital 

coverage from inpatient to outpatient 

(often either simultaneously denying 

inpatient coverage while approving 

coverage for outpatient observation 

services or instructing the provider to 

only bill for outpatient services when 

submitting a subsequent claim), when 

the decision is made concurrently to the 

enrollee receiving such services. These 

types of decisions most often occur 

while enrollees are receiving inpatient 

services in an in-network hospital and 

are at times referred to as ‘‘concurrent 

review decisions,’’ ‘‘level of care 

determinations,’’ ‘‘clinical utilization 

review decisions,’’ or ‘‘inpatient 

authorization denials.’’ For the sake of 

clarity and consistency in describing 

these types of decisions, we will use the 

term ‘‘concurrent review’’ for purposes 

of this rulemaking. 

We understand MA organizations 

conduct concurrent review on 

hospitalizations and other services that 

require review for continued care, such 

as long-term care stays in SNFs, 

LTACHs, or IRFs, HHA services, partial 

hospitalizations, or intensive outpatient 

programs. Such review includes 

utilization management activities that 

occur during inpatient level care, postacute care, or an ongoing outpatient 

course of treatment. In general, the 

concurrent review process includes 

obtaining necessary clinical information 

from the treating physician and other 

providers to determine medical 

necessity based on the clinical status of 

the enrollee and applicable Medicare 

coverage criteria. Concurrent review 

involves the evaluation of the 

appropriateness of the ongoing level of 

care, including decisions related to the 

extension of previously approved care. 

We offer the following example to 

illustrate a common scenario we have 

seen, although we note that certain 

details may vary depending on the MA 

organization making the decision. An 

enrollee will present to an in-network 

hospital and the treating physician will 

order the enrollee admitted to an 

inpatient status. During the admission 

process, the hospital will provide the 

enrollee’s MA organization with a 

Notice of Admission, in accordance 

with the contract between the hospital 


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254 We have received conflicting information on 

the nature of peer-to-peer discussions from MA 

organizations. Some describe the process as solely 

educational in nature and that it has no bearing on 

the prior decision. Other MA organizations appear 

to use the discussion either to supplement or as a 

part of a contracted provider’s appeal. 

255 We note that because an adverse concurrent 

review decision is a denial of inpatient hospital 

coverage, such a decision could also affect an 

enrollee’s eligibility for covered post-hospital 

extended care services furnished in a skilled 

nursing facility (SNF). Section 1861(i) of the Act 

requires Medicare beneficiaries receive at least 3 

consecutive days in a covered inpatient hospital 

stay within the preceding 30 calendar days in order 

to qualify for covered skilled SNF care. While we 

understand that most, if not all, MA organizations 

currently waive this coverage requirement, they are 

not required to continue to do so in future plan 

years. Therefore, if an MA organization that does 

not waive the 3-day inpatient hospital stay 

requirement makes an adverse concurrent review 

decision, the enrollee may not accrue the 3-day 

inpatient hospital stay necessary to receive covered 

skilled SNF care they otherwise could receive. A 

similar impediment to covered skilled SNF care 

could occur for enrollees that have opted into 

Traditional Medicare for the following year when 

an adverse concurrent review is made in the last 30 

days of the plan year. 

and MA organization, that alerts the MA 

organization of the admission but (in 

most circumstances) does not request 

approval for the admission. After 

receiving the Notice of Admission, the 

MA organization will monitor the 

enrollee’s condition by reviewing the 

medical documentation on its own 

accord and, when applicable, will notify 

the hospital that it has made an adverse 

concurrent review decision related to 

the enrollee’s inpatient admission or 

receipt of inpatient services on the basis 

that the enrollee’s condition does not 

meet certain inpatient coverage criteria. 

Accordingly, if the hospital submits an 

inpatient claim for the services, 

whenever it ultimately submits a 

request for payment, the MA 

organization will automatically deny 

payment for inpatient services based on 

the concurrent review decision. In its 

concurrent review decision, the MA 

organization may either approve 

outpatient observation services for the 

enrollee or suggest that the hospital bill 

the entire hospital stay as outpatient 

services. If the treating physician 

disagrees with the decision, the 

physician may engage the MA 

organization in a peer-to-peer 

discussion with a plan physician or may 

appeal using the plan’s internal dispute 

resolution processes.254 It is important 

to note that in many circumstances the 

MA organization does not inform the 

enrollee of the concurrent review 

determination and the enrollee is not 

afforded the opportunity to appeal the 

decision (or have an appeal submitted 

on their behalf) as required. The result 

of the concurrent review is the hospital 

may either continue to provide noncovered inpatient services or it may 

reclassify the enrollee’s hospital status 

from inpatient to outpatient. Many 

times, the enrollee does not know a 

change in status has occurred until they 

are required to pay the outpatient 

deductible and applicable costsharing.255

We have seen several different 

justifications for why an MA 

organization may not process a 

determination to deny an enrollee’s 

inpatient admission, or deny coverage 

for inpatient services, made 

concurrently to the provision of such 

services under the requirements for 

other organization determinations. 

Some MA organizations have posited 

that these concurrent reviews are 

outside the definition of an organization 

determination because the timing of the 

decision is made during an ongoing 

course of treatment. These MA 

organizations appear to mistakenly 

believe that the existing definition of an 

organization determination is limited to 

decisions made before services begin 

and payment decisions that are made 

after a claim is submitted, and thus, a 

decision on inpatient coverage made 

concurrent to the services being 

rendered does not meet the definition of 

an organization determination or need 

to comply with the applicable 

organization determination notice and 

appeal right requirements. 

We have also seen other situations 

where an MA organization 

appropriately considers the 

downgrading of an enrollee from 

receiving inpatient to outpatient 

services as an organization 

determination and yet will still fail to 

provide proper notice of the decision to 

the enrollee, process a timely appeal 

request, or both. We have received many 

complaints from the provider 

community that when the enrollee’s 

treating physician requests an expedited 

reconsideration of an adverse 

concurrent review decision, pursuant to 

§ 422.578, the MA organization will not 

process the appeal for a myriad of 

reasons. Some MA organizations have 

concluded that a level of care denial is 

not an appealable subject matter, while 

others believe reconsideration requests 

may not be processed while an enrollee 

is receiving the services at issue. The 

most common reason cited by plans for 

not processing appeals of adverse 

concurrent review decisions is the 

erroneous view that concurrent reviews 

made while an enrollee is being treated 

in an in-network hospital are 

‘‘contractual denials’’ that are ineligible 

for review under the administrative 

appeals process of part 422, subpart M. 

This line of reasoning relates to the 

provision at § 422.562(c)(2) which states 

that ‘‘[i]f an enrollee has no further 

liability to pay for services that were 

furnished by an MA organization, a 

determination regarding these services 

is not subject to appeal.’’ MA 

organizations reason that because 

contracted providers are contractually 

restricted from billing the enrollee for 

denied services and must accept the 

contractual payment as ‘‘payment in 

full,’’ coupled with the enrollee 

protections against financial liability at 

§§ 422.504(g) and 422.562(c)(2), a 

concurrent review decision will 

ultimately result in the enrollee having 

no further financial liability for the 

inpatient services being rendered so 

there is no right to appeal the decision. 

As we have explained in section III.W.1. 

of this proposed rule, this interpretation 

overlooks the fact that the MA 

organization has made an adverse 

decision on the authorization or 

provision of inpatient services which 

not only impacts the type of care the 

enrollee receives but also directly 

impacts the amount of deductible and 

cost-sharing for which the enrollee is 

liable, when a request for payment is 

eventually submitted. 

CMS does not agree with the above 

interpretations of the existing 

organization determination and appeal 

regulations of part 422, subpart M. In 

the past, we have addressed these types 

of misinterpretations and noncompliance by MA organizations on a 

case-by-case basis as those issues were 

presented to us. However, we realize 

that the inconsistent application or 

misapplication of MA policies 

governing concurrent review is 

becoming increasingly varied and 

widespread across the industry, creating 

substantial confusion to MA 

organizations and, at times, variable 

outcomes to providers and enrollees. In 

addition, we recognize that the direct 

consequence of the misapplication of 

MA policies is that many enrollees do 

not receive notice of a decision to 

downgrade their level of care from 

inpatient to outpatient, nor are they 

given opportunity to appeal such 

decisions as provided under 

§ 422.562(b)(4) (the right to a 

reconsideration of an adverse 

organization determination by an MAO). 

After considering other options 

available to CMS to clarify this matter, 

including increasing outreach and 

updating non-regulatory guidance, we 

decided the most appropriate and 

effective manner to address this issue is 

to clarify and strengthen the existing 


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256 Beginning January 1, 2026, a request for a 

service or item that is subject to an MA 

organization’s prior authorization requirement must 

be processed within 7 calendar days. The timeframe 

for processing requests for items and services not 

subject to an MA organization’s prior authorization 

requirement remains 14 calendar days. See CMS– 

0057–F (89 FR 8976). 

257 Post-payment reviews are performed under 

the reopening rules at §§ 405.980–405.986 and 

422.616 (see § 405.929). Pursuant to § 422.616(d), 

when a payment determination is revised on 

reopening (including through post-payment 

review), any party may file an appeal of the revised 

determination. However, similar to initial payment 

determinations, when an MA organization revises a 

contracted provider payment determination that 

results in no additional financial liability or costsharing for the enrollee, § 422.562(c)(2) precludes 

any party from appealing the revised payment 

determination under the administrative appeals 

processes of part 422, subpart M. Contracted 

providers may appeal adverse payment 

determination revisions under the terms of the 

contract between the provider and the MA 

organization. 

requirements related to organization 

determinations. 

We, therefore, propose to clarify that 

decisions made based on the review of 

an enrollee’s need for continued care, 

commonly known as concurrent review, 

are organization determinations under 

the rules at § 422.566(b). Specifically, 

we are proposing to revise 

§ 422.566(b)(3) to clarify that a decision 

by an MA organization made preservice, post-service, or concurrent with 

the enrollee’s receipt of services in an 

inpatient or outpatient setting is an 

organization determination subject to 

the rules in part 422, subpart M which 

includes providing the enrollee (and the 

provider, as appropriate) with timely 

notice and applicable appeal rights. We 

note that while the primary focus of the 

above discussion relates to the denial of 

inpatient hospital coverage as a result of 

an MA organization’s concurrent 

review, our proposed clarification to the 

definition of an organization 

determination is inclusive of all other 

types of services. 

In addition to adding a reference to 

decisions made concurrently to the 

enrollee’s receipt of services, we are also 

proposing to add to § 422.566(b)(3) a 

reference regarding applicable decisions 

made prior to the enrollee’s receipt of 

services and after the services have been 

completed. Similar to our previous 

discussion related to concurrent review, 

we propose these additions to clarify 

that the subject-matter of an MA 

organization decision dictates whether 

it has made an organization 

determination, regardless of when in the 

continuum of an enrollee seeking and 

receiving covered medical care the 

decision is made. We use the term preservice in proposed § 422.566(b)(3) to 

refer to a request for an MA organization 

to approve coverage for a service before 

the service is received by the enrollee. 

An enrollee, enrollee’s representative, or 

a provider on behalf of an enrollee, has 

the right to request the enrollee’s MA 

organization approve an item, service, 

or Part B drug in circumstances where 

there is a question whether the item, 

service, or Part B drug will be covered. 

This right to receive prior approval 

applies to services for which an MA 

organization may require prior 

authorization as a condition for 

coverage as well as services for which 

there is no prior authorization 

requirement. When an MA organization 

receives a request for an item, service, 

or Part B drug, it must process the 

request according to the timeframes at 

§ 422.568(b) or § 422.572(a).256

The reference to post-service in our 

proposed addition to § 422.566(b)(3) 

refers to applicable decisions that have 

been requested (or made by an MA 

organization in the absence of an 

organization determination request) 

after the enrollee has finished receiving 

the services at issue. The vast majority 

of post-service organization 

determinations are made in response to 

receiving a claim or other request for 

payment from an enrollee or provider. 

We are, however, aware that some MA 

organizations are denying payment for 

services before receiving a claim or 

other request for payment. More 

specifically, we have seen MA 

organizations decide on the 

appropriateness of an enrollee’s 

inpatient admission, or the 

appropriateness of inpatient services, 

after an enrollee has been discharged 

from the hospital but before a request 

for payment has been received. These 

decisions have been referred to as 

‘‘retrospective reviews’’ and, similar to 

our previous discussion on concurrent 

review decisions, many MA 

organizations making these decisions 

fail to comply with all applicable 

organization determination 

requirements, including providing 

appropriate notice and appeal rights to 

enrollees. 

As a point of clarity, we regularly 

observe MA organizations making 

retrospective organization 

determinations when performing a postpayment review (a review that occurs 

after payment is made on the selected 

claim in order to determine whether the 

initial determination for payment was 

appropriate (see definition at 

§ 405.902)).257 The retrospective review 

decisions we are discussing here, 

however, are not reviews of an MA 

organization’s prior payment decisions 

but are initial determinations impacting 

payment for inpatient hospital services 

that are made after the enrollee has been 

released from a hospitalization, but 

before a request for payment is received. 

We have primarily observed MA 

organizations make retrospective review 

decisions on inpatient hospital services 

in a similar fashion as concurrent 

review. For example, an enrollee may be 

admitted as an inpatient in a hospital 

contracted with the enrollee’s MA 

organization. During the hospital stay 

(or shortly thereafter), the MA 

organization will become aware of the 

inpatient admission, generally upon the 

hospital sending the MA organization a 

Notice of Admission. The hospital will 

finish providing services and discharge 

the enrollee in accordance with 

§§ 422.620–422.622. At some point after 

discharge, but before a claim for 

payment is submitted, the MA 

organization will notify the hospital that 

it is denying payment for all inpatient 

services and will instruct the hospital to 

submit an outpatient claim, while 

sometimes simultaneously approving 

the provider to bill for observation 

services. The MA organization does not 

send a notice of the denial to the 

enrollee. The hospital receives an 

opportunity to dispute the decision 

under the MA organization’s internal 

dispute resolution processes, but the 

enrollee has no opportunity to dispute 

the decision under the rules of part 422 

subpart M. 

We find that retrospective reviews are 

conducted very similarly to concurrent 

reviews in that both reviews involve 

obtaining necessary clinical information 

from the treating physician or other 

providers to determine medical 

necessity for the services rendered, 

using the clinical status of the enrollee 

and applicable Medicare coverage 

criteria. In addition, both concurrent 

and retrospective review decisions are 

often made without the MA 

organization first receiving a request for 

coverage or payment. The primary 

difference between the two review types 

is that concurrent review occurs while 

the services are being rendered while 

retrospective review occurs after the 

services at issue are fully furnished. 

This means that a concurrent review 

decision concerns the delivery of care 

being received by the enrollee, while a 

retrospective review decision concerns 

whether the MA organization will make 

payment for the services the enrollee 

received. Put simply, a concurrent 

review decision (whether made 

unsolicited or in response to a request) 

is a coverage decision while a 

retrospective review decision (whether 

made unsolicited or in response to a 

request) is a payment decision. 


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258 While the focus of this discussion is on 

unsolicited retrospective reviews, we acknowledge 

that enrollees or providers may, at times, submit a 

request for ‘‘authorization’’ for services which have 

already been fully rendered. Indeed, we understand 

that some MA organizations currently permit the 

submission of late ‘‘authorization’’ requests for 

certain services subject to prior authorization 

requirements within designated timeframes after a 

service has been rendered and, if approved, would 

consider the applicable prior authorization 

requirements met when separately considering 

payment. However, as we have explained above, 

once a service has been fully furnished, the only 

matter for an MA organization to decide is whether 

to make payment and any resulting enrollee 

financial liability or cost-sharing. Thus, similar to 

unsolicited retrospective review decisions, postservice authorization requests, whether permitted 

by MA organizations or not, must be processed as 

payment requests, under the applicable payment 

timeframes and policies. We note that our proposed 

policies do not prevent MA organizations from 

waiving prior authorization requirements on a caseby-case basis, based on good cause or any other 

consideration, during the claim adjudication or 

subsequent appeal processes when such processes 

are described in their EOC. 

259 An EOB is a model communication material 

which must also contain the information required 

under § 422.111(k). 

260 See section 40.12.1 of the Parts C & D Enrollee 

Grievances, Organization/Coverage Determinations, 

and Appeals Guidance available at https://

www.cms.gov/Medicare/Appeals-and-Grievances/ 

MMCAG/Downloads/Parts-C-and-D-EnrolleeGrievances-Organization-Coverage-Determinationsand-Appeals-Guidance.pdf. 

An MA organization’s refusal to pay 

for services, in whole or in part, 

including the type or level of services, 

the enrollee believes should be 

furnished or arranged for by the MA 

organization is an organization 

determination under the rules at 

existing § 422.566(b)(3). As we 

mentioned above, we have proposed 

adding references to § 422.566(b)(3) to 

clarify that the definition of an 

organization determination includes 

decisions made before, during, and after 

the enrollee’s receipt of the services at 

issue. Under our proposed clarifications 

to what actions constitute an 

organization determination, a postservice payment decision, even if made 

without the MA organization first 

receiving a payment request, is subject 

to the rules in subpart M. In addition, 

as we explained in section III.W.1. of 

this proposed rule, the regulations of 

part 422, subpart M treat organization 

determinations related to coverage for 

services to be or contemporaneously 

being rendered (coverage decisions) 

differently from determinations related 

to payment for services already 

furnished (payment decisions). As such, 

a retrospective review decision would 

be subject to all applicable subpart M 

requirements related to payment 

organization determinations, including 

those related to notice and appeal rights. 

258

In accordance with § 422.568(d)(1), an 

MA organization must give the enrollee 

written notice when denying payment 

in whole or in part. The payment denial 

notice must use approved language in a 

readable and understandable form 

(§ 422.568(e)(1)), state the specific 

reasons for the denial (§ 422.568(e)(2)), 

inform the enrollee of their right to 

appeal (§ 422.568(e)(3)), describe the 

standard reconsideration process and 

the rest of the appeal process 

(§ 42.568(e)(4)(ii)), and comply with any 

other notice requirements specified by 

CMS (§ 422.568(e)(5)). CMS created the 

Notice of Denial of Medical Coverage or 

Payment (form CMS–10003–NDMCP), 

more commonly known as the 

Integrated Denial Notice (IDN), as a 

standardized notice for MA 

organizations to use when making 

adverse coverage or payment decisions. 

Alternatively, an MA organization may 

use the model Explanation of Benefits 

(EOB), when making an adverse 

payment decision as long as it includes 

the approved standard language from 

the IDN.259 We explain in subregulatory 

guidance that an MA organization must 

provide notice of an adverse payment 

decision to an enrollee using the IDN or 

EOB when the enrollee submitted the 

request or through an EOB when the 

payment request was submitted by a 

provider (the provider would receive a 

corresponding remittance notice or 

similar notice).260 We have not 

previously considered the proper notice 

for MA organizations to use when 

making payment decisions without first 

receiving a request for payment. 

As we previously discussed, it is our 

understanding that retrospective review 

decisions are most often, if not 

exclusively, made on inpatient services 

performed by hospitals that are 

contracted with the MA organization. In 

most instances (excluding those which 

fall outside the plan-directed care 

beneficiary protection), when an MA 

organization makes a payment decision 

on contracted provider services, existing 

§ 422.562(c)(2) would preclude a party’s 

appeal of a decision as the enrollee 

would generally have no additional 

financial liability under the terms of the 

contract between the MA organization 

and the provider. However, as we 

discussed in section III.W.1. of this 

proposed rule, proposed § 422.562(c)(2) 

would not be applicable until an MA 

organization makes a decision on an 

enrollee’s financial liability in response 

to a request for payment. Under 

proposed § 422.562(c)(2), an enrollee 

would not be precluded from appealing 

an adverse retrospective review decision 

as the MA organization would not yet 

have received a request for payment 

when the retrospective review decision 

is made. We believe this would be an 

appropriate outcome as an adverse 

retrospective review decision on 

inpatient hospital services typically 

results in the MA organization 

instructing the hospital to submit an 

outpatient claim (at times including an 

approval for observation services), 

thereby changing the cost-sharing 

amount for which the enrollee would be 

responsible. Cost-sharing, which may 

include deductibles, co-payments, and 

co-insurance, varies across the MA 

program, but most often has different 

requirements for inpatient and 

outpatient hospital services. Therefore, 

whether a hospitalization is billed as an 

inpatient or an outpatient stay would 

likely result in different out-of-pocket 

costs for the enrollee. We note that the 

difference in cost-sharing liability could 

be higher or lower for an enrollee after 

an adverse retrospective review decision 

on inpatient hospital services. The exact 

difference in amounts would depend on 

the enrollee’s cost-sharing requirements 

of their particular plan, the length of 

their hospitalization, and, potentially, 

the amount and types of services which 

were rendered. We believe that ensuring 

an enrollee has adequate notice of an 

adverse MA organization payment 

decision, which may negatively affect 

their out-of-pocket expenses for a 

hospitalization, is paramount for 

providing a meaningful opportunity to 

appeal. However, because we have not 

previously considered which existing 

notice type (that is, the IDN or an EOB) 

would be most appropriate for MA 

organizations to use when making a 

retrospective review decision without 

first receiving a request, we are 

requesting comments on the type of 

notice MA organizations should utilize 

to ensure enrollees have adequate notice 

of the organization determination and 

its implications on the enrollee’s costsharing responsibilities. Based on this 

feedback, CMS may consider clarifying 

in future guidance how MA 

organizations can ensure compliance 

with existing notice requirements when 

issuing retrospective review decisions 

prior to receiving a request for payment. 

Finally, we also propose to make a 

corresponding change at § 422.138(c), to 

include concurrent reviews as a type of 

determination subject to the rules at 

§ 422.138(c). Per CMS regulations at 

§ 422.138(c), if the MA organization 

approved the furnishing of a covered 

item or service through a prior 

authorization or pre-service 

determination of coverage or payment, it 

may not deny coverage later on the basis 


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261 Section 422.568(e) also regulates the notice 

requirements for payment denials, which are largely 

the same, with the exception that payment denial 

notices do not need to include information on 

expedited reconsideration processes. 262 https://www.cms.gov/medicare/forms-notices/ 

beneficiary-notices-initiative/ma-denial-notice. 

263 https://www.cms.gov/medicare/appeals-andgrievances/mmcag/downloads/parts-c-and-denrollee-grievances-organization-coveragedeterminations-and-appeals-guidance.pdf. 

of lack of medical necessity and may not 

reopen such a decision for any reason 

except for good cause (as provided at 

§ 405.986 of this chapter) or if there is 

reliable evidence of fraud or similar 

fault per the reopening provisions at 

§ 422.616. We propose to add 

concurrent review decisions to 

§ 422.138(c) as subject to this 

requirement. In the same way that a 

provider and patient reasonably rely 

upon an MA organization’s approval of 

a prior authorization before services are 

rendered, an approval of inpatient or 

outpatient services during a concurrent 

review is an organization determination 

that is relied upon by the patient and 

provider to continue delivering 

medically necessary services that they 

expect to be covered and paid for by the 

MA organization. As a result, an MA 

organization should not be able to later 

deny the services based on a lack of 

medical necessity if the continued 

treatment had already been approved 

during a concurrent review. 

3. Strengthening Requirements Related 

to Notice to Providers (§§ 422.568, 

422.572, and 422.631) 

Section 1852(g)(1)(B) of the Act 

requires MA organizations to provide an 

explanation of determinations regarding 

whether an individual enrolled with a 

plan is entitled to receive a health 

service under this section and the 

amount (if any) that the individual is 

required to pay with respect to such 

service. In accordance with section 

1852(g)(1)(B) of the Act, § 422.568 

establishes the timeframe and notice 

requirements for standard organization 

determinations. Section 422.568(e)(5) 

establishes an additional framework for 

promulgating expanded notice 

requirements. Under § 422.568(f), if a 

MA organization fails to timely meet 

applicable notice requirements, the 

failure constitutes an appealable adverse 

organization determination. 

Existing § 422.568(d) requires MA 

organizations to provide enrollees 

written notice if an MA organization 

decides to deny coverage for a service or 

an item, Part B drug, or payment in 

whole or in part, or decides to reduce 

or prematurely discontinue the level of 

care for a previously authorized ongoing 

course of treatment. Section 422.568(e) 

specifies that an MA organization’s 

written notice of a coverage denial must 

use approved notice language, state the 

specific reasons for the denial, inform 

the enrollee of their right to request and 

the procedures for requesting a standard 

or expedited reconsideration, and must 

also comply with other notice 

requirements specified by CMS.261 CMS 

created the Notice of Denial of Medical 

Coverage or Payment (Form 10003– 

NDMCP), also known as the Integrated 

Denial Notice (IDN) as a standardized 

denial notice that MA organizations 

may use to comply with the written 

notice requirements of § 422.568(e). 

This notice is approved by the Office of 

Management and Budget, subject to 

Paperwork Reduction Act procedures 

and is posted on the CMS website.262

While MA organizations are required to 

provide timely notice of an approved 

organization determination, written 

notice is not required. This means that 

MA organizations may provide oral 

notice of approved coverage decisions. 

The existing notice requirements for 

standard organization determinations at 

§ 422.568(b)(1) only specify that MA 

organizations must provide the enrollee 

with notice of its decisions. This is a 

notable difference from the 

requirements related to expedited 

organization determinations at existing 

§ 422.572(a) and (b) that require MA 

organizations to provide timely notice of 

any expedited organization 

determination to the enrollee and the 

physician or prescriber involved, as 

appropriate. Likewise, for Part B drug 

requests, regulations at § 422.568(b)(3) 

require notice to the prescribing 

physician or other prescriber involved, 

as appropriate. 

However, existing CMS guidance 

instructs MA organizations to notify the 

provider, as well as the enrollee, 

whenever a provider submits an 

organization determination on behalf of 

the enrollee (see section 40.12.1 of the 

Parts C & D Enrollee Grievances, 

Organization/Coverage Determinations, 

and Appeals Guidance.263) Similar 

references are also made in the text of 

the IDN, as CMS explains to enrollees 

that ‘‘If your doctor requested coverage 

on your behalf, [the MA organization 

has] sent a copy of this decision to your 

doctor.’’ 

We do not find a compelling reason 

that a provider should not receive notice 

of a standard organization 

determination when the provider 

submitted a request on behalf of an 

enrollee or when it is otherwise 

appropriate for the provider to receive 

notice of the determination. Indeed, 

under existing regulations at 

§ 422.566(c)(1)(ii), a provider is already 

permitted to request an organization 

determination on an enrollee’s behalf. 

This longstanding policy is premised on 

a reasonable belief that an enrollee will 

welcome and be informed of their 

provider or physician’s willingness to 

pursue an organization determination 

on their behalf. We see no reason that 

a provider or physician to whom an 

enrollee has already entrusted their care 

or has sought to request coverage for 

their care, should not receive notice of 

an organization determination that 

directly affects such care. In fact, we 

believe an enrollee’s provider is often in 

the best position to receive, explain, and 

timely act upon the MA organization 

decision for an enrollee. 

Similar requirements for integrated 

organization determinations apply to 

applicable integrated plans at § 422.631. 

Under § 422.631(d)(1)(i), applicable 

integrated plans are required to send an 

enrollee a written notice of any adverse 

decision on an integrated organization 

determination (including a 

determination to authorize a service or 

item in an amount, duration, or scope 

that is less than the amount previously 

requested or authorized for an ongoing 

course of treatment) within the 

timeframes set forth in § 422.631(d)(2). 

Existing § 422.631(d)(1)(ii) states that an 

integrated organization determination 

not reached within the timeframes 

specified constitutes a denial and thus 

is an adverse decision. Section 

422.631(d)(1)(iii) specifies the integrated 

organization determination notice 

requirements for applicable integrated 

plans must be written in plain language, 

available in a language and format 

accessible to the enrollee, include the 

date the determination was made and 

will take effect, the reason for the 

determination, the enrollee’s right to an 

integrated reconsideration and to have 

someone file an appeal on their behalf, 

procedures for an integrated 

reconsideration, circumstances for an 

expedited resolution and enrollee’s 

rights to continue benefits while their 

appeal is pending. CMS created the 

coverage decision letter (CDL) (Form 

CMS–10716), an OMB approved notice, 

for use by applicable integrated plans to 

comply with the written notice 

requirements at § 422.631(d)(1)(iii). The 

existing notice requirements at 

§ 422.631(d)(1)(i) only specify that an 

applicable integrated plan must provide 

the enrollee with notice of its decisions. 

However, integrated organization 

determinations for Part B drug requests 

are governed by the provisions at 

§ 422.568(b)(3) that require notice to the 


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prescribing physician or other 

prescriber involved, as appropriate. 

Likewise, existing CMS guidance 

instructs applicable integrated plans to 

notify the provider, as well as the 

enrollee. 

We, therefore, propose strengthening 

requirements related to notice of a 

standard organization determination at 

§ 422.568 in paragraph (b)(1) and the 

introductory text for paragraph (d) and 

integrated organization determinations 

at § 422.631(d)(1)(i) to require MA plans 

and applicable integrated plans to notify 

an enrollee’s physician or provider, as 

appropriate, of an organization 

determination or integrated organization 

determination on a request for a nondrug item or service (in addition to the 

existing requirement related to notifying 

an enrollee). Note that ‘‘as appropriate’’ 

means, as with similar requirements in 

§§ 422.568(b)(3) and 422.572(a), that 

notice should be given to the provider 

or prescriber who submitted an 

organization determination request on 

behalf of an enrollee or in other 

circumstances where it would be in the 

enrollee’s best interest for their provider 

or prescriber to receive notice of a 

decision related to an enrolleesubmitted request. 

We are also proposing corresponding 

amendments to §§ 422.568(f), 422.572(f), 

and 422.631(d)(1)(ii) to state that if the 

MA organization or applicable 

integrated plan fails to provide the 

enrollee, physician, or provider 

involved, as appropriate, with timely 

notice of an organization determination 

or integrated organization determination 

as specified in this section, this failure 

itself constitutes an adverse 

organization determination and may be 

appealed. We note that the proposed 

change at § 422.572(f) is a technical 

change to expedited organization 

determination requirements. Under 

existing rules at § 422.572(a), MA 

organizations are required to provide 

notice of an expedited organization 

determination to the physician or 

prescriber, as appropriate. However, 

existing § 422.572(f), which establishes 

that a MA organization’s failure to 

timely meet expedited organization 

determination notice requirements 

constitutes an adverse decision, only 

refers to the MA organization’s 

responsibility to provide timely notice 

to the enrollee. We, therefore, propose a 

technical change to § 422.572(f) to 

clarify that the failure to provide timely 

notice of an expedited organization to 

the enrollee and the physician or 

prescriber, when appropriate, would 

itself constitute an appealable adverse 

organization determination. 

In addition, we are proposing a 

technical change at § 422.631(a) to 

reference the correct Part B drug 

regulation at § 422.568(b)(3) rather than 

the current reference to § 422.568(b)(2) 

to govern the timeframes and notice 

requirements for integrated organization 

determinations for Part B drugs. The 

final rule titled the ‘‘Medicare and 

Medicaid Programs; Patient Protection 

and Affordable Care Act; Advancing 

Interoperability and Improving Prior 

Authorization Processes for Medicare 

Advantage Organizations, Medicaid 

Managed Care Plans, State Medicaid 

Agencies, Children’s Health Insurance 

Program (CHIP) Agencies and CHIP 

Managed Care Entities, Issuers of 

Qualified Health Plans on the FederallyFacilitated Exchanges, Merit-Based 

Incentive Payment System (MIPS) 

Eligible Clinicians, and Eligible 

Hospitals and Critical Access Hospitals 

in the Medicare Promoting 

Interoperability Program,’’ which 

appeared in the February 8, 2024, 

Federal Register, redesignated 

§ 422.568(b)(2) as § 422.568(b)(3). 

We do not believe this proposal will 

have a substantial impact on the 

practices of MA organizations or 

applicable integrated plans as we are 

codifying longstanding guidance that we 

believe the majority of plans already 

implement this practice based on the 

relatively few complaints from 

providers and enrollees. In addition, we 

also understand that due to the 

contractual relationship MA 

organizations have with their providers, 

most contracted providers should 

already receive notice of relevant 

organization determinations, including 

those that the provider submitted on 

behalf of the enrollee. However, we note 

that the few complaints that we do 

receive on this issue reinforce how 

disruptive the lack of provider notice 

can be for enrollees attempting to 

promptly receive covered medical 

services. When an enrollee is the only 

party to receive written notice of a 

decision, not only can this result in a 

delay in their receipt of approved 

medical care but could also delay the 

submission of a valid appeal when 

coverage is denied. 

We also believe this proposal will 

positively support our proposed 

modification of the definition of an 

organization determination at 

§ 422.566(b) by ensuring providers will 

always receive notice of a decision 

notwithstanding when in the continuum 

of care the decision is made. As 

discussed in section III.W.2. of this 

proposed rule, CMS has identified that 

some MA organizations routinely 

misinterpret existing organization 

determination provisions related to 

decisions that rescind prior 

authorization of an inpatient admission, 

deny coverage for inpatient services, or 

downgrade an enrollee’s hospital 

coverage, from inpatient to outpatient, 

when the decision is made concurrently 

to the enrollee receiving such services. 

In these cases, the MA organizations are 

not providing enrollees or their 

providers proper notice of the adverse 

organization determination or providing 

appeal rights. Our proposed 

clarifications to the definition of an 

organization determination at 

§ 422.566(b)(3) seek to clarify that 

applicable decisions made before, 

during, or after the enrollee’s receipt of 

services are organization determinations 

and thus are subject to notice 

requirements pursuant to §§ 422.568, 

422.572 and 422.631. Our proposal at 

§§ 422.568 and 422.631 would, 

therefore, require the MA organization 

or applicable integrated plan to provide 

notice to the enrollee and physician or 

provider that must comply with the 

standard organization determination or 

integrated organization determination 

requirements. We note, however, that in 

the case of an MA organization 

conducting pre-service or concurrent 

review for inpatient services, our 

expectation is that the facts and 

circumstances around that type of 

review will often satisfy the medical 

exigency standard. Therefore, we expect 

in most circumstances an MA 

organization must provide an expedited 

determination because applying the 

standard timeframe for making a 

determination could seriously 

jeopardize the life or health of the 

enrollee or the enrollee’s ability to 

regain maximum function, consistent 

with the provisions at §§ 422.570(c)(2) 

and 422.631(c)(3). 

4. Modifying Reopening Rules Related 

to Decisions on an Approved Hospital 

Inpatient Admission (§§ 422.138 and 

422.616) 

Under the regulations at § 422.576, an 

organization determination is binding 

on all parties unless it is reconsidered 

under the rules at §§ 422.578 through 

422.596 or is reopened and revised 

under § 422.616. The reopening rules at 

§ 422.616 permit an organization or 

reconsidered determination made by an 

MA organization that is otherwise final 

and binding to be reopened and revised 

by the MA organization under the 

applicable rules in part 405, subpart I at 

§§ 405.980 through 405.986. The 

reopening rules in part 405, subpart I 

are based on § 1869(b)(1)(G) of the Act 

which states that the Secretary may 

reopen or revise any initial 


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264 See 88 FR 22120, 22185–22217. 

determination or reconsidered 

determination described in this 

subsection under guidelines established 

in regulations. While the reopening 

rules in §§ 405.980 through 405.986 are 

applicable to the Traditional Medicare 

program, the regulatory provisions at 42 

CFR part 405 historically have been 

cross-referenced in the managed care 

regulations and have been applied to the 

MA program consistent with the 

provisions at §§ 422.562(d) and 422.616 

since the inception of the MA program 

(and to MA’s predecessor, the 

Medicare+Choice program). Thus, the 

ability of an MA organization to reopen 

and revise an organization 

determination for the reasons set forth 

in regulation is well established in the 

MA program. For purposes of this 

proposal, the discussion is specific to 

the application of the reopening rules to 

organization determinations made by an 

MA organization that involve inpatient 

hospital admission decisions. 

Section 422.616(b) permits a 

reopening at the instigation of any party 

and, in accordance with § 422.616(d), 

once an adjudicator issues a revised 

determination, any party may file an 

appeal. Pursuant to the applicable 

reopening regulations at § 405.980(b), an 

organization determination or 

reconsideration may be reopened by an 

MA organization within 1 year from the 

date of the initial determination or 

redetermination for any reason. 

However, in recently promulgated prior 

authorization rules at § 422.138(c), if an 

MA organization approved the 

furnishing of a covered item or service 

through a prior authorization or preservice determination of coverage or 

payment, it may not deny coverage later 

on the basis of lack of medical necessity 

and may not reopen such a decision for 

any reason except for good cause (as 

provided at § 405.986) or if there is 

reliable evidence of fraud or similar 

fault per the reopening provisions at 

§ 422.616.264 Under § 422.138(c), in the 

case of an approved organization 

determination for the furnishing of a 

covered item or service made through 

prior authorization or a pre-service 

determination, an MA organization is 

not permitted to reopen that decision 

within 1 year from the date of 

determination for any reason as is 

otherwise permitted at § 405.980(b)(1). 

While the rules at § 422.138(c) currently 

allow for reopening of a favorable prior 

authorization decision within 4 years 

from the date of the initial 

determination or redetermination for 

good cause, as defined in § 405.986, we 

believe a proposed modification to the 

MA reopening rules at § 422.616 is 

necessary with respect to favorable 

organization determinations on 

inpatient hospital admissions. 

We are aware that some MA 

organizations are reopening and revising 

or otherwise rescinding a prior approval 

for an inpatient hospital admission 

based on a medical necessity 

determination during the enrollee’s 

receipt of the previously authorized 

services or during the adjudication of 

the subsequent inpatient claim for 

payment. For example, when deciding 

to admit an enrollee, the hospital 

requests and receives approval for the 

admission from the enrollee’s MA 

organization. Later, however, the MA 

organization obtains and reviews 

additional medical documentation and 

determines that the enrollee does not 

meet the necessary criteria to support 

payment for inpatient hospital services 

and rescinds or overrides its prior 

approval. As discussed in the context of 

our proposal to strengthen the notice 

requirements in § 422.568, some MA 

organizations are not consistently 

providing notice or appeal rights to the 

enrollee for these decisions. 

The rules at § 405.980(b) permit 

reopening of a decision if there is a 

finding of good cause as defined in 

§ 405.986. If good cause is found, an 

organization determination may be 

reopened within 4 years from the date 

of the determination. Under the rules at 

§ 405.986, good cause may be 

established when (1) there is new and 

material evidence that was not available 

or known at the time of the 

determination and that may result in a 

different conclusion; or (2) the evidence 

that was considered in making the 

determination or decision clearly shows 

on its face that an obvious error was 

made at the time of the determination or 

decision. New and material evidence is 

evidence that was not readily available 

or known to the person or entity 

requesting or initiating the reopening at 

the time the initial determination was 

made by the MA organization and may 

result in a different conclusion than 

reached in the initial determination. 

Such evidence may include any record 

used in the furnishing of care and 

supporting the medical necessity of 

such care. This includes, but is not 

necessarily limited to, medical records, 

progress notes, and physician orders. 

Under the reopening rules, a change of 

legal interpretation or policy by CMS in 

a regulation, ruling, or general 

instruction is not a basis for reopening 

an organization determination. 

Under existing rules at § 422.138(c), 

in cases where an enrollee’s inpatient 

admission into the facility is approved 

prior to admission, this decision is 

binding and may not be reopened and 

revised by the MA organization unless 

there is good cause for a reopening 

pursuant to the rules at § 405.986. The 

inpatient hospital admission rules at 

§ 412.3(d)(1) and (3) are clear that the 

coverage criteria set forth therein are 

based on the admitting physician’s 

expectation at the time of admission 

about whether the hospital care will 

cross two-midnights or is otherwise 

appropriate, as supported by the 

medical record. Since the physician’s 

expectation at the time of admission is 

based on the clinical information known 

at that time as well as the documented 

medical record at the time of admission, 

any subsequent clinical information 

obtained after an MA organization has 

made its initial organization 

determination would not have the effect 

of creating a good cause reopening on 

the basis of new and material evidence 

that was not available or known at the 

time of the determination or decision 

and that may result in a different 

conclusion. As part of the organization 

determination process, it is incumbent 

on the MA organization to obtain and 

review all relevant clinical information 

to make an organization determination 

on a request for inpatient hospital 

admission and to comply with 

requirements for basic benefits as 

described in § 422.101(b)(2). 

Due to the ongoing issues we have 

seen with previously approved inpatient 

hospital admissions later being 

inappropriately revised or rescinded, 

and to augment the rules at § 422.138(c), 

we propose to amend § 422.616(a) to 

state that the reopening provisions are 

subject to the rules at § 422.138(c) and 

propose a new paragraph (e) of 

§ 422.616 that would place a limitation 

on reopening determinations related to 

favorable inpatient hospital admissions. 

Specifically, proposed § 422.616(e) 

would state that if an MA organization 

approved an inpatient hospital 

admission under the rules at 

§ 412.3(d)(1) or (3), any additional 

clinical information obtained after the 

initial organization determination 

cannot be used as new and material 

evidence to establish good cause for 

reopening the determination. 

We believe these proposed 

amendments to the reopening rules at 

§ 422.616 present a reasonable approach 

to curtailing the reopening of approved 

hospital admission decisions and are 

consistent with the rules on inpatient 

admission decision-making. Decisions 

on inpatient admissions under 

§ 412.3(d)(1) or (d)(3) are based on 

whether the complex medical factors 

documented in the clinical record 


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support the admitting physician’s 

clinical expectation or judgment. 

Section 412.3(d)(1) states that, except as 

specified in paragraphs (d)(2) and (3) of 

§ 412.3, an inpatient admission is 

generally appropriate for payment under 

Medicare Part A when the admitting 

physician expects the patient to require 

hospital care that crosses two 

midnights. Section 412.3(d)(1)(i) states 

that the expectation of the physician 

should be based on such complex 

medical factors as patient history and 

comorbidities, the severity of signs and 

symptoms, current medical needs, and 

the risk of an adverse event. The factors 

that lead to a particular clinical 

expectation must be documented in the 

medical record to be granted 

consideration (with respect to 

determining the appropriateness of 

payment for an inpatient stay). Section 

412.3(d)(1)(ii) states that if an 

unforeseen circumstance, such as a 

beneficiary’s death or transfer, results in 

a shorter beneficiary stay than the 

physician’s expectation of at least two 

midnights, the patient may be 

considered to be appropriately treated 

on an inpatient basis, and payment for 

an inpatient hospital stay may be made 

under Medicare Part A. The exception 

in § 412.3(d)(2) relates to inpatient 

admission for a surgical procedure 

specified by Medicare as inpatient only 

under § 419.22(n). The exception in 

§ 412.3(d)(3) states that where the 

admitting physician expects a patient to 

require hospital care for only a limited 

period of time that does not cross two 

midnights, an inpatient admission may 

be appropriate for payment under 

Medicare Part A based on the clinical 

judgment of the admitting physician 

and medical record support for that 

determination. The physician’s decision 

is based on such complex medical 

factors as patient history and 

comorbidities, the severity of signs and 

symptoms, current medical needs, and 

the risk of an adverse event. In these 

cases, the factors that lead to the 

decision to admit the patient as an 

inpatient must be supported by the 

medical record in order to be granted 

consideration. 

Based on these rules, we believe it is 

appropriate to limit reopening of a 

decision involving inpatient hospital 

admission by prohibiting reopening for 

good cause based on new and material 

evidence. Any additional clinical 

information obtained after the initial 

organization determination cannot have 

the effect of creating a good cause 

reopening because the determination 

was made based on what was known by 

the physician and documented in the 

medical record at the time of admission. 

Under the rules at § 405.986(a)(2), good 

cause for reopening may also be 

established if the evidence that was 

considered in making the determination 

clearly shows on its face that an obvious 

error was made at the time of the 

determination or decision. This 

proposed rule does not seek to modify 

or limit the applicability of reopening 

for obvious error per the rules at 

§ 405.986(a)(2) with respect to favorable 

inpatient hospital admission decisions. 

For example, there could be a situation 

where the admitting physician 

documents something related to the 

enrollee’s condition incorrectly into the 

clinical record that the plan relied upon 

when making the favorable decision and 

the facts and circumstances of such a 

mistake, including the significance and 

materiality of the error, may support a 

reopening of the favorable decision on 

the basis of obvious error. We believe 

the need for a plan to reopen a favorable 

inpatient hospital admission decision 

on the basis of obvious error under the 

rules at § 405.986(a)(2) should be a rare 

occurrence given the breadth of clinical 

documentation that is considered when 

making a decision on an inpatient 

hospital admission. 

We acknowledge that our proposed 

limitation on the type of clinical 

information that may be considered new 

and material evidence to form the basis 

to reopen a favorable determination 

related to an inpatient hospital 

admission is a departure from 

corresponding Traditional Medicare 

reopening policies and would, at times, 

restrict certain clinical information from 

forming the basis of new and material 

evidence to reopen that would 

otherwise be available in Traditional 

Medicare. While we strive to create and 

apply policies consistently between the 

MA program and Traditional Medicare, 

the programs’ inherent differences 

require a tailored approach in this 

scenario. In particular, under 

Traditional Medicare, an initial 

determination related to an inpatient 

admission would only be made after a 

beneficiary had received the service and 

a claim for payment has been submitted 

(see § 405.920) and, therefore, generally 

after a beneficiary’s medical record 

supporting that service has been fully 

developed. In contrast, MA enrollees 

may receive a favorable determination 

related to an inpatient hospital 

admission before or contemporaneously 

to the enrollee’s receipt of services (see 

§ 422.566(b)(3)). This means the 

enrollee’s medical records are 

continuing to be updated to reflect the 

changing medical circumstances. Thus, 

it is more likely that clinical 

information obtained after an initial 

organization determination could lead 

to an MA organization reopening a 

decision for an enrollee than a 

beneficiary in Traditional Medicare, 

even though the inpatient admissions 

criteria in § 412.3 apply in the same 

manner to both programs. MA enrollees 

should be able to rely upon an approved 

inpatient admission made in advance of 

the receipt of services, or concurrently 

with the receipt of services, despite 

changing medical circumstances. They 

should not be concerned that an MA 

organization may revise or rescind an 

approved admission due to clinical 

information that was not available or in 

existence when the provider determined 

the need for admission and the MA 

organization approved the admission. 

Finally, for clarity in the applicability 

of the reopening rules to prior 

authorization and pre-service 

determinations, we are proposing a 

technical amendment to the 

parenthetical text in paragraph (c) of 

§ 422.138 to add a cross reference to the 

rules at § 422.616, including proposed 

new paragraph (e) related to decisions to 

approve an inpatient hospital 

admission. 

We are soliciting comments on the 

above proposals and will consider the 

need to revise one or more of these 

approaches based on relevant 

stakeholder feedback. With respect to 

the proposal to clarify that an 

organization determination includes 

decisions made by an MA plan 

concurrent with an enrollee’s receipt of 

services and on a retrospective basis 

after services have ended, we are 

specifically soliciting comments on 

whether a notice other than the existing 

EOB may be needed to convey written 

information to an enrollee on the 

anticipated impact of the decision on 

the enrollee’s financial liability and the 

right to appeal. 

W. Formulary Inclusion and Placement 

of Generics and Biosimilars 

Multiple recent reports, actions, and 

findings published or taken by entities 

outside CMS have raised concerns that 

Part D sponsors and their PBMs engage 

in practices that favor, intentionally or 

unintentionally, more expensive brand 

drugs and reference products over 

generics, biosimilars, and other lower 

cost drugs in terms of formulary 

placement or non-placement. For 

example, a March 2022 HHS OIG report 

titled, ‘‘Medicare Part D and 

Beneficiaries Could Realize Significant 

Spending Reductions with Increased 

Biosimilar Use,’’ found that, since 

biosimilars were introduced in 2015, 


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265https://oig.hhs.gov/reports/all/2022/ 

medicare-part-d-and-beneficiaries-could-realizesignificant-spending-reductions-with-increasedbiosimilar-use/. 266https://www.ftc.gov/system/files/ftc_gov/pdf/ 

pharmacy-benefit-managers-staff-report.pdf (page 

68). 267Compl., In re Caremark Rx, LLC et al., FTC 

Dkt. No. 9437, https://www.ftc.gov/system/files/ftc_

gov/pdf/d9437_caremark_rx_zinc_health_services_

et_al_part_3_complaint_public_redacted.pdf. 

268 Id. at ¶ 256. 

269https://www.cms.gov/medicare/health-plans/

medicareadvtgspecratestats/downloads/ 

announcement2020.pdf (pages 210–211). 

270With respect to generic substitution, CMS 

noted that a significant number of states have 

passed legislation requiring pharmacies to 

substitute lower cost generic drug products for 

brand name drug products where available, and that 

there are laws to encourage generic and biosimilar 

uptake, including the Hatch-Waxman Act and state 

generic substitution laws. 

271 Id. 

use of and spending on these drugs in 

Part D has steadily increased. However, 

the report also found that biosimilars 

are still used far less frequently than 

their higher-cost reference product 

alternatives, and that Part D spending 

on biologics with available biosimilars 

could have decreased by $84 million in 

2019, if all biosimilars had been used as 

frequently as the most-used biosimilars. 

The report asserted that a lack of 

biosimilar coverage on Part D 

formularies could limit the potential for 

these drugs to reduce costs for Part D 

and beneficiaries. The report noted that, 

in 2019, not all plan formularies 

covered available biosimilars, and those 

formularies that did cover biosimilars 

rarely encouraged their use over 

reference products through preferential 

formulary tier placement and utilization 

management (UM) tools.265

In addition, a July 2024 Federal Trade 

Commission (FTC) report titled, 

‘‘Pharmacy Benefit Managers: The 

Powerful Middlemen Inflating Drug 

Costs and Squeezing Main Street 

Pharmacies’’ stated that an FTC review 

of a number of contracts, including both 

commercial and Part D contracts, and 

internal documents summarizing such 

contracts, revealed ‘‘that some rebate 

contracts explicitly premise high rebates 

on the exclusion of AB-rated generics. 

These generic exclusions can be 

accomplished through ‘NDC blocks’ of 

generic equivalents—that is, a 

contractual prohibition on payments for 

generic drugs, as identified by their 

National Drug Code or ‘NDC’ number. 

These findings are consistent with 

public comments that identify the 

practice of PBMs preferring higher 

point-of-sale price branded products 

over generics, which may raise out-ofpocket costs for patients.’’ 266

Furthermore, in September 2024, the 

FTC filed an Administrative Complaint 

against certain PBMs and related 

entities asserting violations of the FTC 

Act based upon formulary and 

manufacturer rebate practices relating to 

disfavoring certain lower cost insulin 

products (some of which are 

biosimilars).267 Among other things, the 

complaint alleges that these PBMs 

‘‘systematically prefer high list price 

insulin products, with high rebates and 

fees, over similar low list price 

products, with low rebates and fees, on 

formularies to inflate the perceived 

value of their commercial drug 

formularies and offer higher rebate 

guarantees.’’ 268 While this complaint 

did not involve the Medicare Part D 

program, it is instructive as to PBM 

practices generally, since the 

respondents also operate in the Part D 

space as contractors to Part D sponsors. 

In addition to external organizations 

highlighting this issue, CMS has 

previously stated that it had identified 

instances when Part D sponsors did not 

include on their formularies generic 

alternatives when available and issued 

guidance to address this issue. In the 

final CY 2020 Call Letter,269 in the 

section ‘‘Improving Access to Generic 

and Biosimilar Medicines’’ that 

discussed tier composition policy, CMS 

stated, ‘‘The use of cost-effective 

therapeutic alternatives like generic and 

biosimilar medicines is critical to the 

current and long-term success of 

Medicare Part D. . . .CMS will continue 

to encourage Part D sponsors to 

prioritize formulary placement for 

generics and biosimilars through 

favorable tier placement relative to 

branded products. . . . [W]hile CMS 

analysis of CY 2019 formularies shows 

robust access to cost-effective generic 

medications and that Part D sponsors 

have been achieving very high generic 

dispensing and substitution rates, we do 

note that there are limited instances 

when Part D sponsors are not including 

generic alternatives when available. 

Instead, sponsors are only covering the 

brand drugs, which decreases generic 

substitution and increases beneficiary 

costs.’’ 270

In the final CY 2020 Call Letter, CMS 

also stated that we would continue to 

monitor beneficiary access to generic 

alternatives, utilization of multi-source 

brand drugs when generics are 

available, and situations where the 

brand drug is situated more favorably in 

comparison to the generic with regards 

to tiering and UM, and that we would 

consider future policy changes should 

this trend continue.271 As part of such 

monitoring, CMS has identified cases 

when an equivalent generic or 

biosimilar is not included on the 

formulary when it is available. There are 

also occasions when the generic is 

included on the same or higher 

formulary tier as the brand drug, and 

occasions when a biosimilar is included 

on the same or higher formulary tier as 

the reference product. 

These reports, actions, and findings 

continue to be concerning because of 

the potential for higher out-of-pocket 

prescription drug costs for Medicare 

beneficiaries when lower cost generics 

and biosimilars are excluded from 

formularies or are placed on the same or 

higher formulary tiers as the more 

expensive brand-name drug or reference 

product. Furthermore, the patterns 

described in the reports, actions, and 

findings may exist for other lower cost 

drugs. Because such formulary 

decisions risk increasing out-of-pocket 

costs for enrollees, CMS believes these 

reports, actions, and findings may be 

indicative of UM programs that are not 

cost-effective and therefore out of 

compliance with Part D requirements. 

We remind sponsors that section 

1860D–4(c)(1)(A) of the Act requires a 

Part D sponsor to have in place, directly 

or through appropriate arrangements, 

with respect to covered Part D drugs, 

‘‘[a] cost-effective drug utilization 

management program, including 

incentives to reduce costs when 

medically appropriate, such as through 

the use of multiple source drugs (as 

defined in section 1927(k)(7)(A)(i) of the 

Act).’’ This statutory requirement is 

codified at § 423.153(b), which states 

that Part D sponsors must have 

established ‘‘a reasonable and 

appropriate drug utilization 

management program’’ that, among 

other requirements, ‘‘[i]ncludes 

incentives to reduce costs when 

medically appropriate.’’ 

Given the concerns highlighted by the 

preceding reports, actions, and findings, 

CMS finds it necessary to clarify that, to 

be compliant with Part D requirements, 

Part D plan formularies must provide 

beneficiaries with broad access to 

generics, biosimilars, and other lower 

cost drugs. We view such access as a 

necessary component of a reasonable 

and appropriate drug UM program that 

is cost-effective and that includes 

incentives to reduce costs when 

medically appropriate. In other words, 

the plain language in section 1860D– 

4(c)(1)(A) of the Act and current 

§ 423.153(b) makes clear that a UM 

program cannot be considered costeffective or inclusive of incentives to 

reduce costs if it broadly excludes or 

restricts access to generics, biosimilars, 

and other lower cost drugs that can 

reduce costs in a medically appropriate 

manner and improve the cost efficiency 


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272https://www.cms.gov/medicare/prescriptiondrug-coverage/prescriptiondrugcovcontra/ 

downloads/dwnlds/chapter7pdf (page 28). 

273We generally use ‘‘Part C’’ to refer to the 

quality measures and ratings system that apply to 

MA plans and cost plans. 

274https://www.cms.gov/medicare/quality/ 

meaningful-measures-initiative/cms-qualitystrategy. 

of drug utilization. This does not mean 

that a sponsor is required to include all 

generics and biosimilars associated with 

a brand drug or reference product on the 

formulary, or if they are included, that 

they all be placed on a more preferred 

formulary tier relative to the brand drug 

or reference product. Nor do we require 

that a sponsor forego UM edits (for 

example, prior authorization (PA) and 

step therapy (ST)) on generics and 

biosimilars. Instead, we are making it a 

point of emphasis that broad access to 

generics, biosimilars, and other lower 

cost drugs is a necessary component of 

having a reasonable, appropriate, and 

cost-effective UM program. 

Broad access to generics, biosimilars, 

and other lower cost drugs, refers not 

only to formulary inclusion, but also tier 

placement and UM practices such as 

PA, ST, and quantity limits (QL). This 

is because a drug UM program may not 

be cost-effective even if the plan broadly 

includes generics, biosimilars, and other 

lower cost drugs on the formulary, if tier 

placement and other UM restrictions 

effectively limit access to these drugs 

compared to their more expensive 

branded versions and reference 

products. The idea that a cost-effective 

UM program includes formulary 

placement and tiering, and UM 

practices (including PA, ST, and QL), is 

consistent with the plain text of section 

1860D–4(c)(1)(A) of the Act. For 

example, a plan that generally includes 

on formulary higher cost drugs and 

biologicals, while broadly excluding 

their lower cost generics and biosimilar 

alternatives, cannot reasonably claim to 

have a ‘‘cost-effective’’ UM program that 

incentivizes reduced costs, when 

medically appropriate, including 

through the use of multiple source 

drugs. The concept of the UM program 

encompassing formulary inclusion, tier 

placement, and various UM practices 

has been a fundamental component of 

the Part D program since its inception. 

The January 2005 final rule establishing 

the Part D program stated, ‘‘While drug 

utilization management is common 

practice, plans appropriately employ a 

number of different approaches (for 

example, formularies, step therapy, 

tiered cost sharing, prior authorization) 

and different combinations of those 

approaches. . .’’ 70 FR 4277–4278. 

Also, the Prescription Drug Benefit 

Manual, Chapter 7, Section 60.1— 

General Rule (Effective 9–1–2008), 

states that ‘‘Common utilization 

management tools include formularies, 

prior authorization requirements, and 

promotion of lower cost generics.’’ 272

CMS currently conducts an extensive 

formulary review process to ensure Part 

D sponsors provide an adequate 

formulary consistent with 

§ 423.120(b)(2). Although we have been 

monitoring beneficiary access to 

generics and biosimilars, we now plan 

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. Specifically, CMS will 

holistically review whether a plan’s 

formulary and UM practices with 

respect to these drugs constitute a drug 

UM program that is ‘‘cost-effective,’’ 

‘‘reasonable and appropriate,’’ and 

inclusive of ‘‘incentives to reduce 

costs.’’ This review would encompass 

an evaluation of whether the formulary 

includes generics, biosimilars, and other 

lower cost drugs, when available, for 

brand drugs and reference products, and 

whether the generics, biosimilars, and 

other lower cost drugs are placed on a 

lower formulary tier than the brand 

drugs or reference products. In addition, 

CMS would review whether a formulary 

incorporates fewer utilization controls 

on brand drugs and reference products 

than on lower cost alternatives. CMS 

would use its authority to negotiate the 

terms and conditions of submitted Part 

D sponsors’ bids under section 1860D– 

11(d)(2) of the Act if a plan’s proposed 

formulary does not appear to provide 

broad access to generics, biosimilars, 

and other lower cost drugs in order to 

ensure such access for Part D 

beneficiaries and compliance with Part 

D requirements in section 1860D– 

4(c)(1)(A) of the Act and § 423.153(b)(1). 

In conjunction with our formulary 

review process, CMS intends to 

continue to monitor and analyze plan 

sponsors’ inclusion of generics, 

biosimilars and other lower cost drugs 

on formularies. CMS seeks comments 

on: (1) the prevalence of manufacturer 

rebates and the extent to which such 

rebates influence formulary decisions 

that reduce Part D beneficiaries’ access 

to generics, biosimilars, and other lower 

cost drugs; and (2) whether further 

programmatic actions within CMS’s 

current statutory authority are necessary 

to prevent Part D formularies from 

excluding or disfavoring coverage of 

generics, biosimilars, and other lower 

cost drugs. Based on this feedback, CMS 

may consider further steps in future 

rulemaking or guidance to promote 

broad access to generics, biosimilars, 

and other lower cost drugs for Part D 

beneficiaries. 

IV. Medicare Advantage/Part C and 

Part D Prescription Drug Plan Quality 

Rating System (§§ 422.166 and 423.186) 

A. Introduction 

CMS develops and publicly posts a 5- 

star rating system for Part C,273 more 

commonly referred to as Medicare 

Advantage (MA), and Part D plans as 

part of its responsibility to disseminate 

comparative information, including 

information about quality, to 

beneficiaries under sections 1851(d) and 

1860D–1(c) of the Act. The Part C and 

Part D Star Ratings system is used to 

determine quality bonus payment (QBP) 

ratings for MA plans under section 

1853(o) of the Act and the amount of 

MA beneficiary rebates under section 

1854(b) of the Act. We use multiple data 

sources based on the collection of 

different types of quality data under 

section 1852(e) of the Act to measure 

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 

§§ 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 

which help beneficiaries compare plans. 

The methodology for the Star Ratings 

system for the MA/Part C and Part D 

programs is codified at §§ 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 

§ 417.472(k) requires cost contracts to be 

subject to the Parts 422 and 423 

Medicare Advantage and Part D 

Prescription Drug Program Quality 

Rating System. (83 FR 16526 and 

16527). As a result, the policies and 

regulatory changes proposed here will 

apply to the quality ratings for MA 

plans, cost plans, and Part D 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 274

evolves over time. To support the CMS 

National Quality Strategy, CMS is 

moving towards a building-block 

approach to streamline quality measures 

across CMS quality and value-based 

care programs. Across our programs, 


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275https://www.nejm.org/doi/full/10.1056/ 

NEJMp2215539 and https://www.cms.gov/ 

medicare/quality/cms-national-quality-strategy/ 

aligning-quality-measures-across-cms-universalfoundation. 

276 Information on the Measures Under 

Consideration list for 2024 will be available here: 

https://mmshub.cms.gov/measure-lifecycle/ 

measure-implementation/pre-rulemaking/lists-andreports. 

where applicable, we are considering 

including the Universal Foundation 275

of quality measures, which is a core set 

of measures that are aligned across CMS 

programs. CMS is committed to aligning 

a core set of measures across all our 

quality and value-based care programs 

and ensuring we measure quality across 

the entire care continuum in a way that 

promotes the best, safest, and most 

equitable care for all individuals. 

Improving alignment of measures across 

Federal programs and with private 

payers would reduce provider burden 

while also improving the effectiveness 

and comparability of measures. Using 

the Universal Foundation of quality 

measures would focus provider 

attention, reduce burden, identify 

disparities in care, prioritize 

development of interoperable, digital 

quality measures, allow for crosscomparisons across programs, and help 

identify measurement gaps. The 

Universal Foundation is a building 

block to which programs would add 

additional aligned or program-specific 

measures. This core set of measures 

would evolve over time to meet the 

needs of individuals served across CMS 

programs. We submitted the following 

Part C measures to the 2024 Measures 

under Consideration list as part of the 

Pre-Rulemaking Measure Review 

process as a step toward proposing use 

of these Universal Foundation measures 

in the Star Ratings system through 

future rulemaking: Adult Immunization 

Status, Depression Screening and 

Follow-Up for Adolescents and Adults, 

and Social Need Screening and 

Intervention.276 We have previously 

solicited feedback regarding potentially 

proposing these measures as Star 

Ratings measures in the future through 

both the Advance Notice of 

Methodological Changes for Calendar 

Year (CY) 2023 for Medicare Advantage 

(MA) Capitation Rates and Part C and 

Part D Payment Policies and 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. CMS is continuing to consider 

ways to streamline the measurement set 

for the Part C and D Star Ratings 

program. We currently plan to solicit 

comments through the 2026 Advance 

Notice and Rate Announcement process 

on ways to focus the measurement set 

to improve the impact of the Star 

Ratings program. 

In this proposed rule, we are 

proposing to add or update the 

following measures: 

• Initiation and Engagement of 

Substance Use Disorder Treatment (IET) 

(Part C) 

• Initial Opioid Prescribing for Long 

Duration (IOP–LD) (Part D) 

• Breast Cancer Screening (Part C) 

• Plan Makes Timely Decisions about 

Appeals (Part C) and Reviewing Appeals 

Decisions (Part C) 

We are also proposing how the health 

equity index (HEI) reward will be 

calculated for contracts that are required 

by a state Medicaid agency to move one 

or more D–SNP plan benefit packages 

from an existing MA contract to an MA 

contract that only includes one or more 

D–SNPs with a service area limited to 

that state, consistent with § 422.107(e), 

beginning with the 2029 Star Ratings. 

Additionally, we are proposing to 

clarify at §§ 422.166(f)(3)(vi) and 

423.186(f)(3)(vi) that in order for 

Institutional Special Needs Plan (I– 

SNP)-only contracts to have the ratingspecific HEI calculated, these contracts 

must have data for at least half the 

measures included in the rating-specific 

HEI for the subset of measures that I– 

SNP-only contracts are required to 

report. 

We are also proposing a couple of 

technical clarifications of the existing 

rules related to how the HEI reward 

enrollment thresholds described at 

§§ 422.166(f)(3)(viii) and 

423.186(f)(3)(viii) are assessed in the 

case of contract consolidations for the 

second year following the consolidation 

and changes to how the HEI score 

would be calculated for contracts that 

have data discrepancies between their 

submitted patient-level detail and 

summary-level data for HEDIS measures 

included in the HEI. We are also 

proposing a clarification of how the 

improvement measure hold harmless for 

the highest rating is determined based 

on the rounded rating before the 

addition of the HEI reward, if 

applicable, at §§ 422.166(g) and 

423.186(g), as well as proposing a 

technical clarification at 

§§ 422.162(b)(3)(iv)(A)(2) and (B)(2) and 

§§ 423.182(b)(3)(iv)(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 proposed rule titled ‘‘Medicare 

Program; Contract Year 2024 Policy and 

Technical Changes to the Medicare 

Advantage Program, Medicare 

Prescription Drug Benefit Program, 

Medicare Cost Plan Program, Medicare 

Parts A, B, C, and D Overpayment 

Provisions of the Affordable Care Act 

and Programs of All-Inclusive Care for 

the Elderly; Health Information 

Technology Standards and 

Implementation Specifications,’’ which 

appeared in the December 27, 2022, 

Federal Register (hereinafter referred to 

as the December 2022 proposed rule), 

we proposed to remove guardrails (that 

is, bi-directional caps that restrict 

upward and downward movement of a 

measure’s cut points for the current 

year’s measure-level Star Ratings 

compared to the prior year’s measurethreshold specific cut points) when 

determining measure-specific 

thresholds for non-Consumer 

Assessment of Healthcare Providers and 

Systems (CAHPS) measures (87 FR 

79625–79626). We are considering 

finalizing this proposal, in this 

rulemaking, to apply beginning with the 

2026 measurement year and 2028 Star 

Ratings because with the 

implementation of Tukey outer fence 

outlier deletion, extreme outliers are 

removed before the clustering algorithm 

is applied, which minimizes the need 

for guardrails to achieve predictability 

and stability of cut points. Additionally, 

the removal of guardrails would allow 

cut points to adjust when there are 

unanticipated changes in performance 

across the industry. We intend to 

address comments received regarding 

the removal of guardrails to the 

December 2022 proposed rule in the 

final rule. 

B. Adding, Updating, and Removing 

Measures (§§ 422.164 and 423.184) 

The regulations at §§ 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. 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) hereinafter 

referred to as the April 2018 final rule, 

we stated we are committed to 

continuing to improve the Part C and 

Part D Star Ratings system and 

anticipated that over time measures 

would be added, updated, and removed. 

We also specified at §§ 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 nonVerDate Sep<11>2014 17:31 Dec 09, 2024 Jkt 262001 PO 00000 Frm 00135 Fmt 4701 Sfmt 4702 E:\FR\FM\10DEP2.SGM 10DEP2

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99474 Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 

277See Announcement of Calendar Year (CY) 

2024 Medicare Advantage (MA) Capitation Rates 

and Part C and Part D Payment Policies (cms.gov) 

pages 162–163 and Announcement of Calendar 

Year (CY) 2025 Medicare Advantage (MA) 

Capitation Rates and Part C and D Payment Policies 

(cms.gov) page 137. 

278The Quality Rating System public use file 

shows the averaged rate of initiation and 

engagement: https://www.cms.gov/files/zip/qrsnationwide-puf-py2023.zip. 

279https://p4qm.org/sites/default/files/2023-09/ 

Guidebook-of-Policies-and-Procedures-for-PreRulemaking-Measure-Review-%28PRMR%29-andMeasure-Set-Review-%28MSR%29-Final_0.pdf. 

280PRMR–2023–MUC-Recommendations-ReportFinal-.pdf (p4qm.org). 

substantive updates. See also 83 FR 

16534–16537. Due to the regular 

updates and revisions made to 

measures, CMS does not codify a list in 

regulation text of the measures (and 

their specifications) adopted for the Part 

C and Part D Star Ratings program. CMS 

lists the measures used for the Star 

Ratings each year in the Medicare Part 

C & D Star Ratings Technical Notes or 

similar guidance issued with 

publication of the Star Ratings. In this 

rule, CMS is proposing to add the 

Initiation and Engagement of Substance 

Use Disorder Treatment (Part C) and 

Initial Opioid Prescribing for Long 

Duration (Part D) measures to the Star 

Ratings program and to update the 

Breast Cancer Screening (Part C), Plan 

Makes Timely Decisions about Appeals 

(Part C), and Reviewing Appeals 

Decisions (Part C) measures for 

performance periods beginning on or 

after January 1, 2026. 

We are committed to continuing to 

improve the Part C and Part D Star 

Ratings system by focusing on 

improving clinical and other health 

outcomes. Consistent with 

§§ 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. For example, we 

regularly review measures developed by 

the National Committee for Quality 

Assurance (NCQA) and Pharmacy 

Quality Alliance (PQA). 

1. Adding Measures 

a. Initiation and Engagement of 

Substance Use Disorder Treatment (IET) 

(Part C) 

We propose to add the Initiation and 

Engagement of Substance Use Disorder 

Treatment (IET) measure beginning with 

the 2028 Star Ratings covering the 2026 

measurement year. Adding the IET 

measure to the Part C Star Ratings 

would further align the Part C Star 

Ratings with the Universal Foundation 

as discussed in the CY 2024 and CY 

2025 Rate Announcements.277

The IET measure is a composite 

measure that averages two separate 

rates: Initiation of Substance Use 

Disorder Treatment and Engagement of 

Substance Use Disorder Treatment. 

Prior to measurement year 2022, this 

measure was called Initiation and 

Engagement for Alcohol and Other Drug 

Abuse or Dependence Treatment and 

the individual rates have been reported 

on the Part C and Part D Star Ratings 

display page beginning with the 2012 

performance period (2014 display page). 

For measurement year 2022, NCQA 

made several updates to the IET 

measure, including updating its name. 

Since many individuals with substance 

use disorder (SUD) attempt treatment 

multiple times before they are able to 

successfully engage, the measure was 

changed from ‘‘member-based’’ to 

‘‘episode-based’’ to allow for each 

recovery attempt to count 

independently, which should result in a 

more valid representation of 

engagement with SUD treatment for 

health plan populations. The length of 

the negative SUD history period was 

increased from 60 days to 194 days to 

limit the number of members receiving 

ongoing treatment who fall into the 

denominator. Emergency department 

visits and medically managed 

withdrawal services were removed from 

the negative SUD history period because 

emergency department visits and 

withdrawal services alone are not 

suggestive of ongoing or planned 

treatment for individuals with SUD and 

thus do not signal that a member is 

already engaged in comprehensive care. 

The requirement that psychosocial 

treatment accompany pharmacotherapy 

was also removed to align with the most 

current clinical practice guidelines (for 

example, allowing for patients who may 

not accept concomitant psychosocial 

treatment). Finally, the adult age 

stratification was split between 18–64 

years and 65+ years to better highlight 

any gaps in care between different age 

groups. 

CMS began reporting the two 

indicators or rates included in the 

historical IET measure on the display 

page for the 2014 Star Ratings. However, 

starting with the display page for the 

2024 Star Ratings covering the 2022 

measurement year, we began reporting 

the updated measure being proposed 

here, including the separate rates for 

initiation and engagement that are part 

of the HEDIS measure and an average of 

the two rates. As provided at 

§§ 422.164(c)(3) and (4) and 

423.184(c)(3) and (4), as new 

performance measures are developed 

and adopted, they are initially posted on 

the display page for at least 2 years. We 

intend to use the period that the 

updated IET measure was on the display 

page to meet this requirement. 

To lessen the complexity in the Star 

Ratings program by minimizing the 

number of new Star Rating measures, 

CMS is proposing to average the 

initiation and engagement rates into one 

measure for reporting in the Star Ratings 

program. A contract must have scores 

on both rates to receive a score for this 

measure as we propose to use it in the 

Star Ratings program. This is similar to 

how the data are reported for the IET 

measure in the Quality Rating System 

for the Qualified Health Plans on the 

Exchanges.278 The two rates of this 

composite measure will continue to be 

reported as separate measures on the 

display page so as to be available to 

plans for use in their quality 

improvement projects after the 

composite IET measure is added to the 

Star Ratings pending rulemaking. 

We submitted the IET measure for 

inclusion in the 2023 Pre-rulemaking 

Measure Review (PRMR) process, 

required under section 1890A of the 

Act. The Consensus-Based Entity (CBE), 

which is currently Battelle, convenes 

interested parties that participate in 

committees to review measures as part 

of the PRMR process. Battelle utilized 

the Novel Hybrid Delphi and Nominal 

Group multi-step process, which is an 

iterative consensus-building approach 

aimed at a minimum of 75% agreement 

among voting members, rather than a 

simple majority vote. The final result 

from the committee’s vote can be: 

Recommend, Recommend with 

conditions, Do not recommend, or 

Consensus not reached. Consensus not 

reached signals continued disagreement 

amongst the committee despite being 

presented with perspectives from public 

comment, committee member feedback, 

and discussion, and highlights the 

multi-faceted assessments of quality 

measures. More details regarding the 

CBE PRMR voting procedures may be 

found in Chapter 4 of the Guidebook of 

Policies and Procedures for PreRulemaking Measure Review and 

Measure Set Review.279 Although the 

committee did support the IET measure 

overall, there were diverging 

perspectives related to data collection 

burden, the effect of patients refusing 

treatment on measure performance, and 

exclusions. Approximately 29 percent (4 

of the 14 voting members) 280 did not 

recommend this measure resulting in 

the committee not reaching consensus. 

Some members of the committee cited 

data collection burden as a challenge to 

the feasibility of the measure given 

interoperability barriers with electronic 

health record (EHR) systems across 


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281 Display Page Technical Notes and Measure 

Data available at: https://www.cms.gov/medicare/ 

health-drug-plans/part-c-d-performance-data. 

282https://www.cms.gov/files/document/2021- 

announcement.pdf. 

283Pre-Rulemaking Measure Review Measures 

Under Consideration 2023 Recommendations 

Report: https://p4qm.org/sites/default/files/2024- 

02/PRMR-2023-MUC-Recommendations-ReportFinal-.pdf. 

284The Pharmacy Quality Alliance Patient & 

Caregiver Advisory Panel Meeting Minutes. https:// 

www.pqaalliance.org/assets/docs/PQA_2018_

PCAP_Excerpt.pdf. 

285The Patient Safety Final Technical Report— 

Spring 2020 Cycle. https://www.qualityforum.org/ 

Publications/2021/03/Patient_Safety_Final_

Technical_Report_-Spring_2020_Cycle.aspx. 

286Licensing and Using PQA Measures. https://

www.pqaalliance.org/measure-licensing-use. 

providers and specialties; however, this 

concern was not shared by all 

committee members and some members 

noted that there was nothing specific 

related to this measure that would result 

in data collection issues. CMS has taken 

the CBE’s input into consideration, but 

since MA contracts have been collecting 

and reporting this measure for over 10 

years, we do not anticipate that data 

collection burden will be an issue with 

moving this measure from the display 

page to the Star Ratings. Additionally, 

the issue of members refusing treatment 

is not unique to this measure. Only one 

committee member, a patient 

representative, mentioned that some 

patients may choose not to initiate 

treatment and that this should not be 

counted against the plan; however, for 

this measure there are not significant 

clinical reasons for refusing treatment 

that would need to be accounted for in 

the measure specification. Having 

considered the CBE’s input, we are 

proposing moving this measure from the 

display page to the Star Ratings 

beginning with the 2028 Star Ratings 

covering the 2026 measurement year. 

b. Initial Opioid Prescribing for Long 

Duration (IOP–LD) (Part D) 

As part of CMS’ ongoing efforts to 

address the national opioid crisis, we 

have implemented balanced drug 

utilization review (DUR) policies and 

quality measurement strategies to help 

reduce prescription opioid misuse in 

the Medicare Part D population while 

maintaining medically necessary access. 

To support this goal, CMS proposes to 

add the IOP–LD measure for the 2028 

Star Ratings (2026 measurement year) in 

accordance with § 423.184(c) because it 

is an important measure to promote 

safer prescription opioid use. The IOP– 

LD measure will be an additional tool 

for Part D sponsors to monitor initial 

opioid prescription exposure to reduce 

the risk for long-term opioid use and 

opioid use disorder. Adequate 

management of pain and assessment 

after opioid initiation is vital to 

minimize the risk of long-term opioid 

use, opioid misuse, and overdose. 

CMS began reporting the IOP–LD 

measure to Part D sponsors through the 

Patient Safety reports starting in 

measurement year 2020 and has 

publicly reported the measure on the 

Part D display page 281 since 2023 (2021 

performance data) in accordance with 

§ 423.184(c)(3). Consistent with 

§ 423.184(c)(2), we announced in the 

Announcement of Calendar Year (CY) 

2021 Medicare Advantage (MA) 

Capitation Rates and Part C and Part D 

Payment Policies,282 as well as in 

subsequent Rate Announcements, that 

the IOP–LD measure would be 

considered in the future for addition to 

the Star Ratings. The IOP–LD measure 

underwent further review and 

evaluation during the 2023 PRMR 

process by the CBE to provide 

recommendations for selecting quality 

and efficiency measures for use in CMS 

programs as required by section 1890A 

of the Act. A consensus for inclusion in 

the Part D Star Ratings was not reached 

during the PRMR process for the IOP– 

LD measure. Approximately 36 percent 

(5 of the 14 voting members) did not 

recommend this measure, resulting in 

the committee not reaching the 75 

percent consensus threshold as 

summarized in the PRMR 2023 

Recommendations Report.283 As noted 

in the Report, committee members 

acknowledged the importance of having 

a measure that assesses opioid 

prescriptions as a method of harm 

reduction and that the measure may fill 

a gap in opioid safety in the Star Ratings 

program. Committee members sought 

clarification on the specifications and 

consideration of measure exclusions for 

patients with complex medical needs. 

Some members of the committee 

expressed concern for the adequacy of 

evidence and alignment with current 

clinical guidelines for opioid 

prescribing. The committee also 

discussed potential unintended 

consequences of measure 

implementation on prescriber hesitancy, 

the quality of pain management, and 

harm for patients who need long-term 

opioids. CMS discussed that the 

measure is not intended to guide 

clinical decision-making for individual 

patients and does not represent a 

prescribing limit. 

We seek comments from a broad range 

of interested parties on the proposal to 

add the IOP–LD measure to the Part D 

Star Ratings. The IOP–LD measure is an 

important area of focus for the Medicare 

Part D program and is supported by 

evidence-based literature and national 

guidelines. The measure specifications 

are designed to reduce unintended 

consequences and complement 

Medicare Part D opioid-related policies. 

Measure Specifications: The PQA is 

the measure steward. The IOP–LD 

measure was endorsed by the PQA’s 

membership and included a review by 

the PQA’s Patient and Caregiver 

Advisory Panel in 2018, with 100% 

voting members in favor of the measure 

as important to patients and 

caregivers.284 The National Quality 

Forum (NQF) Patient Safety Standing 

Committee (NQF #3558) 285 also 

endorsed the measure in 2019, 

demonstrating that it meets high 

standards of evidence to impact 

healthcare quality. The NQF Patient 

Safety Standing Committee 

unanimously deemed the IOP–LD 

measure to meet the importance 

criterion, with zero votes for ‘‘low’’ on 

any importance-related sub-criteria. 

CMS will use the PQA Measure 

Manual specifications and Value 

Sets.286 The IOP–LD measure evaluates 

the percentage of Part D beneficiaries, 

18 years or older with at least one initial 

opioid prescription for more than 7 

cumulative days’ supply. To prevent 

misapplication, the following 

beneficiaries are excluded: (i) those with 

cancer or sickle cell disease diagnoses 

and (ii) those who elected to receive 

hospice care or are in palliative care at 

any time during the measurement 

period or the 90 days prior to the index 

prescription start date, which is the 

earliest date of service (DOS) for an 

opioid medication during the 

measurement year. The IOP–LD period 

has a lookback period, which is 90 days 

prior to each opioid prescription claim. 

Therefore, beneficiaries with no opioid 

prescription claims in the lookback 

period are defined as having a negative 

medication history for opioids. 

The initial opioid prescription is the 

earliest DOS for an opioid prescription 

claim during the measurement year 

following a negative medication history. 

The opioid initiation period is the 3-day 

period when the numerator is assessed 

and ensures a comprehensive view of 

initial opioid prescribing. The opioid 

initiation period includes the date of the 

initial opioid prescription plus 2 days. 

All prescription claims during the 

opioid initiation period are counted 

cumulatively towards the days’ supply 

total to avoid situations where a patient 

is prescribed a long duration of opioids 

following a very brief initial duration 

(that is, 1–3 days). 


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287https://www.cdc.gov/mmwr/volumes/71/rr/ 

rr7103a1.htm?s_cid=rr7103a1_w. 

288Mundkur ML, Franklin JM, Abdia Y, et al. 

Days’ supply of initial opioid analgesic 

prescriptions and additional fills for acute pain 

conditions treated in the primary care setting— 

United States, 2014. MMWR Morb Mortal Wkly Rep 

2019;68:140–3. https://doi.org/10.15585/mmwr.

mm6806a3. 

289https://www.fda.gov/media/167058/download. 

290Shah A, Hayes CJ, Martin BC. Characteristics 

of Initial Prescription Episodes and Likelihood of 

Long-Term Opioid Use—United States, 2006–2015. 

MMWR Morb Mortal Wkly Rep. Mar 17 

2017;66(10):265–269. 

291Shah A, Hayes CJ, Martin BC. Factors 

Influencing Long-Term Opioid Use Among Opioid 

Naive Patients: An Examination of Initial 

Prescription Characteristics and Pain Etiologies. J 

Pain. Nov 2017;18(11):1374–1383. doi:10.1016/ 

j.jpain2017.06.010 at https://www.jpain.org/article/ 

S1526-5900(17)30635-1/pdf. 

The IOP–LD measure is intended for 

retrospective population-level 

performance measurement of Part D 

plan sponsors (at the contract-level) and 

not to guide clinical decision-making for 

individual patients. The measure does 

not address opioid dosage, only the 

duration of an initial opioid 

prescription. Medications used for 

opioid use disorder (MOUD) are not 

included in the IOP–LD measure; for 

methadone, only use for pain is 

included. 

The measure is not intended to 

impact current long-term opioid use. 

Because this measure only captures 

initial opioid prescriptions in 

individuals with no opioid history in 

the preceding 90 days, it is not 

anticipated to result in unintended 

consequences related to discontinuation 

or abrupt tapering of opioid use in 

current, long-term users. We recognize 

that some beneficiaries may require a 

longer duration for their initial opioid 

prescription based on the acute pain 

condition being treated (for example, 

major surgery or injury). Subsequent 

fills for opioids after the initial opioid 

prescription are not factored into the 

measure. However, by design, the 

measure does encourage re-evaluation of 

the benefits and risks for continued 

opioid therapy, which is a 

recommendation in the updated Centers 

for Disease Control and Prevention 

(CDC) Clinical Practice Guideline for 

Prescribing Opioids for Pain, 2022 287

(‘‘2022 CDC Guideline’’). Based on 

Recommendation 6 of the 2022 CDC 

Guideline, when opioids are used to 

treat acute pain, no greater quantity of 

opioids should be prescribed than 

needed for the expected duration of 

pain that is severe enough to require 

opioids. However, when acute pain does 

continue longer than the expected 

duration, prescribers, practices, and 

clinicians ‘‘should have mechanisms in 

place for the subset of patients who 

experience severe acute pain that 

continues longer than the expected 

duration. These mechanisms should 

allow for timely reevaluation to confirm 

or revise the initial diagnosis and adjust 

pain management accordingly.’’ 

Evidence for Measure: The duration of 

initial opioid exposure is associated 

with a higher likelihood of long-term 

opioid use. There is a consistent body 

of empirical evidence that a greater 

days’ supply for initial opioid 

prescriptions is associated with 

significant risks, including increased 

risk of long-term opioid use, opioid 

misuse, and overdose. In the 2022 CDC 

Guideline, the CDC reaffirmed their 

recommendation on initial opioid 

prescription duration that ‘‘when 

opioids are needed for acute pain, 

clinicians should prescribe no greater 

quantity than needed for the expected 

duration of pain severe enough to 

require opioids.’’ In the associated 

implementation consideration text, the 

updated CDC Guideline notes that 

‘‘when the diagnosis and severity of 

acute pain warrant use of opioids, 

clinicians should prescribe no greater 

quantity than needed for the expected 

duration of pain severe enough to 

require opioids’’ and ‘‘for many 

common causes of nontraumatic, 

nonsurgical pain, when opioids are 

needed, a few days or less are often 

sufficient.’’ Furthermore, the 2022 CDC 

Guideline references an analysis 

conducted in 2014 288 that found that 

the median durations of initial opioid 

analgesic prescriptions for acute pain 

indications in primary care settings 

were 4 to 7 days, suggesting that in most 

cases, clinicians considered an initial 

opioid prescription of 4 to 7 days’ 

duration sufficient. In April 2023, the 

Food and Drug Administration (FDA) 

announced that it was requiring updates 

to the prescribing information of opioid 

pain medicines to provide additional 

guidance on the use of opioids. In this 

Drug Safety Communication,289 the FDA 

stated, ‘‘Data also suggest that many 

acute pain conditions treated in the 

outpatient setting require no more than 

a few days of an opioid pain medicine, 

although the dose and duration of 

treatment needed to adequately manage 

pain will vary based on the underlying 

cause and individual patient factors.’’ 

Existing evidence-based literature 

reinforces the CDC’s recommendations 

regarding the duration of initial opioid 

prescriptions. A retrospective cohort 

study by Shah et al., found that the 

probability of long-term opioid use 

increased with each additional day 

supplied when initiating opioid 

therapy, following the third day 

supplied.290 The study examined 

1,294,247 patients aged 18 years or 

older who met the inclusion criteria and 

received initial opioid prescriptions, 

defined as those with no opioid 

prescriptions in the preceding 6 months 

of continuous enrollment. The study 

found that the probability of long-term 

use was more than twice as high for 

individuals who received greater than 7 

days’ supply, when compared to those 

with at least one day’s supply (13.5 

percent vs. 6.0 percent). 

A different retrospective study 

published by Shah et al., provided 

further evidence that a greater days’ 

supply for initial opioid prescriptions 

was associated with a decreased 

likelihood of opioid discontinuation.291

The study followed a total of 1,353,902 

opioid naı ̈ve individuals who had at 

least one opioid prescription between 

June 1, 2006, and December 31, 2014 

and at least six months of continuous 

pharmacy and medical enrollment 

without an opioid prescription before 

their first opioid prescription. Among 

the 1.3 million study participants, 

993,935 were enrolled for at least 1 year. 

Out of the 993,935 study participants, 

33,019 individuals (3.32 percent) 

continued opioid use for 365 days or 

longer. After controlling for patient 

factors and underlying pain etiologies, 

the authors’ results suggested a doseresponse relationship between days’ 

supply and likelihood of 

discontinuation. The hazard ratios for 

discontinuation of opioids were 0.70 (95 

percent confidence interval (CI) 0.70– 

0.71) for a 3–4 days’ supply, 0.48 (95 

percent CI 0.47–0.48) for a 5–7 days’ 

supply, 0.37 (95 percent CI 0.37–0.38) 

for an 8–10 days’ supply, 0.32 (95 

percent CI 0.31–33) for an 11–14 days’ 

supply, 0.29 (95 percent CI 0.28–0.29) 

for 15–21 days’ supply, and 0.20 (95 

percent CI 0.19–0.20) for 22 or more 

days’ supply of opioids, where a 1–2 

days’ supply is the reference group. This 

study also narrowed the sample by 

further evaluating opioid-naı ̈ve 

individuals to only those individuals 

who were opioid naı ̈ve for 12 months. 

This decreased the sample to 955,371 

individuals and the results found the 

relationship between the first opioid 

prescription and the likelihood of 

discontinuation from opioids showed 

similar trends to the original study 

population. 

Another study by Hadlandsmyth 

replicated Shah et al.’s methodology 

and researched the relationship between 

initial opioid exposure and long-term 


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292Hadlandsmyth K, Lund BC, Mosher HJ. 

Associations between initial opioid exposure and 

the likelihood for long-term use. J Am Pharm Assoc 

(2003). Jan–Feb 2019;59(1):17–22. doi:10.1016/ 

j.japh.2018.09.005 at https://www.sciencedirect.

com/science/article/pii/S154431911830

4059?via%3Dihub. 

293Mojtabai, R. (2018). National trends in 

long-term use of prescription opioids. 

Pharmacoepidemiology and drug safety, 27(5), 526– 

534 at https://pubmed.ncbi.nlm.nih.gov/28879660/. 

21 73 FR 20489–20490 in ‘‘Medicare Program; 

Policy and Technical Changes to the Medicare 

Prescription Drug Benefit’’ published April 15, 2008 

(73 FR 20486). However, CMS’s longstanding 

interpretation of the phrase ‘‘[a]gents when used 

for. . .weight gain . . .’’ (emphasis added) in the 

same section of the Act has not included drugs used 

to treat acquired immunodeficiency syndrome 

(AIDS) wasting and cachexia (73 FR 20490). 

294HPMS memorandum, dated December 19, 

2022, Medicare Part D Opioid Safety Edit 

Reminders and Recommendations and Frequently 

Asked Questions (FAQs) available at: https://

www.cms.gov/files/document/cy-2023-opioidsafety-edit-reminders-and-recommendations.pdf. 

295HPMS memorandum, dated July 5, 2024, 

Contract Year (CY) 2025 Medicare Part D Opioid 

Safety Edits—Submission Instructions, 

Recommendations, and Reminders available at: 

https://www.cms.gov/files/document/cy-2025- 

opioid-safety-edit-submission-instructions.pdf. 

use.292 There were 19,600 Veteran’s 

Health Administration patients who 

received an initial opioid prescription 

(defined as the first prescription with no 

opioid prescriptions in the preceding 

year) and subsequently met the criteria 

for long-term opioid use within one year 

of follow-up. The authors of this study 

compared their 2011 and 2016 data. 

Their results corroborated Shah’s study 

that an association exists between initial 

opioid exposure and the rate of longterm use. This long-term opioid use 

appeared to persist even though the 

overall rate of long-term opioid use may 

have decreased, therefore concluding 

that cumulative days’ supply was a 

strong predictor of long-term use and 

limiting initial opioid use can 

potentially decrease the risk of longterm opioid use. The study results 

found that in 2016, the overall rate of 

continued opioid use 1 year after initial 

opioid exposure was 16.8 percent and in 

2011 was 29.2 percent. 

Additionally, a study by Mojtabai 

analyzed trends in prescription opioid 

use among adults in the United States 

from 1999–2000 to 2013–2014.293 The 

study found a significant increase in the 

prevalence of prescription opioid use, 

driven by an increase in long-term 

use.21 By 2013–2014, nearly 80 percent 

of opioid users were classified as longterm users.21 Long-term opioid use was 

linked to poorer physical health status, 

concurrent use of benzodiazepines, and 

a history of heroin use.21 These findings 

emphasize the growing prevalence and 

implications of long-term opioid use in 

the U.S.21

Medicare Part D Opioid-Related 

Policy Alignment: Medicare Part D 

sponsors must have concurrent DUR 

systems, policies, and procedures 

designed to ensure that a review of the 

prescribed drug therapy is performed 

before each prescription is dispensed to 

an enrollee in a sponsor’s Part D plan, 

typically at the point-of-sale (POS) (that 

is, the pharmacy) or point of 

distribution as described in 

§ 423.153(c)(2). To help prevent and 

combat prescription opioid overuse 

through improved concurrent DUR, 

sponsors are expected to implement 

real-time opioid safety edits at the POS, 

including an edit to limit initial opioid 

prescription fills for opioid naı ̈ve 

beneficiaries to no more than a 7 days’ 

supply. Sponsors should not implement 

these edits so that beneficiaries’ access 

to MOUD, such as buprenorphine, is 

impacted; sponsors should not include 

MOUD in this edit. 

Sponsors should have procedures in 

place to allow the edit to be overridden 

at POS if an enrollee is already taking 

opioids or is exempt.294 295 For 

example, sponsors may not have opioid 

claims history for new enrollees, 

especially at the start of a new contract 

year, and they may experience a claim 

rejection due to the opioid naı ̈ve edit 

with their first opioid prescription over 

7 days’ supply. Furthermore, 

beneficiaries who are residents of a 

long-term care facility, are in hospice 

care or receiving palliative or end-of-life 

care or have cancer or sickle cell disease 

should be excluded from these reviews. 

A pharmacist can override a POS edit 

for an exemption or for the enrollee not 

being opioid naı ̈ve. A beneficiary or 

their prescriber may also request a 

coverage determination from the plan 

for a longer duration for their initial fill, 

including the right to request an 

expedited or standard coverage 

determination in advance of prescribing. 

Subsequent prescriptions filled within 

the plan’s look back window are not 

subject to the 7 days’ supply limit, as 

the enrollee will no longer be 

considered opioid naı ̈ve.296 While the 

opioid safety edit may help plan 

sponsors reduce prescription opioid 

overuse across their enrollment 

population, it should not be 

implemented by Part D plans as a onesize-fits-all prescribing limit or as a 

substitute for individual clinical 

judgment. Implementation of opioid 

safety edits, including the opioid naı ̈ve 

edit, by Part D sponsors, is monitored 

through the CMS Part D Reporting 

Requirements (OMB 0938–0992), 

beneficiary complaints, and other 

sources of CMS administrative data. 

The IOP–LD measure complements 

the opioid naı ̈ve safety edit because it is 

similarly focused on the duration of 

initial opioid prescriptions to reduce 

risks, but the IOP–LD measure is 

retrospective. Sponsors are also required 

to establish a drug management program 

(DMP) for beneficiaries at-risk for 

misuse or abuse of frequently abused 

drugs, and beneficiaries with potential 

patterns of opioid misuse or with a 

history of opioid-related overdose are to 

be included in DMPs per the established 

retrospective criteria. DMP requirements 

are codified at § 423.153(f). Under such 

programs, Part D sponsors engage in 

case management of such beneficiaries 

by contacting their prescribers to 

determine if a beneficiary is at risk. 

The Medicare Part D opioid-related 

policies were carefully developed to 

balance the need to address opioid 

misuse with the need to maintain a 

positive patient-doctor relationship, to 

preserve access to medically necessary 

drug regimens, and to reduce the 

potential for unintended consequences. 

The IOP–LD measure is an additional 

tool for sponsors to assess the 

effectiveness of Medicare Part D opioidrelated strategies to reduce the risk of 

long-term opioid use, opioid misuse, or 

overdose. 

Data-Driven Need: CMS routinely 

monitors the impact of the Medicare 

Part D opioid-related policies. We have 

observed positive trends in our 

population, especially after the opioid 

DUR—safety edit and DMP—policies 

were enhanced beginning in 2019, but 

we must continue to use available tools 

to proactively address potential misuse 

and overdose, including quality 

measures. 

The IOP–LD rates for Part D contracts 

can be improved. The average IOP–LD 

rate across all contracts was about 16 

percent for the 2021 measurement year 

(2023 display page) and 2022 

measurement year (2024 display page). 

The average rates were 17 percent for 

MA–PDs and 13 percent for PDPs in the 

2021 measurement year and 17 percent 

and 14 percent for MA–PDs and PDPs, 

respectively, in 2022. There was a range 

of IOP–LD rates among contracts; some 

of the highest rates for this measure by 

contract are 43 percent, 53 percent, and 

64 percent. 

Furthermore, based on the internal 

analysis of Part D prescription drug 

event (PDE) data from 2018 to 2023 

(extracted January 17, 2024), the 

percentage of non-MOUD opioid Part D 

claims with 7 days’ supply or less 

positively increased from 18.4 percent 

in 2018 to 27.7 percent in 2023 after the 

implementation of enhanced opioid 

safety edits at POS in 2019, but the 


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296Medicare Part D Opioid Policies: Information 

for Prescribers available at: https://www.cms.gov/ 

medicare/coverage/prescription-drug-coveragecontracting/improving-drug-utilization-reviewcontrols-part-d. 

297CMS internal analysis excluded beneficiaries 

who elected to receive hospice care, are in 

palliative care, who have cancer or sickle cell 

disease, or who are in a long-term care setting. 

298See Announcement of Calendar Year (CY) 

2020 Medicare Advantage Capitation Rates and 

Medicare Advantage and Part D Payment Policies 

and Final Call Letter available at: https://

www.cms.gov/medicare/health-plans/ 

medicareadvtgspecratestats/downloads/ 

announcement2020.pdf. The ODHMP measure was 

299Refer to 2024 Medicare part C & D Display 

Measure Technical Notes available at: https://

www.cms.gov/medicare/health-drug-plans/part-c-dperformance-data. 

300These measures will use continuous 

enrollment beginning in measurement year 2025 

(2027 display page) as announced in the 

Announcement of Calendar Year (CY) 2025 

Medicare Advantage (MA) Capitation Rates and Part 

C and Part D Payment Policies available at: https:// 

www.cms.gov/files/document/2025- 

announcement.pdf. 

301CDC Newsroom Release. Overdose death rates 

increased significantly for Black, American Indian/ 

Alaska Native people in 2020: https://www.cdc.gov/ 

media/releases/2022/s0719-overdose-rates-vs.html. 

302 JAMA Internal Medicine: Overdose, 

Behavioral Health Services, and Medications for 

Opioid Use Disorder After a Nonfatal Overdose at 

https://jamanetwork.com/journals/jamainternal

medicine/fullarticle/2820177. 

303https://www.uspreventive

servicestaskforce.org/uspstf/recommendation/ 

breast-cancer-screening#bcei-recommendation-titlearea. 

number of claims were 10 million 

(2018), 12 million (2019), 11.5 million 

(2020), 12 million (2021), 12 million 

(2022), and 9.4 million (2023). 

The percentage of Part D enrollees 

who had at least one opioid Part D claim 

in the year in PDE data decreased from 

28.6 percent in 2018 to 20.6 percent in 

2023 (not including MOUD).297

Similarly, the percentage of non-MOUD 

opioid Part D claims (out of all covered 

Part D claims) after exclusions 

decreased from 4.7 percent to 3.6 

percent. However, the number of users 

and claims remains a concern. The 

number of non-MOUD opioid Part D 

users from 2018 to 2023 were 10.4 

million (2018), 9.8 million (2019), 9.1 

million (2020), 9.3 million (2021), 9.3 

million (2022), and 9.4 million (2023). 

The number of non-MOUD opioid Part 

D claims from 2018 to 2023 were 55 

million (2018), 51.3 million (2019), 49.3 

million (2020), 47.5 million (2021), 45.9 

million (2022), and 44.7 million (2023). 

The PQA has developed other 

measures to address opioid misuse, 

including the Use of Opioids at High 

Dosage in Persons without Cancer 

(OHD), Use of Opioids from Multiple 

Providers in Persons without Cancer 

(OMP), and Use of Opioids at High 

Dosage and from Multiple Providers in 

Persons without Cancer (OHDMP) 

measures, which CMS has used for 

quality and performance oversight. In 

2019, the PQA updated these three 

measures and CMS implemented the 

measure revisions in the Patient Safety 

reports to Part D sponsors for the 2019 

measurement year. These three 

measures were added to the display 

page beginning in 2021 (then using 2019 

data).298

These three measures share the same 

denominator criteria, based on the 

number of member-years (MYs) of 

enrolled Part D beneficiaries with two or 

more prescription claims for opioids, 

filled on at least two unique dates of 

service, for at least 15 total cumulative 

opioid days’ supply over a period of 90 

days or longer during the measurement 

period.299 CMS currently adjusts Part D 

enrollment based on MYs 300 to account 

for enrolled beneficiaries for only part of 

the contract year. Upon reviewing the 

denominator data, there has been an 

increase in the number of MYs of 

enrolled beneficiaries from almost 35.6 

million to about 42.7 million from 2017 

to 2022 measurement years 

(respectively, from 2019 to 2024 display 

page). However, the proportion of MYs 

of enrolled beneficiaries receiving at 

least two fills of prescription opioids 

and at least 15 days of supply of opioids 

over a period of 90 days or longer has 

decreased from 17 percent in 2017 to 9 

percent in 2022. Even with this 

reduction, roughly four million MYs of 

enrolled beneficiaries still demonstrate 

long-term use of opioid prescriptions. 

There is also continued concern for 

long-term opioid and illicit opioid use 

leading to overdose and death. 

According to the CDC, there are 

widening disparities among various 

population groups for overdose death 

rates, which have recently been driven 

by illicitly manufactured fentanyl 

use.301 In 2020, the overdose death rates 

per 100,000 people increased by 44 

percent for the Black population and 39 

percent for American Indian and Alaska 

Native (AI/AN) population compared to 

2019. Additionally, among Black males 

65 years and older, the overdose death 

rate was nearly seven times more than 

their White male counterparts of the 

same age group. 

Additionally, officials from the 

Substance Abuse and Mental Health 

Services Administration (SAMHSA), 

CDC, and the National Institute on Drug 

Abuse published a study that followed 

a cohort of 136,762 Medicare 

beneficiaries who experienced an index 

nonfatal drug overdose in 2020.302 This 

population consisted primarily of 

Hispanic (5.8 percent), non-Hispanic 

Black (10.9 percent), and non-Hispanic 

White (78.8 percent) beneficiaries. The 

researchers followed the beneficiaries 

12 months after the initial index 

nonfatal drug overdose and found that 

23,815 beneficiaries (17.4 percent) had 

at least one more nonfatal drug overdose 

and 1,323 beneficiaries (1.0 percent) 

died of a fatal overdose. The study 

found that opioids were involved in 

72.2 percent of these fatal drug 

overdoses. 

Differences are seen in the Medicare 

Part D population based on internal 

analysis of PDE and administrative 

claims data by CMS. In 2023, the 

percentages of non-MOUD opioid Part D 

users were 24 percent for Black 

beneficiaries, 24 percent for AI/AN 

beneficiaries, and 22 percent for White 

beneficiaries. We found that overall, the 

number of Part D beneficiaries with a 

primary opioid overdose claim 

decreased from 32,120 in 2018 to 28,365 

in 2023 (0.83 per 1,000 to 0.62 per 1,000 

Part D beneficiaries). The opioid 

overdose rates varied among the Part D 

population in 2023 (January 1, 2023 to 

December 31, 2023): 1.52 per 1,000 AI/ 

AN Part D beneficiaries, 1.35 per 1,000 

Black Part D beneficiaries, and 0.57 per 

1,000 White Part D beneficiaries. The 

disparities in opioid overdose rates 

existing among different population 

groups, as highlighted by CMS’s internal 

data analysis, underscore the urgency to 

address the widening gap in health 

outcomes. As discussed in this 

preamble section, there is room for 

improvement and variations in IOP–LD 

rates among Part D sponsors. 

The IOP–LD measure is a 

preventative-focused quality measure 

that addresses initial prescription 

opioid exposure to reduce the 

likelihood of long-term opioid use and 

reduce the risk of opioid overdose. We 

propose to add the Part D IOP–LD 

measure to the Star Ratings for the 2028 

Star Ratings (2026 measurement year) 

and solicit comments on this proposal. 

2. Updating Measures 

a. Breast Cancer Screening (Part C) 

CMS is proposing a substantive 

update to the existing Breast Cancer 

Screening measure because the measure 

steward, NCQA, is updating the 

measure as a result of changes in the 

applicable clinical guidance. In April 

2024, the U.S. Preventive Services Task 

Force (USPSTF) issued final updated 

guidance for the age at which breast 

cancer screenings should begin.303

Subsequently, NCQA announced their 

intention to update their breast cancer 


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304See Announcement of Calendar Year (CY) 

2025 Medicare Advantage (MA) Capitation Rates 

and Part C and Part D Payment Policies (cms.gov) 

page 138. 

305https://www.medicareappeal.com/sites/ 

default/files/New%20Manual%20

with%20Timefram%20Updates%2010

%207%2024.pdf. 

screening measure for measurement 

year 2025 to include biennial 

mammography screening for women 

aged 40–74 years at average risk of 

breast cancer (see https://www.ncqa.org/ 

blog/updates-to-breast-cancerscreening-age-range-for-hedis-my-2025/ 

). As discussed in the CY 2025 Rate 

Announcement, CMS is proposing to 

expand the age range for the Breast 

Cancer Screening measure to women 

aged 40–49, for an updated age range of 

40–74, for the 2027 and subsequent 

measurement years.304 The expanded 

age range for this screening measure 

significantly increases the size of the 

population covered by this measure and 

is therefore a substantive measure 

specification change within the scope of 

§ 422.164(d)(2). The legacy measure 

with the narrower age range of 50–74 

years will remain available and used in 

Star Ratings until the updated measure 

has been on the display page for two 

years and has been adopted through 

rulemaking. For measures such as this, 

NCQA requires plans to submit the data 

as the total rate and rates for each age 

stratification so data will be available to 

calculate the legacy measure rate until 

the expanded rate is adopted through 

rulemaking for the Star Ratings. The 

updated measure will be on the display 

page for the 2027 and 2028 Star Ratings 

and will be included in the 2029 Star 

Ratings if finalized through rulemaking. 

b. Plan Makes Timely Decisions About 

Appeals (Part C) and Reviewing Appeals 

Decisions (Part C) 

CMS is proposing substantive updates 

to the Plan Makes Timely Decisions 

about Appeals (Part C) measure that 

evaluates the percent of appeals timely 

processed by the plan (numerator) out of 

all the plan’s appeals decided by the 

Independent Review Entity (IRE) 

(includes upheld, overturned, partially 

overturned, and appeals not evaluated 

by the IRE because the plan agreed to 

cover) (denominator). Given the extent 

to which cases are now submitted 

electronically (via the portal) to the IRE, 

CMS has updated the Maximus 

Medicare Health Plan Reconsideration 

Process Manual Medicare Managed Care 

Reconsideration Project (that is, the IRE 

Manual) effective January 1, 2025 305 to 

better align when submission of a case 

file to the IRE is considered timely with 

the existing regulations. First, CMS is 

eliminating the additional days the IRE 

allows for appeal files that are 

submitted electronically. Currently, the 

IRE includes additional days to make 

allowances for any mail delays. Because 

the IRE now receives over 99 percent of 

case files electronically via the portal, 

CMS has updated the language in the 

IRE Manual to use a deadline for timely 

portal (that is, electronic) submission 

that aligns with the timeliness 

requirements in § 422.590 for 

submission of standard, expedited, and 

Part B drug cases. Section 422.590(a)(2) 

requires Medicare health plans to 

submit an unfavorable standard service 

reconsideration to the IRE as 

expeditiously as the enrollee’s health 

condition requires, or not later than 30 

calendar days after the receipt of a valid 

reconsideration request, subject to an 

additional 14-calendar day extension if 

requested by the enrollee or otherwise 

justified and in the enrollee’s interest as 

set forth in § 422.590(f). These 

timeframes apply as well to Medicare 

cost plans under § 417.600. 

The regulations do not provide any 

additional time for mail delays and 

Medicare health plans are not required 

to use overnight delivery for nonexpedited cases. For purposes of 

defining and calculating timeliness, the 

IRE currently adds five calendar days to 

the timeframes listed above for all 

appeal file submissions. For example, 

the IRE currently considers a standard 

service case, without an extension, to be 

submitted timely if it is received within 

35 calendar days of the valid request for 

reconsideration; this means that for 

electronic submissions by the plan, the 

plan has an extra five days to submit the 

file to the IRE beyond the deadline 

established in the applicable regulation. 

Since CMS is eliminating this 5-day 

period for all cases submitted 

electronically starting on January 1, 

2025, we are proposing to make this 

update to the Plan Makes Timely 

Decisions about Appeals measure to 

align the measure with the timeframe 

used by the IRE in processing appeal 

files submitted to it. CMS believes this 

change is justified due to the 

overwhelming majority of cases being 

submitted electronically; further, 

eliminating the 5-day grace period for 

electronic submissions aligns this 

measure with the regulation text, which 

does not provide for or require any grace 

period for submission of files to the IRE. 

Per § 422.590(a)(2), (b)(2), (c)(2) and 

(e)(5), submission of the written 

explanation of an adverse 

reconsideration decision and associated 

documentation to the IRE is required 

within the same timeframe as notice to 

the enrollee (that is, 30, 60, or 7 days or 

24 hours, depending on the specific 

item or service under appeal). Please 

note these changes are only in effect for 

electronic submissions. The timeliness 

of case files submitted by mail would 

continue to be subject to the 5-day grace 

period. 

The second update CMS is 

implementing starting January 1, 2025, 

is to use the electronic system receipt 

date and time as the date the appeal was 

received by the IRE, regardless of 

whether it is during the IRE’s business 

hours, for electronic submissions 

through the IRE’s secure web portal. 

Currently, the IRE uses the system 

receipt date as the date the appeal was 

received if it is during the IRE’s normal 

business hours. If the system receipt 

time or date is outside of the IRE’s 

normal business hours, the following 

business day is currently used as the 

receipt date. For example, if the appeal 

is received on a Sunday when the IRE 

offices are closed, the appeal would be 

considered received on Monday when 

the offices are open. With this change 

the receipt date would be Sunday rather 

than Monday. CMS has updated the IRE 

Manual and process to allow case files 

submitted via the electronic portal to be 

considered received on the date and 

time of portal submission, even if it is 

outside of normal business hours, 

starting January 1, 2025. This means 

that cases received up to 11:59 p.m. 

(Eastern Time) each day via the portal 

would be considered received on that 

day. (However, the processing 

timeframe for the IRE-level review 

would not commence until the 

following business day.) This update 

more closely reflects the process of the 

submission of electronic files than 

current practice; because the electronic 

submission is available to the IRE at the 

time the electronic submission process 

is complete and the portal system has 

the functionality to track the minute of 

submission and record that as part of 

the submission record, using that date 

and time will better reflect when the IRE 

has possession and the ability to use the 

submitted materials to perform its work. 

These proposed specification changes 

would only affect electronic 

submissions. If hard copies are 

delivered outside of the IRE’s normal 

business hours, the following business 

day is used as the receipt date. We are 

proposing to incorporate this change as 

part of the Plan Makes Timely Decisions 

about Appeals measure. We are 

proposing to incorporate this change 

also in the Reviewing Appeals Decisions 

measure since the appeals used in this 

measure are based on the date in the 


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calendar year the appeals were received 

by the IRE, and this proposed update 

could affect the received date. 

We are proposing to adopt these 

measure updates as defined at 

§ 422.164(d)(2) for the Plan Makes 

Timely Decisions about Appeals and the 

Reviewing Appeals Decisions measures 

for the 2026 measurement year. The 

legacy appeals measures would remain 

in the Star Ratings until the updated 

measures have been on the display page 

for at least 2 years. Then, the legacy 

measures would be retired, and the 

respecified appeals measures would 

move into the Star Ratings beginning 

with the 2029 Star Ratings. 

3. Summary of Measure Changes for the 

Part C and D Star Ratings 

Table 14 summarizes the additional 

and updated measures addressed in this 

proposed rule, beginning with the 2028 

Star Ratings. The measure descriptions 

listed in this table are high-level 

descriptions. 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 2028 are produced 

in the fall of 2027. If a measurement 

period is listed as ‘‘the calendar year 2 

years prior to the Star Ratings year’’ and 

the Star Ratings year is 2028, the 

measurement period is referencing the 

January 1, 2026 to December 31, 2026 

period. As noted earlier in section IV.B. 

of this proposed rule, CMS does not 

codify the specific measures for the Part 

C and Part D Quality Rating System in 

regulation; doing so would be 

unnecessarily lengthy and cumbersome 

due to the relative regularity with which 

measure specifications are updated. 

BILLING CODE 4120–01–P 


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BILLING CODE 4120–01–C 

C. Health Equity Index Reward 

(§§ 422.166(f)(3) and 423.186(f)(3)) 

The Health Equity Index (HEI) reward 

will be implemented beginning with the 

2027 Star Ratings (measurement years 

2024 and 2025) that will be released in 

October 2026. The HEI reward is an 

upside only reward for obtaining high 

measure-level scores for the subset of 

enrollees with the specified social risk 

factors (SRFs). The current SRFs include 

receipt of the low income subsidy or 

being dually eligible for Medicare and 

Medicaid (LIS/DE), or having a 

disability as defined by the original 

reason for Medicare entitlement. 

Additional SRFs may be added over 

time through rulemaking. The goal of 

the HEI reward is to improve health 

equity by incentivizing MA, 1876 cost, 

and PDP contracts to perform well 

among enrollees with specified SRFs. 

The methodology for the HEI reward 

is codified at §§ 422.166(f)(3) and 

423.186(f)(3). The calculation of the HEI 

reward includes an assessment of 

contract enrollment against two 

enrollment thresholds as described at 

§§ 422.166(f)(3)(vii) and 

423.186(f)(3)(vii). To qualify for the full 

HEI reward (which ranges from 0.0 to 

0.4 on a linear scale), contracts must 

have percentages of enrollees with the 

specified SRFs combined greater than or 

equal to the contract-level median in the 

most recent year of data used to 

calculate the HEI. To qualify for onehalf of the HEI reward (which ranges 

from 0.0 to 0.2 on a linear scale), 

contracts must have percentages of 

enrollees with SRFs greater than or 

equal to one-half of the contract-level 

median up to, but not including the 

contract-level median percentage of 

enrollees with SRFs in the most recent 

year of data used to calculate the HEI. 

Paragraph (f)(3)(viii) describes how the 

HEI reward is calculated, with 

paragraphs (f)(3)(viii)(A) and (B) 

addressing calculation of the HEI 

reward in cases of contract 

consolidation. 

We propose to revise 

§§ 422.166(f)(3)(viii)(B) and 

423.186(f)(3)(viii)(B) to clarify how the 

HEI reward enrollment thresholds are 

assessed beginning with the 2027 Star 

Ratings in the case of calculating the 

HEI reward for contract consolidations 

for the second year following the 

consolidation. We also propose changes 

at §§ 422.166(f)(3)(viii)(C) and 

423.186(f)(3)(viii)(C) to how the HEI 

reward will be calculated beginning 

with the 2029 Star Ratings for contracts 

that are required by a state Medicaid 

agency to move one or more D–SNP 

plan benefit packages from an existing 

MA contract to an MA contract that only 

includes one or more D–SNPs with a 

service area limited to that state, 

consistent with § 422.107(e). Finally, we 

propose to revise §§ 422.166(f)(3)(vi) 

and 423.186(f)(3)(vi) to clarify that in 

order for I–SNP-only contracts to have 

the rating-specific HEI calculated, these 

contracts must have data for at least half 

the measures included in the ratingspecific HEI for the subset of measures 

that I–SNP-only contracts are required 

to report. 

In calculating the HEI reward for the 

surviving contract of a consolidation, 

we want to avoid masking the scores of 

contracts with low performance among 

enrollees with the specified SRFs under 

higher performing contracts. We also 

want to avoid rewarding contracts that 

serve relatively few enrollees with the 

specified SRFs as they consolidate with 

contracts serving relatively more of 

these enrollees, because we want to 

focus the HEI reward on contracts 

serving larger percentages of enrollees 

with the specified SRFs where 

improvement is most needed. Starting 

with the 2027 Star Ratings, for the 

second year following a consolidation, 

we propose at §§ 422.166(f)(3)(viii)(B) 

and 423.186(f)(3)(viii)(B) to clarify that 

the combined enrollment from the 

consumed and surviving contracts from 

the most recent year of data used in 

calculating the HEI will be used to 

assess whether the surviving contract 

meets one of the enrollment thresholds 

as described at §§ 422.166(f)(3)(vii) and 

423.186(f)(3)(vii). When two or more 

contracts consolidate, the enrollment 

data used for the second year following 

the consolidation are from prior to the 

consolidation since the HEI is 

measuring performance prior to the 

contracts combining. For example, if 

two contracts consolidate as of January 

1, 2026, we would combine the 

enrollment of the surviving and 

consumed contracts when calculating 

the 2027 Star Ratings based on 

enrollment in the surviving and 

consumed contracts in 2025. This is 

similar to how enrollment is combined 

for the calculation of enrollment for the 

second year following a consolidation 

for the categorical adjustment index at 

§§ 422.166(f)(2)(i)(B)(1) and 

423.186(f)(2)(i)(B)(1). 

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 (87 FR 27704), we codified 

at § 422.107(e) a provision allowing D– 

SNPs with exclusively aligned 

enrollment to apply for and maintain 

MA contracts that only include one or 

more D–SNPs with a service area 

limited to a specific state. If states 

require such D–SNP-only contracts 

along with integrated materials 

described at § 422.107(e)(ii) through 

their state Medicaid agency contracts, 

CMS will facilitate operationalization of 

additional opportunities for integration. 

As we described in the May 2022 final 

rule (87 FR 27763), D–SNP-only 

contracts established under § 422.107(e) 

result in several benefits for states and 

dually eligible individuals, including 

greater transparency on the MA 

organizations’ performance in serving 

dually eligible enrollees by establishing 

Star Ratings specific to D–SNPs. As of 

plan year 2025, five states have taken 

advantage of the opportunity at 

§ 422.107(e) to require D–SNP-only 

contracts. We anticipate the number of 

states with D–SNP-only contract 

requirements to increase by another 

eight or nine states in 2026, with the 

majority of these new states a result of 

the transition of those participating in 

the capitated financial alignment model 

demonstrations. We expect a limited 

number of additional states may move 

in this direction over time. 

As a result of these state 

requirements, some MA organizations 

have had to, or will have to, move D– 

SNP plan benefit packages from existing 

MA contracts (hereafter referred to as 

‘‘legacy MA contracts’’) to D–SNP-only 

contracts established under § 422.107(e). 

These changes may make it more 

difficult for a legacy MA contract to 

meet either of the enrollment thresholds 

for the percentages of enrollees with the 

specified SRFs for the HEI reward as 

defined at §§ 422.166(f)(3)(vii) and 

423.186(f)(3)(vii) while the specified 

SRFs included in the HEI are LIS/DE or 

having a disability as currently defined 

at §§ 422.166(f)(3)(i)(A) and 

423.186(f)(3)(i)(A). As such, MA 

organizations operating in states that 

elected § 422.107(e) may not be eligible 

for the HEI reward if fewer enrollees 

with SRFs remain following the 

establishment of separate D–SNP-only 

contracts, potentially creating an 

incentive for these organizations to 

promote enrollment of individuals with 

the specified SRFs in the legacy MA 

contracts as opposed to the D–SNPs. 

This incentive runs counter to our goal 

of encouraging enrollment in highquality integrated products that better 


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suit the dually eligible population. To 

address this, we propose at 

§§ 422.166(f)(3)(viii)(C) and 

423.186(f)(3)(viii)(C) to modify the way 

eligibility for an HEI reward and the size 

of the HEI reward are determined for 

legacy MA contracts that no longer meet 

either of the percentage SRF enrollment 

thresholds due to state contracting 

requirements under § 422.107(e). As 

additional SRFs are added to the HEI 

reward through rulemaking, we 

anticipate that the need for this 

adjustment will no longer be necessary. 

Thus, we propose at 

§§ 422.166(f)(3)(viii)(C) and 

423.186(f)(3)(viii)(C) that this change 

would be implemented every year after 

the D–SNP-only contract established 

under § 422.107(e) is required to be 

created until the Star Ratings year when 

additional SRFs are added to the HEI 

reward, after which time, legacy MA 

contracts will have the potential HEI 

reward calculated based on their own 

enrollment and performance following 

the methodology at §§ 422.166(f)(3)(viii) 

and 423.186(f)(3)(viii). There are no 

changes to how eligibility for, or the size 

of, the HEI reward are calculated for D– 

SNP-only contracts established under 

§ 422.107(e). 

We propose a series of rules that 

would be applied in order to determine 

whether the legacy MA contract would 

qualify for an HEI reward and the size 

of the reward if applicable. First, we 

propose at §§ 422.166(f)(3)(viii)(C)(1) 

and 423.186(f)(3)(viii)(C)(1) to follow 

the methodology for calculating the HEI 

reward at paragraphs 

§§ 422.166(f)(3)(viii) and 

423.186(f)(3)(viii) for legacy MA 

contracts that continue to meet either of 

the percentage SRF enrollment 

thresholds (i.e., the contract-level 

median threshold or one-half of the 

contract-level median threshold) based 

on their own enrollment. For legacy MA 

contracts that do not meet either of the 

percentage SRF enrollment thresholds 

(i.e., the contract-level median threshold 

or one-half of the contract-level median 

threshold) based on their own 

enrollment, we propose at 

§§ 422.166(f)(3)(viii)(C)(2) and 

423.186(f)(3)(viii)(C)(2) to first 

determine whether the legacy MA 

contract can reliably have the ratingspecific HEI score calculated based on 

its own enrollment as described at 

§§ 422.166(f)(3)(iv) and (vi) and 

423.186(f)(3)(iv) and (vi). If the legacy 

MA contract cannot reliably have the 

rating-specific HEI score calculated 

based on its own enrollment, then the 

legacy MA contract would not qualify 

for an HEI reward for the given rating. 

We propose this to ensure that legacy 

MA contracts are not rewarded unless 

they are still providing relatively high 

quality care for their remaining 

enrollees with SRFs, and we cannot 

ensure this if the rating-specific HEI 

score cannot be reliably calculated. 

Additionally, we propose at 

§§ 422.166(f)(3)(viii)(C)(2) and 

423.186(f)(3)(viii)(C)(2) that if the D– 

SNP-only contract established under 

§ 422.107(e) that received the D–SNP(s) 

from the legacy MA contract cannot 

have the rating-specific HEI score 

reliably calculated, then the legacy MA 

contract would not qualify for an HEI 

reward for the given rating. We propose 

this because without the HEI score from 

the D–SNP-only contract established 

under § 422.107(e), the potential HEI 

reward for the legacy contract would be 

based solely on its own performance 

among a relatively small percentage of 

enrollees with the specified SRFs. This 

would be inconsistent with our policy 

goals for the HEI reward, one of which 

is to focus the HEI reward on contracts 

serving larger percentages of enrollees 

with the specified SRFs, as this is where 

improvement is most needed. For 

example, the D–SNP-only contract 

established under § 422.107(e) that 

received the D–SNP(s) from the legacy 

MA contract would not be able to have 

a rating-specific HEI score reliably 

calculated if the D–SNP contract is too 

new or does not have enough data, and 

therefore the legacy MA contract in this 

instance also would not qualify for an 

HEI reward. To further illustrate this 

point using example measurement 

years, a D–SNP-only contract 

established under § 422.107(e) that 

begins operating in 2027 would first be 

eligible for a Star Rating as of the 2029 

Star Ratings (measurement year 2027) 

and an HEI reward as of the 2030 Star 

Ratings (measurement years 2027 and 

2028). For the 2027 and 2028 Star 

Ratings, the calculation of the 

enrollment thresholds and the HEI for 

the legacy MA contract would be based 

on measurement periods that were prior 

to the D–SNP-only contract transition. 

The 2029 Star Ratings are based on a 

measurement period following the D– 

SNP-only contract transition, and since 

the D–SNP-only contract cannot have an 

HEI reward calculated that rating year, 

the legacy MA contract would not be 

eligible for the HEI reward unless it 

qualifies solely based on its own 

enrollment. 

We propose at 

§§ 422.166(f)(3)(viii)(C)(3) and 

423.186(f)(3)(viii)(C)(3) that the legacy 

MA contract would not qualify for a 

rating-specific HEI reward if the legacy 

MA contract’s performance on the 

rating-specific HEI based on its own 

enrollment does not meet the minimum 

index score of greater than zero defined 

at §§ 422.166(f)(3)(vii) and 

423.186(f)(3)(vii) or if the legacy MA 

contract’s performance on the ratingspecific HEI based on its own 

enrollment is less than the performance 

on the rating-specific HEI of the D–SNPonly contract established under 

§ 422.107(e). 

If both the legacy MA contract and the 

D–SNP-only contract established under 

§ 422.107(e) can reliably have the ratingspecific HEI scores calculated as defined 

at §§ 422.166(f)(3)(iv) and (vi) and 

§§ 423.186(f)(3)(iv) and (vi) based on 

their own enrollment, and the legacy 

MA contract does not meet an 

enrollment threshold on its own, then 

we propose at §§ 422.166(f)(3)(viii)(C)(4) 

and 423.186(f)(3)(viii)(C)(4) the 

methodology to determine the potential 

HEI reward for the legacy MA contract 

for the given rating. Specifically, we 

propose at §§ 422.166(f)(3)(viii)(C)(4)(i) 

and 423.186(f)(3)(viii)(C)(4)(i) to base 

the enrollment threshold at 

§§ 422.166(f)(3)(vii) and 

423.186(f)(3)(vii) on the combined 

enrollment from the legacy MA contract 

and the D–SNP-only contract 

established under § 422.107(e) from the 

most recent measurement year used in 

calculating the HEI. Additionally, we 

propose at §§ 422.166(f)(3)(viii)(C)(4)(i) 

and 423.186(f)(3)(viii)(C)(4)(i) that if the 

legacy MA contract’s rating-specific HEI 

score based on its own enrollment meets 

the minimum index score of greater 

than zero defined at §§ 422.166(f)(3)(vii) 

and 423.186(f)(3)(vii), and the legacy 

MA contract’s rating-specific HEI score 

based on its own enrollment is greater 

than or equal to the rating-specific HEI 

score for the D–SNP-only contract 

established under § 422.107(e), then the 

legacy MA contract would qualify for an 

HEI reward for the given rating. This 

potential rating-specific HEI reward 

would be calculated following 

§§ 422.166(f)(3)(viii) and 

423.186(f)(3)(viii) and would be based 

on the enrollment threshold using the 

combined enrollment from the legacy 

MA contract and the D–SNP-only 

contract established under § 422.107(e) 

as defined at 

§§ 422.166(f)(3)(viii)(C)(4)(i) and 

423.186(f)(3)(viii)(C)(4)(i), and using the 

HEI score for the D–SNP-only contract 

established under § 422.107(e). We 

propose this because we want to avoid 

overly rewarding legacy MA contracts 

that are serving a smaller percentage of 

enrollees with SRFs and therefore may 

find it easier to perform well on the HEI. 

We also propose at 

§§ 422.166(f)(3)(viii)(C)(5) and 


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423.186(f)(3)(viii)(C)(5) that when 

multiple legacy MA contracts move 

their D–SNP plan benefit packages to 

the same D–SNP-only contract 

established under § 422.107(e), the 

combined enrollment from the multiple 

legacy MA contracts and the D–SNPonly contract would be used to 

determine if a percentage SRF 

enrollment threshold is met for legacy 

MA contracts that do not meet an 

enrollment threshold based on their 

own enrollment. 

Further, in calculating the ratingspecific HEI, we require at 

§§ 422.166(f)(3)(vi) and 423.186(f)(3)(vi) 

that contracts must have at least 500 

enrollees and meet the criteria specified 

at §§ 422.166(f)(3)(iv) and 

423.186(f)(3)(iv) for at least half of the 

measures included in the ratingspecific HEI. Since I–SNP-only contracts 

are not required to report CAHPS, HOS, 

and certain HEDIS measures, there may 

be situations depending on the set of 

measures included in the HEI each year 

where I–SNP-only contracts cannot 

meet this half of measures requirement 

based on not being required to report 

some of the measures included in the 

HEI. To address this, we propose to 

revise §§ 422.166(f)(3)(vi) and 

423.186(f)(3)(vi) to clarify that starting 

with the 2027 Star Ratings, contracts 

that are I–SNP-only contracts in the 

rating year must meet the criteria 

specified at §§ 422.166(f)(3)(iv) and 

423.186(f)(3)(iv) for at least half of the 

measures included in the rating-specific 

HEI for the subset of measures that I– 

SNP-only contracts are required to 

report. For example if there were 20 

measures included in a rating-specific 

HEI but only 16 of the measures were 

required to be reported by I–SNP-only 

contracts, then I–SNP-only contracts 

would need to meet the criteria 

specified at §§ 422.166(f)(3)(iv) and 

423.186(f)(3)(iv) for at least half of the 

16 measures or for 8 measures. We 

propose this to avoid situations where 

I–SNP-only contracts are not able to 

meet the half of measures requirement 

at §§ 422.166(f)(3)(vi) and 

423.186(f)(3)(vi) based solely on 

reporting requirements. We are not 

proposing changes for other contract 

types, because we do not anticipate 

scenarios for other contract types where 

it is not possible to meet the half of 

measures requirement based solely on 

reporting requirements. We also propose 

at §§ 422.166(f)(3)(iv)(C) and 

423.186(f)(3)(iv)(C) that for a measure to 

be included in the calculation of the HEI 

for a contract that is an I–SNP-only 

contract in the ratings year, the measure 

must be required to be reported by I– 

SNP-only contracts. We propose this to 

address situations where a contract may 

not have been an I–SNP-only contract in 

one of the measurement years and 

therefore has data on measures that are 

not required to be reported by I–SNPonly contracts and are not reflective of 

the population served by I–SNP-only 

contracts. 

Finally, we propose changes at 

§§ 422.166(f)(3)(v)(A) and 

423.186(f)(3)(v)(A) to how the HEI score 

would be calculated for contracts that 

have data discrepancies between their 

submitted patient-level detail and 

summary-level data for HEDIS measures 

included in the HEI beginning with the 

2026 and 2027 measurement years used 

for the 2029 Star Ratings. For HEDIS 

measures included in the HEI we rely 

on the patient-level detail data that 

contracts submit to CMS. It is critical 

that these data are complete so we can 

accurately calculate performance for the 

subset of enrollees with the specified 

SRFs. We propose that for measures 

included in the HEI, if a contract’s 

HEDIS measure score across all 

enrollees for a measure that is 

calculated by CMS using the contract’s 

submitted patient-level detail HEDIS 

data does not match the contract’s 

summary-level HEDIS score submitted 

to NCQA for either of the two 

measurement years used to construct 

the HEI as defined at 

§§ 422.166(f)(3)(i)(B) and 

423.186(f)(3)(i)(B), the contract would 

receive ¥1 points for that measure (the 

same number of points assigned to the 

bottom third of the distribution of 

contract performance) in the calculation 

of the HEI as described at 

§§ 422.166(f)(3)(v) and 423.186(f)(3)(v). 

We also propose at 

§§ 422.166(f)(3)(v)(A) and 

423.186(f)(3)(v)(A) that a contract that 

does not provide patient-level HEDIS 

data for a measure included in the HEI 

for which it has provided summarylevel HEDIS data to NCQA would 

receive ¥1 points for that measure in 

the calculation of a contract’s HEI score 

at §§ 422.166(f)(3)(v) and 

423.186(f)(3)(v). For example, if the HEI 

is based on the 2026 and 2027 

measurement years and a contract does 

not provide HEDIS patient-level data for 

a measure for either the 2026 or 2027 

measurement years, the contract would 

receive ¥1 points for that measure in 

the calculation of its HEI score. 

We solicit comments on these 

proposals, including whether these 

rules for calculating the HEI reward 

when an MA organization is required by 

a state, consistent with § 422.107(e), to 

establish and maintain a D–SNP-only 

contract that is limited to only D–SNPs 

offered by the MA organization in that 

state should apply for one year, multiple 

years, or every year after the D–SNPonly contract is required to be 

established by the state or until 

additional SRFs are added to the HEI. 

D. Applying the Improvement Measure 

Scores (§§ 422.166(g) and 423.186(g)) 

We propose to clarify at 

§§ 422.166(g)(1)(i) and (ii) and 

§§ 423.186(g)(1)(i) and (ii) that the 

improvement measure hold harmless for 

the highest rating is determined based 

on the rounded rating before the 

addition of the HEI reward, if 

applicable. This is consistent with how 

the improvement measure hold 

harmless rules have historically been 

applied based on the rounded rating, 

and §§ 422.166(f)(3)(ix) and 

423.186(f)(3)(ix) require that the HEI 

reward be added after the application of 

the improvement measures and before 

rounding to the nearest half star. 

To operationalize this, CMS would 

determine the application of the 

improvement measures for the highest 

rating using the rating rounded to the 

nearest half star before the addition of 

the HEI reward, if applicable. Then 

when adding the HEI reward if 

applicable for the highest rating, CMS 

would go back to the unrounded rating 

either with or without the improvement 

measures as determined using the steps 

described at §§ 422.166(g) and 

423.186(g), add the HEI reward, and 

then round to the nearest half star. This 

is our current (and historical) process 

and how the proposed regulatory 

clarification would be applied. 

E. Contract Consolidations 

(§ 422.162(b)(3) and § 423.182(b)(3)) 

We are proposing a technical 

clarification of existing policy at 

§§ 422.162(b)(3)(iv)(A)(2) and (B)(2) and 

§§ 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 

proposes 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 


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306CMS commissioned studies on experiences 

and terms pertaining to integrated care and solicited 

feedback from States and plans on integrated 

member ID cards. 

307Rachelle Brill, Listening to Dually Eligible 

Individuals: Person-Centered Enrollment Strategies 

for Integrated Care. Center for Consumer 

Engagement in Health Innovation, June 2021. 

Online at https://communitycatalyst.org/wpcontent/uploads/2023/06/Person-CenteredEnrollment-Strategies-for-Integrated-Care.pdf. 

data to meet the measure technical 

specification, CMS proposes to treat this 

measure score as missing in the 

calculation of the enrollment-weighted 

measure score. For 

§ 423.182(b)(3)(ii)(A)(2) and (B)(2) we 

also removed reference to 

§ 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). 

F. Burden 

As described in this section of this 

proposed rule, we are proposing adding 

and updating certain measures. The 

proposed measure additions and 

updates are calculated from 

administrative data or entail moving 

existing measures from the display page 

to Star Ratings, which would have no 

impact on plan burden. We are also 

proposing a series of technical 

clarifications related to applying the 

improvement measure scores and 

calculating the health equity index, as 

well as proposing how the health equity 

index reward would be calculated for 

contracts that are required by a state 

Medicaid agency to move one or more 

D–SNP plan benefit packages from an 

existing MA contract to an MA contract 

that only includes one or more D–SNPs 

with a service area limited to that state, 

consistent with § 422.107(e). The 

proposed provisions would not change 

any respondent requirements or burden 

pertaining to any of CMS’s Star Ratings 

related PRA packages. 

V. Improving Experiences for Dually 

Eligible Enrollees 

A. Member ID Cards, Health Risk 

Assessments, and Individualized Care 

Plans (§§ 422.101, 422.107, 422.2267, 

423.2267) 

Dually eligible individuals face 

fragmentation in many parts of the 

health care system, including their 

experiences as enrollees of Medicare 

and Medicaid managed care plans. One 

way in which we seek to address such 

fragmentation is through policies that 

integrate care for dually eligible 

individuals. ‘‘Integrated care’’ refers to 

delivery system and financing 

approaches that (1) maximize personcentered coordination of Medicare and 

Medicaid services; (2) mitigate costshifting incentives between the two 

programs; and (3) create a seamless 

experience for dually eligible 

individuals. 

In recent years, we have advanced 

integrated care by: 

• Incorporating features of the 

Medicare-Medicaid Financial 

Alignment Initiative’s (FAI) MedicareMedicaid Plans (MMPs) into dual 

eligible special needs plan (D–SNP) 

requirements, including enrollee 

participation in plan governance, 

screening for social risk factors in health 

risk assessments (HRAs) (which applies 

to all SNPs), integrated enrollee 

materials, and mechanisms for joint 

Federal-State oversight; 

• Implementing provisions of the 

Bipartisan Budget Act of 2018 to unify 

appeals and grievance processes across 

Medicare and Medicaid; and 

• Increasing opportunities for 

enrollment in D–SNPs with aligned 

Medicaid managed care plans operated 

by the same parent organization. 

However, there remain aspects of care 

for dually eligible individuals that can 

be misaligned, confusing, or duplicative 

even when a dually eligible individual 

is enrolled in Medicare and Medicaid 

managed care plans operated by the 

same parent organization. 

In this section we describe proposals 

to establish new Federal requirements 

for D–SNPs that are applicable 

integrated plans (AIPs) to: (1) have 

integrated member identification (ID) 

cards that serve as the ID cards for both 

the Medicare and Medicaid plans in 

which an enrollee is enrolled; and (2) 

conduct an integrated health risk 

assessment for Medicare and Medicaid, 

rather than separate HRAs for each 

program. These proposals continue our 

work to advance integrated care by 

applying MMP features into D–SNP 

requirements. More importantly, our 

proposals would improve and simplify 

experiences for dually eligible enrollees 

in AIP D–SNPs. We are also proposing 

to amend the requirements related to 

HRAs and individualized care plans 

(ICPs) for all SNPs (that is, D–SNPs, 

chronic condition SNPs, and 

institutional SNPs). Under this third 

proposal, we would codify timeframes 

for SNPs to conduct HRAs and develop 

ICPs and prioritize the involvement of 

the enrollee or the enrollee’s 

representative, as applicable, in the 

development of the ICPs. Finally, we 

propose a related addition to 

requirements for D–SNP enrollee 

advisory committees. We describe each 

proposal in greater detail in the 

following sections. 

a. Integrating Member ID Cards for 

Dually Eligible Enrollees in Certain 

Integrated D–SNPs 

Sections 422.2267(e)(30) and 

423.2267(e)(32) require MA and Part D 

plans, including D–SNPs, to provide 

member ID cards to enrollees. Medicaid 

managed care plans, which include 

managed care organizations (MCOs), 

prepaid inpatient health plans (PIHPs), 

and prepaid ambulatory health plans 

(PAHPs) also send member ID cards to 

enrollees which they use to access the 

items and services provided under that 

plan. However, when a dually eligible 

individual is enrolled in both a 

Medicare Advantage (MA) plan and a 

Medicaid managed care plan, the plans 

usually issue the enrollee separate 

member ID cards—one for their MA 

plan and one for their Medicaid 

managed care plan—to access services 

for each program. This is 

administratively confusing, as providers 

may not always know which insurance 

to charge for which services, and 

confusing for enrollees, who may not 

always be aware of when to present 

which card.306 Through studies and 

conversations with dually eligible 

enrollees, we have learned that 

individuals dually eligible for Medicare 

and Medicaid view having one 

insurance card instead of two as a 

benefit of integrated care.307 As such, 

we are proposing to continue our effort 

to integrate materials for dually eligible 

enrollees by requiring that certain D– 

SNPs provide one integrated member ID 

card to serve as the ID card for both the 

Medicare and Medicaid plans in which 

the enrollee is enrolled. 

In the past several years, we have 

partnered with States to make integrated 

materials more broadly available, with 

the goal of streamlining the managed 

care enrollee experience and reducing 

burden and confusion for dually eligible 

individuals. As of January 2024, 

approximately 846,000 dual eligible 

individuals were enrolled in integrated 

care plans that used integrated 

materials. That includes all MMPs in 

the FAI, which use integrated Medicare 

and Medicaid materials including the 

member ID card, annual notice of 

change, evidence of coverage (Member 

Handbook), Formulary (List of Covered 


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Drugs), Summary of Benefits, and 

Provider and Pharmacy Directory. 

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 May 9, 2022, Federal 

Register (hereinafter referred to as the 

May 2022 final rule), we finalized a 

pathway at § 422.107(e) by which States 

can require D–SNPs with exclusively 

aligned enrollment (EAE) to use 

integrated Medicare and Medicaid 

materials including the Summary of 

Benefits, Formulary, and combined 

Provider and Pharmacy Directory— 

essential information for dually eligible 

enrollees to be able to understand and 

utilize their managed care benefits. 

Eleven States currently require D–SNPs 

that are AIPs, as defined at § 422.561, to 

use at least some integrated materials for 

CY 2025, as shown in table 15. 

In addition, in some cases, dually 

eligible enrollees in D–SNPs and an 

affiliated Medicaid managed care plan 

with EAE receive a single ID card that 

serves as the ID card for both health 

plans. According to State Medicaid 

agency contracts (SMACs) for contract 

year 2024, nine States (California, 

Florida, Hawaii, Idaho, Massachusetts, 

Minnesota, New Jersey, Tennessee, and 

Wisconsin) currently require D–SNPs to 

use a single integrated member ID card 

for both Medicare and Medicaid 

benefits. 

Establishing a Federal requirement for 

integrated member ID cards for AIP D– 

SNPs would improve experiences for 

dually eligible individuals (in such 

plans not already deploying an 

integrated ID card) and build on our 

past work to integrate Medicare and 

Medicaid. Therefore, under our 

authority to interpret, implement and 

carry out the Part C and D programs 

under sections 1851(h), 1852(c), 1860D– 

1(b)(1)(B)(vi), 1860D–4(a), and 1860D– 

4(l) of the Social Security Act (the Act), 

we are proposing to add a requirement 

at §§ 422.2267(e)(30) and 

423.2267(e)(32) that AIPs provide 

enrollees one integrated member ID card 

that serves as the ID card for both the 

Medicare and Medicaid plans in which 

they are enrolled. 

We are not proposing substantive 

changes to the Medicare or Medicaid 

requirements for the content of the ID 

cards. Therefore, the integrated ID cards 

would need to comply with the 

applicable Medicare requirements at 

§§ 422.2267(e)(30) and 423.2267(e)(32) 

and as further described in the Medicare 

Communications and Marketing 

Guidelines as well as applicable 

Medicaid requirements. 

For example, we finalized a provision 

at § 438.3(s)(7) in the final rule titled 

‘‘Medicaid Program; Misclassification of 

Drugs, Program Administration and 

Program Integrity Updates Under the 

Medicaid Drug Rebate Program,’’ which 

appeared in the September 26, 2024, 

Federal Register (hereinafter referred to 

as the September 2024 Medicaid final 

rule), requiring States that contract with 

MCOs, PIHPs, or PAHPs that provide 

coverage of Medicaid outpatient drugs 

to require those managed care plans to 

assign and exclusively use unique 

Medicaid-specific Bank Identification 

Number (BIN) and Processor Control 

Number (PCN) combination, and group 

number identifiers for all Medicaid 

managed care enrollee identification 

cards for pharmacy benefits to make the 

Medicaid drug program run more 

efficiently and improve the level of 

pharmacy services provided to 

Medicaid enrollees. Although Medicaid 

managed care plans are not Federally 

required to issue member ID cards, it is 

a standard business practice for the 

MCOs, PIHPs, and PAHPs to routinely 

issue identification cards for pharmacy 

benefits for Medicaid enrollees. To the 

extent AIPs cover outpatient drugs for 

which Medicaid (not Medicare) would 

be the primary payer, § 438.3(s)(7) 

would still apply to the AIP. 

We note that the September 2024 

Medicaid final rule states that 

§ 438.3(s)(7) is effective for Medicaid 

managed care contracts (which would 

require compliance by MCOs, PIHPs, 

and PAHPs) no later than the first rating 

period for contracts with managed care 

plans beginning on or after 1 year 

following the effective date of the 

September 2024 Medicaid final rule, 

which is November 19, 2024. While our 

proposed updates to §§ 422.2267 and 

423.2267 are applicable for contract year 

2027, beginning October 1, 2026, the 

requirements at § 438.3(s)(7) would be 

applicable as is described in the 

September 2024 Medicaid final rule. 

Our proposal would not add new 

requirements in the nine States that 

currently require integrated member ID 

cards in their SMACs. Similarly, we 

expect—independent of this proposal— 

several additional States will require 

integrated member ID cards when 

MMPs transition to D–SNPs in 2026 

(because these States already require 

integrated member ID cards for the 

MMPs). If finalized, this proposal would 

require current AIPs in three additional 

States and Territories (District of 

Columbia, New York, and Puerto Rico) 

to implement integrated member ID 

cards, and if more plans become AIPs, 

this requirement would apply to any 

such plans as well. However, we do not 

believe that this proposed requirement 

to integrate member ID cards would 

create additional burden in these States 

and Territories as the issuance of 

member ID cards is a normal and 

customary practice throughout the 

insurance industry. Since we will be 

working with several States to update an 

array of integrated materials as we 

transition MMPs to become integrated 

D–SNPs in 2026, and to give AIPs time 

needed to implement such updates as 

appropriate during the annual material 

creation cycle, we propose to require the 

use of the integrated member ID card for 

enrollments effective January 1, 2027. 

Thus, our proposed updates to 

marketing and communication 

provisions at §§ 422.2267(e)(30) and 

423.2267(e)(32) would be applicable for 

all contract year 2027 marketing and 


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308Rachelle Brill, Listening to Dually Eligible 

Individuals: Person-Centered Enrollment Strategies 

for Integrated Care. Center for Consumer 

Engagement in Health Innovation, June 2021. 

Online at https://communitycatalyst.org/wpcontent/uploads/2023/06/Person-CenteredEnrollment-Strategies-for-Integrated-Care.pdf. 

309 2024 Part C Reporting Technical 

Specifications: https://www.cms.gov/files/ 

document/cy2024-part-c-technical-specifications02222024.pdf. 

310CMS review and analysis of State SMACs. 

311https://www.macpac.gov/wp-content/uploads/ 

2019/03/Care-Coordination-in-Integrated-CarePrograms-Serving-Dually-Eligible-Beneficiaries.pdf. 

communications beginning October 1, 

2026. 

We believe requiring that AIPs use 

integrated member ID cards is an 

important step to further integration and 

make enrollees’ experience with 

Medicaid and Medicare less confusing, 

less burdensome, and more accessible. 

To our knowledge, this proposal 

represents the first time we have 

proposed a Federal requirement for any 

integrated materials for any type of D– 

SNP. We chose to focus on ID cards 

because having one ID card is important 

to dually eligible individuals 308 and— 

relative to integrating other materials— 

is operationally manageable for 

integrated plans and requires the least of 

State Medicaid agencies. We solicit 

comment on this proposal and feedback 

on successes, challenges, and other 

experiences to date with integrated 

member ID cards. 

We are considering, and invite 

comment on, whether the final rule 

should provide that any requirement for 

integrated ID cards should apply to AIPs 

and all HIDE SNPs, including those that 

do not also qualify as AIPs. However, in 

this proposed rule, we chose to limit our 

proposal to AIPs because we assume 

that integrated member ID cards would 

be more complex to administer in 

situations where some D–SNP enrollees 

have aligned enrollment but others are 

enrolled in a Medicaid plan operated by 

a different organization or fee-forservice Medicaid. In contrast to an AIP, 

where all of the D–SNP’s enrollees 

would receive the integrated ID card, a 

non-AIP would need a reliable and 

timely mechanism for differentiating 

among enrollees within the plan to 

determine which ID card to send. We 

are unaware of any D–SNPs or other MA 

plans that currently deploy the types of 

integrated ID cards envisioned in our 

proposal for plans that do not have 

exclusively aligned enrollment. We 

solicit comment on the accuracy of 

these assumptions and, as noted above, 

whether in the final rule to apply the 

proposed requirement to AIPs and all 

HIDE SNPs. We also welcome 

comments on different situations in 

which commenters believe that 

integrated member ID cards could be 

helpful to include in potential future 

rulemaking. 

Finally, we welcome comment on 

other considerations for future 

rulemaking on ID cards, including ways 

to prevent stigma and ensure their 

security and utility for dually eligible 

enrollees. 

b. Integrating Health Risk Assessments 

for Dually Eligible Enrollees in Certain 

Integrated D–SNPs 

Medicare requirements at 

§ 422.101(f)(1) require D–SNPs to 

conduct a comprehensive HRA for each 

enrollee, both at the time of enrollment 

and annually thereafter. Separately, 

Medicaid managed care regulations at 

§ 438.208(b)(3) require Medicaid 

managed care plans to make a best effort 

to conduct an initial screening of 

enrollee needs within 90 days of their 

effective enrollment date, and States 

may require additional assessments 

such as long-term services and supports 

(LTSS) and home and community-based 

services eligibility screenings. 

In the FAI, MMP enrollees complete 

a single integrated HRA, encompassing 

both Medicare and Medicaid 

requirements. In contrast, dually eligible 

individuals enrolled in both a D–SNP 

and a Medicaid managed care plan may 

end up completing multiple 

assessments during the year, some of 

which may be duplicative, as managed 

care plans aim to meet all applicable 

enrollee assessment requirements across 

both programs, and to gather 

information about enrollee needs and 

preferences and create individualized 

care plans. Completing two separate, but 

potentially overlapping, assessments 

creates unnecessary burden for 

enrollees, who may have to answer the 

same detailed personal questions more 

than once. 

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’’ which appeared in 

the January 19, 2021, Federal Register 

(hereinafter referred to as the January 

2021 final rule), we clarified that D– 

SNPs receiving capitation for Medicaid 

services may combine their Medicarerequired HRA with a State Medicaidrequired assessment to reduce burden 

for enrollees, as long as the assessment 

meets all applicable requirements (86 

FR 5879). We also noted that, to the 

extent there is overlap and the HRA 

required by § 422.101(f)(1)(i) can be 

aligned with other assessments 

conducted by a SNP, the model of care 

(MOC) should describe that alignment, 

consistent with the standards in MOC 2, 

Element B in Chapter 5, section 20.2.2 

of the Medicare Managed Care Manual. 

We explained that the factors outlined 

in the MOC guidelines allow SNPs the 

flexibility to align the HRA required by 

§ 422.101(f)(1)(i) with other assessment 

tools. In addition, the contract year (CY) 

2024 Medicare Part C Reporting 

Requirements, in which MA plans must 

report on HRA completion, allow D– 

SNPs to count a Medicaid HRA that is 

performed within 90 days before or after 

the effective date of Medicare 

enrollment as meeting the Part C 

obligation to perform an HRA, so long 

as the requirements in § 422.102(f) 

regarding the HRA are met.309 As 

outlined in both the January 2021 rule 

and the most recent Part C Reporting 

Requirements, we have allowed a 

certain degree of flexibility for SNPs to 

streamline their Medicare and Medicaid 

assessments. However, we have not 

previously required that D–SNPs 

integrate Medicare and Medicaid 

enrollee HRAs into a single HRA for 

dually eligible individuals. 

States have implemented their own 

requirements, through SMACs, to 

reduce burden and duplication. For 

example, Arizona requires D–SNPs to 

perform an integrated HRA for both 

Medicare and Medicaid. California 

requires D–SNPs with exclusively 

aligned enrollment to make their best 

effort to create a single unified HRA for 

enrollees, and New Jersey’s SMAC 

includes requirements related to 

minimizing duplication of 

assessments.310 Other States, while not 

explicitly requiring integrated HRAs, 

have implemented requirements to 

improve integration and coordination 

across Medicare and Medicaid HRAs 

and services. A 2019 Health 

Management Associates (HMA) report 

commissioned by the Medicaid and 

CHIP Payment and Access Commission 

(MACPAC) noted one State requires its 

D–SNPs to request a representative from 

an enrollee’s Medicaid plan to 

participate in all needs assessments, and 

that another State requires integrating 

Medicaid LTSS assessments within the 

HRA.311 We have also heard from a few 

D–SNP parent organizations that are 

actively working to reduce duplication 

between their Medicare and Medicaid 

HRAs. 

Under our authority at section 1856(b) 

of the Act to establish standards for MA 

plans by regulation, we propose to 

adopt specific standards to implement 

the requirement at section 


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1859(f)(5)(A)(ii)(I) of the Act that all MA 

SNPs conduct an initial assessment and 

an annual reassessment of the 

individual’s physical, psychosocial, and 

functional needs. We propose to add a 

new paragraph at § 422.101(f)(1)(v) that 

would require D–SNPs that are AIPs (as 

defined in § 422.561) to conduct a 

comprehensive HRA that meets all 

requirements at § 422.101(f)(1)(i) 

through (v) as well as any applicable 

Medicaid requirements, including those 

at § 438.208, such that enrollees in the 

AIP complete a single integrated HRA 

for Medicare and Medicaid. If this 

proposal is finalized, we believe it 

would meaningfully reduce assessment 

burden for dually eligible individuals 

and improve their experience as 

managed care enrollees (where States 

aren’t already requiring something 

similar). It may also improve integration 

of care within D–SNP AIPs and their 

affiliated Medicaid managed care plans 

by collecting all enrollee assessment 

information in one place, potentially 

facilitating better care coordination 

across Medicare and Medicaid services. 

This proposal would also continue our 

efforts to incorporate MMP features into 

D–SNP requirements. Finally, we 

believe this proposal for a new Federal 

requirement would not create a 

significant burden for health plans 

because similar State requirements to 

integrate Medicare and Medicaid HRAs 

are already in place in some States, and 

at least a few health plans have taken on 

these efforts themselves. 

We are proposing only to require D– 

SNPs that are AIPs to meet this new 

requirement because we believe it is 

most feasible for D–SNPs whose 

enrollees are exclusively aligned with 

an affiliated Medicaid MCO to 

implement a fully integrated HRA. 

Because all FIDE SNPs are AIPs 

beginning in 2025, the proposal 

encompasses all FIDE SNPs. Numerous 

HIDE SNPs and some coordination-only 

D–SNPs with exclusively aligned 

enrollment are also AIPs. We are 

considering whether we should apply 

this new requirement to all HIDE SNPs 

or all D–SNPs, even those without 

exclusively aligned enrollment. 

However, in a scenario where some D– 

SNP enrollees receive their Medicaid 

benefits from a different organization or 

through fee-for-service, it could be 

challenging for the D–SNP to assess 

aligned enrollees with an integrated 

HRA and to assess non-aligned enrollees 

with a different, Medicare-only 

assessment. We welcome comment on 

whether, in the final rule, this 

requirement should be applied to all 

HIDE SNPs or suggestions as to whether 

application to a different subset of D– 

SNPs should be proposed in future 

rulemaking. 

This proposal would not change any 

specific Medicare or Medicaid 

requirements for the timing of or 

elements included in an HRA (although 

we address an issue related to the 

timing of required HRAs elsewhere in 

this proposed rule). Nor would this 

proposal preclude deployment of 

assessments that are modular (such as a 

base level assessment that meets all 

Medicare and Medicaid requirements 

with optional additional sections that 

are specific to people for substance use 

or other factors) or include additional 

elements for people with special needs. 

For example, some States may require 

more expansive assessment questions to 

develop a service plan for 1915(c) 

waiver services, or plans may conduct 

additional assessment for people who 

screen positive for substance use 

disorder or other conditions. Our 

proposal would not require that all 

enrollees complete such an assessment, 

nor would it preclude plans from 

conducting such additional assessments 

separately from the HRA. Rather, our 

proposal simply requires that the base 

HRA and screening applies across both 

programs, such that enrollees are not 

asked to complete independent HRAs 

for Medicare and Medicaid. We 

welcome comment on potential 

challenges that health plans and other 

stakeholders foresee, or have already 

experienced, in implementing HRAs 

that integrate LTSS assessments. We 

also welcome comment on any potential 

conflicts with State Medicaid 

assessment requirements our proposal 

may create. 

In addition to separate Medicare and 

Medicaid managed care assessment 

requirements, different Medicare and 

Medicaid enrollment timeframes and 

effective dates can be a barrier to D–SNP 

AIPs administering a single, integrated 

HRA. In the final rule titled ‘‘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’’ which appeared in the April 

23, 2024, Federal Register (hereinafter 

referred to as the April 2024 final rule), 

we noted at 89 FR 30704 that Medicare 

and Medicaid managed care enrollment 

start and end dates can be misaligned. 

Sections 1851(f)(2) and 1860D– 

1(b)(1)(B)(iv) of the Social Security Act, 

and regulations codified at §§ 422.68 

and 423.40 respectively, generally 

require that Medicare enrollments 

become effective on the first day of the 

first calendar month following the date 

on which the election or change is 

made, although section 1851(f)(4) of the 

Act and §§ 422.68(d) and 423.40(c) 

allow CMS flexibility to determine the 

effective dates for enrollments that 

occur in the context of special 

enrollment periods. 

Medicaid managed care regulations at 

§ 438.54 do not specify the timelines or 

deadlines by which any enrollment 

must be effective. Some States have cutoff dates after which enrollment in a 

Medicaid managed care plan is not 

effectuated until the first day of the next 

month after the following month. In this 

scenario, a dually eligible individual 

requesting to enroll in an AIP D–SNP 

with an aligned Medicaid MCO on 

March 28 might be enrolled in the D– 

SNP effective April 1, but in the aligned 

Medicaid MCO effective May 1, leaving 

a month-long gap. We believe it would 

still be feasible to assess an enrollee 

using an integrated HRA in this 

scenario, given that the enrollee’s 

Medicaid eligibility would already be 

verified. However, we are interested in 

hearing from stakeholders about 

whether this would present operational 

challenges to implementing an 

integrated HRA for AIP D–SNP 

enrollees. 

We believe our proposal would 

reduce confusion, assessment burden, 

and fragmentation for dually eligible 

individuals enrolled in AIP D–SNPs and 

potentially lead to more effective 

coordination of care. We also believe 

our proposal would not be overly 

burdensome for AIP D–SNPs to 

implement, given there are existing 

requirements in eight States 312 either to 

use a single, integrated HRA or take 

action to reduce duplication in HRAs. 

We welcome comment on our proposal. 

c. Promoting Person-Centeredness in 

SNP ICPs and Timeliness of HRAs and 

ICPs 

(1) Medicare Context 

Section 1859(f)(5)(A) of the Act 

requires SNPs to conduct an initial 

assessment and an annual reassessment 

of each enrollee’s physical, 

psychosocial, and functional needs and 

ensure that the results are addressed in 

each enrollee’s ICP. We codified this 

requirement at § 422.101(f)(1)(i), using 

the term ‘‘health risk assessment,’’ as a 

required component of the SNP MOC. 

Specifically, § 422.101(f)(1)(i) requires 


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that MA organizations offering SNPs 

conduct a comprehensive initial HRA of 

the individual’s physical, psychosocial, 

and functional needs as well as annual 

HRA, using a comprehensive risk 

assessment tool that CMS may review 

during oversight activities, and ensure 

that the results from the initial 

assessment and annual reassessment 

conducted for each individual enrolled 

in the plan are addressed in the 

individuals’ individualized care plan. 

In addition, § 422.112(b)(4)(i) requires 

that MA organizations offering 

coordinated care plans make a ‘‘best 

effort’’ attempt to conduct an initial 

assessment of each enrollee’s health 

care needs, including following up on 

unsuccessful attempts to contact an 

enrollee, within 90 days of the effective 

date of enrollment. In the CY 2024 

Medicare Part C Reporting 

Requirements, as further defined by the 

Medicare Part C Technical 

Specifications Document Contract Year 

2024,313 CMS specifies that SNPs must 

provide CMS with the number of initial 

HRAs completed within 90 days of 

(before or after) the effective date of 

enrollment and annual HRAs performed 

within 365 days of the last HRA. As 

described in the Medicare Part C 

Technical Specification Document 

Contract Year 2024, SNPs may report an 

enrollee as unable to be reached if: the 

enrollee did not respond to at least three 

‘‘non-automated’’ phone calls and a 

follow-up letter from the SNP where all 

the efforts were to solicit participation 

in the HRA, none of the efforts to solicit 

participation were automated calls 

(‘‘robo’’ or ‘‘blast’’ calls), and 

documentation of the enrollee’s refusal 

and/or the SNP’s inability to reach the 

enrollee is available at any time to CMS. 

The technical specifications include 

additional details regarding how to 

interpret the CY 2024 Medicare Part C 

Reporting Requirements. 

In addition, § 422.101(f)(1)(ii) requires 

SNPs to develop and implement a 

comprehensive ICP through an 

interdisciplinary team in consultation 

with the beneficiary, as feasible, 

identifying goals and objectives 

including measurable outcomes as well 

as specific services and benefits to be 

provided. There are no timeframe 

requirements for developing ICPs in 

§ 422.101(f). Chapter 5 of the Medicare 

Managed Care Manual, section 20.2.2, 

MOC 2, Element C notes that SNPs must 

describe the process for developing the 

ICP, including specifying how often the 

ICP is modified as beneficiaries’ health 

care needs change, in the SNPs’ MOC, 

which are subject to review and 

approval by NCQA and subsequent CMS 

audits. 

(2) Medicaid Context 

Many D–SNPs have affiliated 

Medicaid managed care plans that 

deliver Medicaid services to D–SNP 

enrollees through their parent 

organization or another entity that is 

owned and controlled by the D–SNP’s 

parent organization. For Medicaid 

managed care, § 438.208(b)(3) requires 

that MCOs, PIHPs, or PAHPs make a 

best effort to conduct an initial 

screening of each enrollee’s needs, 

within 90 days of the effective date of 

enrollment for all new enrollees, 

including subsequent attempts if the 

initial attempt to contact the enrollee is 

unsuccessful. 

For individuals enrolled in certain 

Medicaid home and community-based 

services (HCBS) programs, we have 

adopted requirements for a personcentered care planning process. For 

section 1915(c) Medicaid HCBS waiver 

programs, these requirements are set 

forth at § 441.301(c)(1) through (3); for 

section 1915(k) Medicaid HCBS State 

plan amendments, these requirements 

are set forth at § 441.540; and for section 

1915(i) Medicaid State plan HCBS 

benefits, these requirements are set forth 

at § 441.725. We refer readers to these 

regulations for more details. 

Generally, these regulations require 

the State administering these Medicaid 

HCBS programs to ensure an 

individualized person-centered services 

plan, meeting certain minimum 

requirements, is developed for each 

individual beneficiary enrolled in a 

Medicaid HCBS program. This plan 

must reflect the services and supports 

that are important for the individual to 

meet their needs identified through an 

assessment of functional need, as well 

as what is important to the individual 

with regard to their preferences for the 

delivery of such services and supports 

(§§ 441.301(c)(2); 441.540(b); 

441.725(b)). The process by which the 

person-centered service plan is 

developed must be led or driven by the 

individual. The individual’s authorized 

representative should play a 

participatory role, as needed and as 

defined by the individual. If State law 

confers decision-making authority to the 

legal representative, the individual 

should still lead the person-centered 

service plan process to the extent 

possible. The plan must also meet other 

person-centered requirements, 

including: ensuring people chosen by 

the individual are included in the 

process; providing necessary 

information and support to ensure that 

the individual directs the process to the 

maximum extent possible; reflecting 

cultural considerations of the 

individual; and offering choices to the 

individual regarding the services and 

supports they receive and from whom 

(§§ 441.301(c)(1); 441.540(a); 

441.725(a)). The resulting personcentered service plan must be tailored 

and individualized, and the approach 

must consider personal preferences and 

goals. Additionally, the State must 

ensure that the person-centered service 

plan for every individual is reviewed, 

and revised as appropriate, based upon 

reassessment of functional need at least 

every 12 months, when the individual’s 

circumstances change significantly, or at 

the individual’s request 

(§§ 441.301(c)(3)(i); 441.540(c); 

441.725(c)). 

(3) Medicare-Medicaid Plan (MMP) 

Context 

Like Medicaid managed care plans, 

MMPs are subject to more requirements 

than SNPs on person-centeredness and 

timeliness of HRAs and ICPs. The MMP 

care coordination requirements for 

HRAs and ICPs for the FAI are included 

in the three-way contracts between 

CMS, State Medicaid agencies, and 

MMPs. In several States, the three-way 

contracts apply requirements on the 

person-centeredness of ICPs beyond 

what is required for SNPs and specific 

requirements for the timing of HRAs 

and ICPs. Most States participating in 

the FAI (Illinois, Massachusetts, 

Michigan, Ohio, South Carolina, and 

Texas) require MMPs to develop HRAs 

and ICPs within 90 days or less of 

enrollment and include enrollees in the 

development of the ICPs. 

d. Opportunities for Improvement 

Over the years, we have identified 

opportunities to improve personcenteredness in care planning and the 

need to codify the timeline for 

development of HRAs and ICPs. For 

example, we have learned of instances 

in which SNPs did not complete initial 

or annual HRAs timely, or it took 

several months to develop an ICP for 

enrollees after an HRA. In addition, we 

have reviewed ICPs that were only 

loosely related to the needs and 

preferences of enrollees or did not 

contain measurable outcomes. We have 

identified some similarities in our 

review of MMP care plans, such as care 

plans that do not include goals that are 

meaningful to enrollees. Through this 

proposed rule, we are seeking to address 

these opportunities for improvement, 

better align requirements across 

Medicare and Medicaid, and build on 


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our experiences in other programs and 

demonstrations. 

We propose amendments to 

§ 422.101(f)(1) to codify timeliness 

standards, improve the organization of 

the various HRA and ICP requirements, 

and strengthen these requirements. 

First, in § 422.101(f)(1)(i), we propose to 

specify that SNPs conduct the 

comprehensive initial HRA within 90 

days (before or after) of the effective 

date of enrollment for all new enrollees. 

This would better align with the 

Medicaid requirement at § 438.208(b)(3) 

and, for Medicare, conform to 

§ 422.112(b)(4)(i) and the standard 

currently described for reporting HRA 

completion in the Part C Reporting 

Requirements. We also note that, as 

described in the Medicare Part C 

Technical Specifications, when a person 

enrolls, disenrolls, and re-enrolls into 

any SNP under the same contract 

number, the previous HRA is still 

considered valid and can continue to be 

used as long as it is not more than 365 

days old. CMS will continue to provide 

guidance on these types of issues 

through the Medicare Part C Technical 

Specifications. 

Second, we propose to move the 

requirement for a comprehensive annual 

HRA from § 422.101(f)(1)(i) to 

§ 422.101(f)(1)(ii) based on the updates 

and to improve the flow of the rule. 

Third, we propose to relocate the 

requirement for SNPs to use a 

comprehensive risk assessment tool that 

CMS may review during oversight 

activities that assesses the enrollee’s 

physical, psychosocial, and functional 

needs and includes one or more 

questions from a list of screening 

instruments specified by CMS in 

subregulatory guidance on housing 

stability, food security, and access to 

transportation from § 422.101(f)(1)(i) to 

§ 422.101(f)(1)(iii). This is a technical 

change to improve the organization of 

the rule. 

Fourth, we propose a new 

§ 422.101(f)(1)(iv)(A) through (C) to 

establish specific requirements for all 

SNPs related to outreach to enrollees 

regarding completion of the HRA. 

Consistent with the Medicare Part C 

Technical Specifications, we propose to 

require that the SNP must make at least 

three non-automated phone call 

attempts, unless an enrollee agrees or 

declines to participate in the HRA 

before three attempts are made. We 

propose to newly require that these 

attempts be made on different days at 

different times of day. Also consistent 

with the Medicare Part C Technical 

Specifications, we propose to require 

that, if the enrollee has not responded 

to these attempts, the SNP send a 

follow-up letter to conduct the initial or 

annual risk assessments. We also 

propose that, for any enrollees who are 

unable to be reached or decline to 

participate in the HRA, the SNP must 

document the attempts to contact the 

enrollee and, if applicable, the 

enrollee’s choice not to participate. 

Fifth, in § 422.101(f)(1)(v), as 

discussed earlier in this proposed 

rulemaking in section III.E.b. of this 

proposed rule, we propose to require D– 

SNPs that are AIPs conduct a 

comprehensive HRA that meets all 

requirements at paragraphs (f)(1)(i) 

through (iv) of this section as well as 

any applicable Medicaid requirements, 

including those at § 438.208, such that 

enrollees complete a single integrated 

assessment for Medicare and Medicaid. 

Sixth, we propose to relocate the 

requirement to ensure that the results 

from the comprehensive initial and 

annual HRA conducted for each 

individual enrolled in the plan are 

addressed in the enrollee’s ICP to 

§ 422.101(f)(1)(vi). 

Seventh, we propose to add a new 

§ 422.101(f)(1)(vii) that would require 

that SNPs within 30 days of conducting 

a comprehensive initial HRA or 30 days 

after the effective date of enrollment, 

whichever is later, develop and 

implement a comprehensive ICP that— 

• Is person-centered and based on the 

enrollee’s preferences, including for 

delivery of services and benefits, and 

needs identified in the HRA; 

• Is developed through an 

interdisciplinary care team with the 

active participation of the enrollee (or 

the enrollee’s representative, as 

applicable), as feasible; 

• Identifies person-centered goals and 

objectives (as prioritized by the 

enrollee), including measurable 

outcomes as well as specific services 

and benefits to be provided; and 

• Is updated as warranted by changes 

in the health status or care transitions of 

enrollees. 

While section 1859(f)(5)(A) of the Act 

uses the term individual throughout, we 

have used the term enrollee to make it 

clear that the proposed requirements are 

for individuals who are enrolled in the 

SNP, consistent with how we have 

generally used the term enrollee in other 

recent rulemaking. 

The Resources for Integrated Care 

(RIC) Tip Sheet on Using PersonCentered Language provides context for 

what we intend the proposed 

requirements for a person-centered ICP 

to mean and include.314 It notes that 

person-centered language acknowledges 

the person first and foremost and places 

any diagnosis, condition, or disability in 

the context of the whole person and 

describes person-centered language as 

an essential component of a personcentered MOC (see The Medical Model 

versus Person-Centered Model callout 

box). As also described in the RIC tip 

sheet, the traditional medical model of 

health care focuses mainly on diagnosis 

and treatment of disease, and 

individuals receiving services under 

this model are typically expected to take 

a passive role. In a person-centered 

model, people are empowered to 

participate as active partners in 

discussions and decisions about their 

care. The person-centered model 

considers diagnosis, condition, and 

disability in the context of the whole 

person. This model focuses on 

supporting and communicating with 

people by emphasizing their strengths, 

capabilities, and opportunities to reach 

their chosen goals. We also note that an 

IT system-generated ICP that simply 

suggests understanding the importance 

of keeping appointments with providers 

or taking medications as prescribed is 

not what we intend to meet the 

proposed requirement. We believe that, 

for the ICP to be an effective tool in 

promoting health, the ICP should be 

tailored to the specific needs of the 

enrollee based on the enrollee’s chosen 

goals. 

We intend for ICPs to engage and 

motivate enrollees by including goals 

that are meaningful to each enrollee. 

These may include goals that are not 

specific to a medical diagnosis, such as 

attending a child’s graduation, pursuing 

higher education, or being able to attend 

religious services each week. The ICP 

should outline steps for managing 

conditions, such as diabetes or high 

blood pressure, that may have been 

identified in the HRA and impact the 

enrollee’s ability to meet their goals. 

The steps should also take account of 

the enrollee’s preferences for delivery of 

any needed services or benefits. For 

example, an enrollee may have a goal of 

attending a child’s graduation, but 

weight and mobility limitations are 

current barriers identified in the HRA. 

The care plan would include specific 

steps to help the enrollee lose weight 

and improve mobility, which would 

support the enrollee’s efforts to attend 

the graduation. This personalized 

approach allows enrollees to take 

control of their health and work toward 

achieving meaningful life goals and 

aspirations. 

As part of a person-centered care 

plan, we also remind SNPs that 

§ 422.2267(a)(3) requires that ICPs be 


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319https://www.kff.org/medicare/issue-brief/10- 

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provided to enrollees on a standing 

basis in any non-English language 

identified in paragraphs (a)(2) and (a)(4) 

of § 422.2267 or accessible format upon 

receiving a request for any required 

materials (including the ICP) or 

otherwise learning of the enrollee’s 

primary language or need for an 

accessible format. The HHS website 

Think Cultural Health 315 has a suite of 

resources that SNPs can use to ensure 

their case managers/care coordinators 

are developing person-centered plans 

that consider the language access and 

disability access needs of enrollees. In 

particular, the Guide to Providing 

Effective Communication and Language 

Assistance Services 316 may be useful to 

SNP front-line employees working with 

enrollees as well as D–SNP 

management. Another resource that 

SNPs may find helpful to ensure the 

development of culturally and 

linguistically appropriate care plans is 

the CMS OMH Guide to Developing a 

Language Access Plan.317

Proposed § 422.101(f)(1)(vii)(D) would 

codify that SNPs must update ICPs as 

warranted when there are changes in an 

enrollee’s health status or the enrollee 

has a care transition. While not a 

complete list, examples of the types of 

changes that would necessitate a review 

of the ICP could include hospitalization, 

being diagnosed with a new chronic 

condition such as diabetes, admission to 

a long-term care facility when such 

admission is likely to result in long-term 

institutionalization, or return home 

from a long-term care facility. 

Finally, we propose to add 

§ 422.101(f)(1)(viii) to require that, for 

any enrollees who are unable to be 

reached or decline to participate in the 

development or updates to the 

comprehensive ICP, the SNP must 

document the attempts to contact the 

enrollee or the enrollee’s refusal to 

participate. While our goal is for SNPs 

to develop person-centered ICPs, if a 

SNP is unable to reach an enrollee (after 

the SNP has fulfilled its obligations as 

previously described to contact the 

enrollee for the HRA) or an enrollee 

declines to participate, then at a 

minimum the SNP should base the ICP 

on enrollee encounter data or other 

available data. We strongly encourage 

SNPs to continue to try to reach the 

enrollee even after satisfying the 

proposed regulatory requirement. We 

note that RIC has developed a brief on 

Locating and Engaging Members: Key 

Considerations for Plans Serving 

Members Dually Eligible for Medicare 

and Medicaid, which SNPs may find 

helpful in bolstering their efforts to 

engage enrollees.318

In addition, as a result of these 

updates, we propose to redesignate 

§ 422.101(f)(1)(iii) as § 422.101(f)(1)(ix) 

and redesignate § 422.101(f)(1)(iv) as 

§ 422.101(f)(1)(x) and change the term 

‘‘individual’s’’ to ‘‘enrollee’s’’. 

Collectively, our proposals would 

promote more timely and personcentered HRAs and ICPs for SNP 

enrollees. Our proposals at 

§§ 422.101(f)(1)(i) through (iv), 

422.101(f)(1)(vi), and 422.101(f)(1)(viii) 

through (x) would codify elements of 

the CY 2024 Part C Reporting 

Requirements and Technical 

Specifications and restructure the 

current section for better flow. Our 

proposal at § 422.101(f)(1)(vii) would 

require that SNPs create and implement 

the ICP within 30 days of conducting an 

initial HRA or 30 days after the effective 

date of enrollment, whichever is later, 

although many SNPs already complete 

ICPs within such timeframes. We 

believe that the benefit gained by the 

ability for enrollees to quickly have an 

ICP in place which will assist with 

coordinating their care in a personcentered manner outweighs this burden. 

These enrollees often have limited 

financial resources and health care 

needs that are more wide-ranging and 

complex than the average Medicare 

enrollee.319 We are considering whether 

to instead adopt alternative timelines for 

development and implementation of the 

ICP. We note that the three-way 

contracts for MMPs participating in 

several of the FAI States require that 

HRAs and ICPs be conducted within 90 

days of enrollment. Alternatively, we 

are considering allowing additional time 

for the development of the ICP, such as 

within 60 or 90 days of completion of 

the HRA. We are also considering that 

the ICP not be required when the 

enrollee is unable to be reached or 

declines to participate. Some States 

participating in the FAI—including 

Illinois, Michigan, South Carolina, and 

Texas—do not require the ICP in these 

circumstances. We are considering 

whether text messaging could be useful 

for contacting enrollees to conduct 

HRAs in addition to phone calls and 

how follow-up to conduct the HRA 

would occur following the contact by 

text messages. 

Finally, for § 422.101(f)(vii) where we 

use the term ‘‘person-centered,’’ we are 

considering whether to cross-reference 

the elements of the person-centered 

planning process at § 441.540(a) as 

written, a subset of those elements, or a 

different definition. Cross-referencing 

the person-centered planning process at 

§ 441.540(a) would promote consistency 

in the language across Medicare and 

Medicaid, which is helpful for the 

purpose of integrated Medicare and 

Medicaid. However, we are not sure that 

all the components of the description at 

§ 441.540(a) fully apply to SNP 

enrollees. 

We solicit comments on these 

alternatives. We also seek feedback on 

potential challenges to our proposals 

and alternatives under consideration. 

e. Assuring Enrollee Advisory 

Committee Input on MOC Updates 

In the May 2022 final rule, we 

codified the requirement at § 422.107(f) 

that D–SNPs establish or maintain one 

or more enrollee advisory committees 

(EACs) that serve the D–SNPs offered by 

the MA organization in a State. We 

believe that it is important for enrollees 

to have a voice in the development of 

the D–SNPs’ MOC, which includes 

details regarding how a D–SNP 

conducts HRAs and ICPs. Enrollee 

feedback on the MOC should improve 

how D–SNPs and other SNPs engage 

enrollees in conducting HRA and ICPs, 

the quality of information obtained from 

these enrollees, and the usefulness of 

the HRAs and ICPs as tools in 

supporting enrollees’ health care. 

Therefore, we propose adding language 

to D–SNP EAC requirements at 

§ 422.107(f) to include updates to MOCs 

as described at § 422.101(f) among the 

minimum required EAC discussion 

topics. While MA organizations can 

already include MOCs among their D– 

SNP EAC topics, adding these topics to 

the D–SNP EAC conversations would 

ensure MA organizations solicit 

feedback directly from enrollees to 

improve the care coordination process 

including HRAs and ICPs as described 

in the MOC. 

We are not proposing to require that 

D–SNP EACs review or approve the 

MOC, per se, because they are often 

lengthy and technical documents. 

However, we believe the D–SNP EAC’s 

perspectives should inform updates to 

the MOC over time. We do not 

anticipate additional burden from this 

proposal. We welcome comments on 

our proposal and underlying 

assumptions. 


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320https://www.oregon.gov/oha/HPA/Pages/ 

CCOs-Oregon.aspx. 

321https://oregon.public.law/statutes/ors_

414.572. 

f. Comment Solicitation—Making State 

Medicaid Agency Contracts Public 

Section 164 of the Medicare 

Improvements for Patients and 

Providers Act of 2008 (MIPPA) (Pub. L. 

110–275) amended section 1859(f) of the 

Act to require that a D–SNP contract 

with the State Medicaid agency in each 

State in which the D–SNP operates. We 

refer to such contracts as SMACs. As we 

have emphasized in rulemaking over the 

last several years, SMACs are important 

vehicles for integrating the delivery of 

Medicare and Medicaid services and 

improving experiences for dually 

eligible individuals. In many States, the 

provisions in the SMAC are of 

significant public policy interest, 

affecting the ways that many people 

experience the Medicare and Medicaid 

programs. 

Some States, including Indiana, New 

Jersey, and Washington, have posted 

SMACs and any SMAC amendments— 

usually as a single model agreement, 

rather than the individual signed copies 

with each D–SNP—on their websites. 

We encourage all States to post the 

content of the SMACs online. However, 

we have never done so on a CMS 

website. 

Posting SMACs would improve public 

transparency on the important 

requirements included in these 

agreements. This, in turn, would 

promote accountability in implementing 

the terms of the SMAC and make it 

easier for States, advocates, researchers, 

and others to identify promising 

practices or opportunities for 

improvement across States. However, 

while we review all SMACs for 

compliance with the requirements of 

§ 422.107, CMS is not a signatory to the 

SMACs. And we have never 

systematically analyzed the extent to 

which SMACs may include confidential 

commercial or financial information 

that should not be shared publicly. 

We solicit comments on whether and 

how CMS should post SMACs online. 

B. Clarifying Highly Integrated Dual 

Eligible Special Needs Plan Definition 

Relative to Oregon’s Coordinated Care 

Organization Structure (§ 422.2) 

The definition of HIDE SNPs is 

codified at § 422.2. According to this 

definition, a HIDE SNP, in addition to 

meeting other requirements, is a D–SNP 

offered by an MA organization that 

provides coverage of Medicaid benefits 

under a capitated contract between the 

State Medicaid agency and the MA 

organization itself, the MA 

organization’s parent organization, or 

another entity that is owned and 

controlled by its parent organization. 

CMS defined this term in the final rule 

titled ‘‘Medicare and Medicaid 

Programs; Policy and Technical Changes 

to the Medicare Advantage, Medicare 

Prescription Drug Benefit, Programs of 

All-Inclusive Care for the Elderly 

(PACE), Medicaid Fee-For-Service, and 

Medicaid Managed Care Programs for 

Years 2020 and 2021’’ which appeared 

in the April 16, 2019, Federal Register 

(hereinafter referred to as the April 2019 

final rule) (84 FR 15705), and further 

refined it 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 May 

9, 2022, Federal Register (hereinafter 

referred to as the May 2022 final rule) 

(87 FR 27755). 

The May 2022 final rule revised the 

HIDE SNP definition to outline more 

clearly the services HIDE SNPs must 

cover in their contracts with State 

Medicaid agencies to include LTSS or 

behavioral health services to the extent 

Medicaid coverage of those benefits is 

available to individuals eligible to enroll 

in a HIDE SNP, and required the 

capitated contract with the State 

Medicaid agency to cover the entire 

service area of the D–SNP beginning in 

2025. The revisions facilitate HIDE SNP 

enrollees having access to both 

Medicare and Medicaid benefits from a 

single parent organization. 

However, the definition of HIDE SNP 

at § 422.2 does not explicitly account for 

certain ownership arrangements of 

Medicaid managed care organizations 

that operate Medicaid health plans 

affiliated with D–SNPs that we believe 

should meet the definition of and be 

treated as a HIDE SNP. In Oregon, the 

State Medicaid managed care program 

utilizes community-governed 

organizations called coordinated care 

organizations (CCOs) to provide 

comprehensive Medicaid benefits, 

including physical, behavioral, and 

dental services.320 These nonprofit 

community-governed organizations are 

locally based (rather than national 

organizations), and may be single 

corporate structures or networks of 

providers with contractual 

relationships, per Oregon law.321

In the Portland metro area that 

includes Clackamas, Multnomah, and 

Washington counties, one of the CCOs 

delivering Medicaid benefits to eligible 

residents is Health Share, a nonprofit 

public benefit corporation with 11 

founding members that include 

providers, health systems, and county 

governments. A subset of these founding 

members includes organizations with 

which Health Share contracts to provide 

covered Medicaid physical, behavioral, 

and dental health services to 

beneficiaries assigned to them on a fully 

capitated basis through agreements 

called Integrated Delivery System (IDS) 

Participation Contracts. These founding 

members with IDS Participation 

Contracts administer Medicaid benefits 

on Health Share’s behalf and assume 

full risk for their assigned beneficiaries’ 

services. 

Three of these Health Share founding 

members are organizations that also 

operate a D–SNP with a service area that 

includes the three-county Portland 

metro area. Dually eligible individuals 

in that three-county service area who 

are enrolled in one of these D–SNPs can 

therefore receive their Medicaid benefits 

from the same organization from which 

they receive their Medicare benefits, 

through the organization’s IDS 

Participation Contract with Health 

Share to provide Medicaid benefits. 

Oregon estimates that between 80 and 

91 percent of the Health Share enrollees 

who receive Medicare benefits through 

a D–SNP are assigned to the same 

organization for their Medicaid benefits, 

depending on which of the three 

organizations in which they are 

enrolled. We believe this arrangement is 

functionally similar to and should be 

treated as meeting the HIDE SNP 

definition because dually eligible 

individuals are receiving their Medicare 

and Medicaid benefits from the same 

organization or the parent organization 

of the entities that operate the D–SNP 

and the Medicaid managed care plan. 

While that organization does not 

directly hold a contract with the State 

Medicaid agency for Medicaid managed 

care services, it is responsible for the 

full obligations of the CCO contract with 

the State Medicaid agency through its 

IDS Participation Contract with Health 

Share. Furthermore, the current HIDE 

SNP definition requires the capitated 

contract to be between the State 

Medicaid agency and either the MA 

organization itself, the MA 

organization’s parent organization, or 

another entity that is owned and 

controlled by its parent organization. 

While the founding members of Health 

Share do not meet the CMS definition 


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322CMS considers a parent organization to be the 

legal entity that owns a controlling interest in a 

contracting organization. 

of a parent organization,322 founding 

members appoint representatives to 

Health Share’s board of directors, vote 

on key leadership decisions, serve on 

standing committees of the board 

(including committees that oversee 

Health Share’s contractual obligations), 

and financially support Health Share. 

We believe this is functionally an entity 

that is owned and controlled by the MA 

organization’s parent organization as 

included in paragraph (1)(ii) of the HIDE 

SNP definition. For these reasons, we 

categorized these D–SNPs in the threecounty Portland area as HIDE SNPs for 

CY 2025 as part of our review of 

Oregon’s SMAC agreements with D– 

SNPs operating in the State. 

Nonetheless, given the foregoing 

ambiguity about the applicability of the 

existing HIDE SNP definition, we are 

proposing to modify the HIDE definition 

at § 422.2 to make clear that it applies 

to this type of arrangement, whether in 

Oregon or elsewhere. 

Under our authority at section 

1859(f)(8)(D) of the Act to require that 

all D–SNPs meet certain minimum 

criteria for Medicare and Medicaid 

integration, and under section 1856(b) 

to establish requirements by regulation, 

we are proposing to amend the 

definition of a HIDE SNP at § 422.2 to 

make minor edits to paragraph (1) and 

add a new paragraph (1)(iii) to the 

definition to explicitly describe a 

scenario in which there is a capitated 

contract between the State Medicaid 

agency and a local nonprofit public 

benefit corporation of which the MA 

organization is a founding member. The 

proposed change would clarify that D– 

SNPs with this ownership arrangement 

meet the HIDE SNP definition. (We are 

not proposing any changes to 

paragraphs (2) or (3) of the HIDE SNP 

definition.) 

In developing this proposal, we 

considered other scenarios that have 

arisen related to the HIDE SNP 

definition. For example, in the April 

2019 final rule (84 FR 15705) we 

discussed a scenario in which an entity 

with a managed care contract with the 

State Medicaid agency subsequently 

subcontracts certain aspects of the 

managed care contract to another entity 

under § 438.230. We noted that in such 

situations where that subcontractor also 

is a D–SNP, we recognized that there 

may be a level of integration for 

enrollees that is greater than that of a D– 

SNP that has no contract—directly or 

indirectly—with a State to provide 

LTSS, behavioral health services, or 

both. However, we stated we do not 

believe that the subcontractor in that 

situation should be treated as a HIDE 

SNP. 

We believe that the situation we 

addressed in the April 2019 final rule is 

fundamentally different from the 

arrangement in Oregon, in which the 

founding members with IDS 

Participation Contracts with Health 

Share have an ownership and 

leadership role within Health Share, as 

noted previously, participating 

financially and in key decision-making. 

In other more common delegation 

scenarios, like the one described in the 

April 2019 final rule, the delegated 

organization does not have such a role 

in the organization that is delegating its 

responsibilities. We believe this is an 

essential difference that sets these two 

situations apart. With our proposal, we 

do not aim to allow scenarios where the 

delegated organization does not have a 

meaningful ownership role in the 

delegating organization to meet the 

HIDE SNP definition. We therefore 

include the term ‘‘local nonprofit 

benefit corporation’’ in our proposal to 

be specific to the structure of CCOs and 

to clarify that such an arrangement does 

not include certain delegation situations 

in which an MCO—including a forprofit MCO—capitates an unrelated 

organization with no ownership stake in 

the MCO to administer Medicaid 

benefits on the MCO’s behalf, as is 

currently common in California. We 

also include the term ‘‘founding 

member’’ because we have experience 

with this ownership arrangement in 

Oregon. In contrast, we have not fully 

analyzed how the arrangement may 

differ if an organization newly became 

a member through acquisition or 

otherwise. We chose to include this 

language to keep this narrowly 

applicable to a scenario we understand 

and limit any possible gaming until we 

have more experience. However, we 

welcome comments on our proposed 

use of the term ‘‘founding member.’’ 

We welcome comment on our 

proposed clarifications to the HIDE SNP 

definition. We also welcome comment 

on whether the language we propose 

here is sufficiently narrow such that it 

does not unintentionally encompass 

additional delegation situations that are 

contrary to our goals of increasing the 

level of integration between D–SNPs 

and affiliated Medicaid managed care 

plans and facilitating D–SNP enrollees 

having access to Medicare and Medicaid 

benefits provided by the same parent 

organization. Additionally, we welcome 

comment on whether there are existing 

scenarios like Health Share we may 

want to consider as we revise the HIDE 

SNP definition. 

We do not believe that this provision 

would add any additional burden to the 

three D–SNPs in Oregon with affiliated 

Medicaid CCOs, which we have already 

classified as HIDE SNPs in recent years. 

We do not believe that any additional 

work from the three D–SNPs would 

amount to burden above and beyond 

what is routine, and as such, this work 

has already been accounted for in other 

burden estimates under OMB control 

number 0938–1410 (CMS–10796). 

C. Technical Changes 

1. Technical Change to the Specific 

Rights to Which a PACE Participant Is 

Entitled (§ 460.112) 

In the Medicare Program: Changes to 

the Medicare Advantage and 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), we 

finalized changes to the regulations 

impacting the specific rights to which a 

participant is entitled (89 FR 30756). 

Specifically, we added a new paragraph 

(a) which was entitled ‘‘right to 

treatment,’’ and redesignated existing 

paragraphs § 460.112 (a) through (c) as 

(b) through (d). In the new paragraph 

(a), we finalized that each participant 

has the right to appropriate and timely 

treatment for their health conditions. 

On May 6, 2024, we issued the 

Nondiscrimination in Health Programs 

and Activities final rule (hereinafter 

referred to as the Nondiscrimination 

2024 final rule), with the intention of 

adding language to the respect and 

nondiscrimination paragraph regarding 

sexual orientation and gender identity. 

Because the respect and 

nondiscrimination paragraph had only 

been redesignated a few weeks prior to 

the issuance of the Nondiscrimination 

2024 final rule, the updated language 

was added in error to paragraph (a) 

instead of the redesignated paragraph 

(b); thereby replacing the right to 

treatment language provision added to 

paragraph (a) through the April 2024 

final rule. As a result of this error, the 

current regulation text has two 

identically titled subsections 

(§§ 460.112(a) and 460.112(b)). To avoid 

any further confusion and for the 

reasons explained in the April 2024 

final rule at 89 FR 30756, we propose 

to make a technical change to reinstate 


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323For updated information about court orders 

impacting the Nondiscrimination in Health 

Programs and Activities 2024 Final Rule, please see 

hhs.gov/1557. 

the language that each participant has 

the right to appropriate and timely 

treatment for their health conditions in 

§ 460.112(b) instead of in § 460.112(a). 

We also finalized two paragraphs 

under § 460.112(a) in the April 2024 

final rule. Paragraph (a)(1) related to the 

right to receive all care and services 

needed to improve or maintain the 

participant’s health condition and attain 

the highest practicable physical, 

emotional, and social well-being. 

Paragraph (a)(2) related to the 

participants’ rights to access emergency 

health care services when and where the 

need arises without prior authorization 

by the PACE interdisciplinary team. 

Since the two paragraphs under 

§ 460.112(a), (a)(1) and (a)(2), more 

appropriately align with the 

requirement in the ‘‘right to treatment’’ 

paragraph, we propose to redesignate 

§ 460.112(a)(1) and (a)(2) as 

§ 460.112(b)(1) and (b)(2). The 

subparagraphs under § 460.112(b) more 

appropriately align with the ‘‘respect 

and nondiscrimination’’ paragraph. 

Therefore, we propose to redesignate the 

paragraphs under § 460.112(b)(1) 

through (b)(8) as § 460.112(a)(1) through 

(a)(8). 

Finally, we note that two courts, in 

Tennessee v. Becerra, No. 1:24–cv–161– 

LG–BWR (S.D. Miss.), and Texas v. 

Becerra, 6:24–cv–211–JDK (E.D. Tex.), 

have issued orders that, in relevant part, 

stay nationwide the effective date of, 

respectively, § 460.112 to the extent it 

‘‘extend[s] discrimination on the basis 

of sex to include discrimination on the 

basis of gender identity’’ and 

§ 460.112(a). Nothing in this technical 

change is intended to affect the scope of 

those stay orders or CMS’s compliance 

with those orders as long as they remain 

in effect.323

This provision is technical and is 

therefore not expected to have economic 

impact beyond current operating 

expenses. 

2. Technical Change to PACE 

Contracted Services (§ 460.70(e)(2)) 

In the April 2024 final rule, we 

finalized changes to the PACE service 

delivery requirements at § 460.98. 

Specifically, we removed paragraph 

(b)(4), added a new paragraph at 

§ 460.98(c), and redesignated paragraphs 

(b)(5) and (c) through (e) as paragraphs 

(b)(4) and (d) through (f), respectively 

(89 FR 30845). As part of these changes, 

the paragraph titled ‘‘Minimum services 

furnished at each PACE center’’ was 

redesignated from § 460.98(c) to 

§ 460.98(d). However, the April 2024 

final rule did not include a correction to 

the cross-reference at § 460.70(e)(2) to 

reflect the redesignation of ‘‘Minimum 

services furnished at each PACE center’’ 

requirements from § 460.98(c) to 

§ 460.98(d). 

Therefore, we are proposing a 

technical change at § 460.70(e)(2) to 

update the cross-reference from 

§ 460.98(c) to § 460.98(d), which would 

affirm the connection between 

§ 460.70(e)(2) and the ‘‘Minimum 

services furnished at each PACE center’’ 

requirements at the redesignated 

§ 460.98(d). 

The proposed technical change would 

not impose any new requirements or 

burden on PACE organizations. 

Additionally, we expect no cost impact 

to the Medicare Trust Fund. 

We solicit comment on the proposed 

technical change. 

3. Technical Change to Notice of 

Availability of Language Assistance 

Services and Auxiliary Aids and 

Services (§ 423.2267(e)(33)) 

In the April 2024 final rule, we 

finalized changes at § 422.2267(e)(31) 

and (e)(33) to—(1) update multilanguage insert (MLI) references to 

notice of availability of language 

assistance services and auxiliary aids 

and services (Notice of Availability); (2) 

allow plans to utilize the updated MLI 

during contract year 2025; and (3) 

require the Notice of Availability be 

provided 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 be provided in alternate 

formats for individuals with disabilities 

who require auxiliary aids and services 

to ensure effective communication. 

When amending the regulation at 

§ 423.2267(e)(33)(i), we neglected to 

denote that the MLI is a notice for Part 

D sponsors. Similarly, when we 

amended the regulation at 

§ 423.2267(e)(33)(ii), we neglected to 

note the Notice of Availability is a 

notice for Part D sponsors. 

Therefore, we are proposing technical 

changes in § 423.2267(e)(33)(i) and (ii) 

to denote the MLI and notice of 

availability are notices for Part D 

sponsors. 

The proposed technical changes 

would not impose any new 

requirements or burden on Part D 

sponsors. 

VI. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995 (PRA) (44 U.S.C. 3501 et seq.), 

we are required to provide 60-day notice 

in the Federal Register and solicit 

public comment before a ‘‘collection of 

information,’’ as defined under 5 CFR 

1320.3(c) of the PRA’s implementing 

regulations, is submitted to the Office of 

Management and Budget (OMB) for 

review and approval. To fairly evaluate 

whether an information collection 

requirement should be approved by 

OMB, section 3506(c)(2)(A) of the PRA 

requires that we solicit comment on the 

following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of these issues for the following 

sections of this document that contain 

information collection requirements. 

Comments, if received, will be 

responded to within the subsequent 

final rule (CMS–4208–F, RIN 0938– 

AV40). 

A. Wage Data 

1. Private Sector 

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/2023/may/ 

oes_nat.htm), which, at the time of 

publication of this proposed rule, 

provides May 2023 wages. In this 

regard, table 16 presents BLS’s mean 

hourly wage, our estimated cost of 

fringe benefits and other indirect costs 

(calculated at 100 percent of salary), and 

our adjusted hourly wage. 


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Adjusting our employee hourly wage 

estimates by a factor of 100 percent is 

a rough adjustment that is being used 

since fringe benefits and other indirect 

costs vary significantly from employer 

to employer and because methods of 

estimating these costs vary widely from 

study to study. In this regard, we believe 

that doubling the hourly wage to 

estimate costs is a reasonably accurate 

estimation method. 

2. Beneficiaries 

We believe that the cost for 

beneficiaries undertaking administrative 

and other tasks on their own time is a 

post-tax wage of $20.71/hr. The Valuing 

Time in U.S. Department of Health and 

Human Services Regulatory Impact 

Analyses: Conceptual Framework and 

Best Practices identifies the approach 

for valuing time when individuals 

undertake activities on their own time. 

To derive the costs for beneficiaries, a 

measurement of the usual weekly 

earnings of wage and salary workers of 

$998, divided by 40 hours to calculate 

an hourly pre-tax wage rate of $24.95/ 

hr. This rate is adjusted downwards by 

an estimate of the effective tax rate for 

median income households of about 17 

percent, resulting in the post-tax hourly 

wage rate of $20.71/hr. Unlike our 

private sector wage adjustments, we are 

not adjusting beneficiary wages for 

fringe benefits and other indirect costs 

since the individuals’ activities, if any, 

would occur outside the scope of their 

employment. 

For valuing time spent outside of 

work, there is logic to this approach but 

also to using a fully loaded wage. In the 

past we have used occupational code 

00–0000, the average of all occupational 

codes, which currently is $29.76/hr. 

Thus, we propose a range for enrollees 

of $20.71/hr to $29.76/hr. Nevertheless, 

the upper limit is based on an average 

over all occupations while the lower 

limit reflects a detailed analysis by 

ASPE targeted at enrollees many of 

whom are over 65 and unemployed; 

consequently, in our primary estimates 

we will use the lower limit as we 

consider it more accurate. The effect of 

this range will be footnoted in table J5 

and the summary table (table F11). 

Since the impact to beneficiaries is 

approximately $54,000, increasing the 

wage by 50 percent would result in a 

roughly $24,000 increase. 

B. Proposed Information Collection 

Requirements (ICRs) 

The following ICRs are listed in the 

order of appearance within the 

preamble of this proposed rule. 

1. ICRs Regarding Medicare Prescription 

Payment Plan Calculation of the 

Maximum Monthly Cap on Cost-Sharing 

Payments (§ 423.137(c)) 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–1475 (CMS– 

10882). 

This rule proposes to implement the 

requirements in section 1860D– 

2(b)(2)(E)(iv) of the Act related to the 

calculation of the monthly caps on OOP 

cost sharing payments. The burden 

related to these new requirements for 

Part D sponsors reflects the time and 

effort needed to correctly calculate the 

monthly caps based on the statutory 

formulas, determine the amount to be 

billed, and send monthly bills to 

program participants. 

We estimate a one-time burden for 

Part D sponsors to update their payment 

systems to process data from their PBMs 

and contracted pharmacies, calculate 

monthly caps, and determine the 

amount to be billed. The average 

number of Part D contracts per year is 

807 (based on 2021, 2022, and 2023 

data). This average number of Part D 

contracts per year excludes contracts 

with Program of All-Inclusive Care for 

the Elderly (PACE) organizations and D– 

SNPs and Medicare-Medicaid Plans 

(MMP) that exclusively charge $0 cost 

sharing, which we do not expect to offer 

enrollees the option to pay their OOP 

costs through monthly payments over 

the course of the plan year or otherwise 

comply with the Medicare Prescription 

Payment Plan requirements set forth in 

this proposed rule and in the proposed 

new regulation at § 423.137. On average, 

we expect each Part D contract to have 

a team that consists of one software 

developer at $132.80/hr, one web 

developer at $91.90/hr, and one 

business operations specialist at $85.70/ 

hr who will each spend 125 hours to 

implement these system changes. This 

team will also include a software quality 

assurance analyst and tester who will 

spend 10 hours at $104.30/hr 

performing assurance and testing. Thus, 

a total of 385 hours is spent per contract 

with a weighted average wage of 

$103.49/hr (see table 17). 


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In aggregate, we estimate a one-time 

burden of 310,695 hours (385 hr/ 

contract * 807 Part D contracts) at a cost 

of $32,153,826 (310,695 hr * $103.49/ 

hr). 

After an enrollee elects to participate 

in the Medicare Prescription Payment 

Plan, the Part D sponsor will pay the 

pharmacy for any amounts that would 

have been due as OOP costs, calculate 

the enrollee’s monthly payment based 

on the statutory formula and any prior 

prescription drug expenditures, and 

send a separate bill to the enrollee for 

those amounts every month. 

The burden associated with sending 

monthly bills to program participants is 

a function of the number of enrollees 

likely to enroll in the program. CMS 

conducted internal analyses of CY 2021 

Prescription Drug Event (PDE) data to 

identify the number of enrollees likely 

to be identified as likely to benefit from 

the program and estimates that between 

435,000 and 3,200,000 individuals will 

elect to participate in the Medicare 

Prescription Payment Plan. Because of 

the prior to plan year and during the 

plan year targeted outreach required for 

individuals identified as likely to 

benefit, we assume that the majority of 

enrollees who participate will pick up a 

high-cost prescription early in the year, 

for which they will be billed over all 12 

months of the plan year. Assuming 

3,200,000 enrollees participate, and they 

all incur drug costs in January for which 

they are billed over the course of 12 

months, the projected number of bills 

sent per year is 38,400,000 (3,200,000 * 

12). Billing statements may be provided 

via mail or electronically; consistent 

with existing estimates for other 

required Part D materials, we estimate 

that approximately one-third or 

12,800,000 (1⁄3 * 38,400,000) will be 

sent electronically since we estimate 

that one third of enrollees will opt to 

receive billing statements electronically 

while the remaining two-thirds or 

25,600,000 (2⁄3 * 38,400,000) will 

receive hard copy billing statements. 

We assume the following costs 

include paper, toner, and postage 

(envelope weight is normally 

considered negligible when citing these 

rates and is not included), and envelope 

(supplies) 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). 

• Postage: The cost of first-class 

metered mail is $0.73 per letter up to 1 

ounce. We estimate that a sheet of paper 

weighs 0.16 ounces, and do not 

anticipate additional postage for 

mailings in excess of 1 ounce. 

• Envelope: Bulk envelope costs are 

$440 for 10,000 envelopes or $0.044 per 

envelope. 

We estimate the aggregate cost per 

mailed billing statement is $0.802 

([$0.007 for paper * 2 pages] + [$0.007 

for toner * 2 pages] + $0.73 for postage 

+ $0.044 per envelope). We assume a 

maximum of 4 single sided pages will 

be needed for a billing statement, based 

on the required content for billing 

statements. Billing statements are 

assumed to be printed double-sided to 

save on printing costs, yielding 2 pages 

of double-sided print, generally 

weighing less than 1 ounce. Because 

preparing and generating a hard-copy 

billing statement is automated once the 

systems have been developed, we do not 

estimate any labor costs. Therefore, we 

estimate a total annual mailing cost by 

sponsors to enrollees of $20,531,200 

(25,600,000 mailings * $0.802/mailing). 

Part D sponsors will also need to 

process payments received from 

Medicare Prescription Payment Plan 

participants. This may require the 

development of new systems since Part 

D premium payment often occurs 

through automatic deduction from 

Social Security. On average, we expect 

that for each Part D contract a twoperson team consisting of one web 

developer at $91.90/hr and one business 

operations specialist at $85.70/hr will 

each spend 50 hours to these system 

changes. To make the necessary systems 

changes, we estimate a total one-time 

burden of 80,700 hours (807 Part D 

contracts * 100 hr/contract) at a cost of 

$7,166,160 (807 contracts × [($91.90/hr 

× 50 hr) + ($85.70/hr × 50 hr)]). 

We also estimate annual burden 

associated with maintenance of 

associated systems. On average, we 

expect that for each Part D contract, a 

two-person team consisting of one 

database administrator at $100.78/hr 

and one computer systems analyst at 

$106.54/hr will each spend 50 hours per 

year performing system maintenance. In 

aggregate, we estimate an annual burden 

of 80,700 hours (807 Part D contracts * 

100 hr/contract) at a cost of $8,365,362 

(807 contracts × [($100.78/hr × 50 hr) + 

($106.54/hr × 50 hr)]). 

Therefore, the total burden for all Part 

D contracts associated with the 

aforementioned provisions is 472,095 

hours at a first-year cost of $68,216,548 

and an annual subsequent year cost of 

$28,896,562 (see table 18). 


khammond on DSK9W7S144PROD with PROPOSALS2EP10DE24.023</GPH>
Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 99497 

2. ICRs Regarding Medicare Prescription 

Payment Plan Eligibility and Election 

Requirements (§ 423.137(d)) 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–1475 (CMS– 

10882). 

This rule’s proposed amendments to 

§ 423.137(d) would require that Part D 

sponsors offer the Medicare Prescription 

Payment Program to all Part D enrollees. 

It also proposes requirements for how 

Part D sponsors must process program 

election requests, including timing and 

notice requirements and procedures for 

collecting missing information on 

election requests. 

The proposed amendments to 

§ 423.137(d) require Part D sponsors to 

have a process to effectuate retroactive 

election into the Medicare Prescription 

Payment Plan when an enrollee believes 

that a delay in filling a prescription 

would seriously jeopardize their life, 

health, or ability to regain maximum 

function and has paid the associated 

cost sharing before their participation 

was effective. Sponsors are also required 

to develop standardized procedures for 

determining and processing 

reimbursements for excess program 

payments made by participants who 

become LIS eligible. Finally, we propose 

to require Part D sponsors to send a 

notice alerting the Part D enrollee that 

their participation in the Medicare 

Prescription Payment Plan will continue 

into the next year unless they indicate 

that they choose to opt out. In 

developing these requirements, we 

referred to existing requirements and 

procedures for Part D plan enrollment, 

to minimize the updates and new 

systems necessary to implement and 

administer the Medicare Prescription 

Payment Plan. 

We estimate a one-time burden for 

Part D sponsors to set up systems to 

process election requests and develop 

procedures to effectuate retroactive 

election into the program and process 

reimbursements for participants who 

become LIS eligible. We expect that for 

each Part D contract, a four-member 

team will be used consisting of one 

software developer at $132.80/hr, one 

web developer at $91.90/hr, and one 

business operations specialist at $85.70/ 

hr will each work 40 hours while a 

software quality assurance analyst and 

tester will spend 10 hours at $104.30/hr 

to implement these system changes. 

The total time spent per contract is 

130 hours at a weighted average wage of 

$103.54/hr (see table 19). 

In aggregate, we estimate a one-time 

burden of 104,910 hours (130 hr/plan * 

807 Part D contracts) at a cost 

$10,862,381 (104,910 hr * $103.54/hr). 

We estimate a one-time burden for 

Part D sponsors to develop a standard 

notice of request for additional 

information to provide to any enrollees 

who provide an incomplete election 

request form. On average, we expect that 

for each Part D contract, a team of one 

medical and health services manager 

who will spend 2 hours at $129.28/hr 

and one business operations specialist 

who will spend 10 hours at $85.70/hr 

will be needed to implement this 

proposal. In aggregate, we estimate a 

one-time burden of 9,684 hr (12 hr/ 

contract * 807 Part D contracts) at a cost 

of $900,257 (807 contracts × [($129.28/ 

hr × 2 hr) + ($85.70/hr × 10 hr)]). 

We also estimate annual burden for 

Part D sponsors providing these requests 

for additional information to Part D 

enrollees. We estimate that 3,200,000 

individuals will elect to participate in 

the Medicare Prescription Payment 

Plan, representing 3,200,000 election 

request forms. We estimate that 

approximately 10 percent of election 

request forms will be incomplete, 

requiring 320,000 requests for 

additional information. We assume that 

one-third or 106,667 (320,000 * 1⁄3) 

enrollees will receive this request 

electronically or via telephone; and the 

remaining two-thirds of enrollees or 

213,333 (320,000 * 2⁄3) will receive hard 

copy notices. 

We estimate the aggregate cost per 

mailed request for additional 

information to be $0.802 ([$0.007 for 

paper * 2 pages] + [$0.007 for toner * 

2 pages] + $0.73 for postage + $0.044/ 

envelope). We assume a maximum of 2 


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99498 Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 

pages will be needed for this notice. 

Notices are assumed to be printed 

double-sided to save on paper costs, 

yielding 2 pages of double-sided print, 

generally weighing less than 1 ounce. 

Because preparing and generating hard 

copy notices is automated once the 

systems have been developed, we do not 

estimate associated labor costs. 

Therefore, we estimate total annual 

mailing costs to sponsors of $171,093 

(213,333 hard copy notices * $0.802/ 

notice). 

To estimate the information collection 

burden for beneficiaries, we estimate 

that it would take approximately 15 

minutes (0.25 hr) to complete the 

requests for additional information. We 

estimate the cost for beneficiaries 

undertaking administrative and other 

tasks on their own time is a post-tax 

wage of $20.71/hr. We estimate a total 

one-time burden of 80,000 hours 

(320,000 enrollees * 0.25 hr) at a cost of 

$1,656,800 ($20.71/hr * 80,000 hr) 

across 320,000 enrollees. 

Finally, we estimate a one-time 

burden for Part D sponsors to develop 

a standard auto-renewal notice alerting 

the Part D enrollee that their 

participation in the Medicare 

Prescription Payment Plan will continue 

into the next year unless they indicate 

that they choose to optout. On average, 

we expect that for each Part D contract, 

a team of one medical and health 

services manager who will spend 2 

hours at $129.28/hr and one business 

operations specialist who will spend 10 

hours at $85.70/hr will be needed to 

implement this proposal. In aggregate, 

we estimate a one-time burden of 9,684 

hours (12 hr/contract * 807 Part D 

contracts) at a cost of $900,257 (807 

contracts × [($129.28/hr × 2 hr) + 

($85.70/hr × 10 hr)]). 

To estimate the information collection 

burden for beneficiaries, we estimate 

that approximately 160,000 enrollees 

will voluntarily terminate their 

participation in the program in CY2026. 

We estimate that 99,200 will opt out of 

the program electronically, and the 

remaining 60,800 will opt out via 

telephone. We estimate that it would 

take approximately 5 minutes (0.083 hr) 

to voluntarily terminate participation in 

the Medicare Prescription Payment 

Program. We estimate the cost for 

beneficiaries undertaking administrative 

and other tasks on their own time is a 

post-tax wage of $20.71/hr. We estimate 

a total one-time burden of 13,280 hours 

(160,000 enrollees * 0.083 hr) at a cost 

of $275,029 ($20.71/hr * 13,280 hr). 

We estimate annual burden for Part D 

sponsors to provide these auto-renewal 

notices to all enrollees participating in 

the Medicare Prescription Payment Plan 

at the end of the plan year. Assuming 

3,200,000 individuals participating in 

the Medicare Prescription Payment 

Plan, we estimate a total of 3,200,000 

auto-renewal notices sent each year. We 

assume that one-third or 1,065,600 

enrollees (3,200,000 * 1⁄3) will receive 

this notice electronically and the 

remaining two-thirds or 2,133,333 

enrollees (3,200,000 * 2⁄3) will receive 

hard copy notices. 

We estimate the aggregate cost per 

mailed request for additional 

information to be $0.802 ([$0.007 for 

paper * 2 pages] + [$0.007 for toner * 

2 pages] + $0.73 for postage + $0.044/ 

envelope). We assume a maximum of 2 

pages will be needed for this notice. 

Notices are assumed to be printed 

double-sided to save on paper costs, 

yielding 2 pages of double-sided print, 

generally weighing less than 1 ounce. 

Because preparing and generating hard 

copy notices is automated once the 

systems have been developed, we do not 

estimate associated labor costs. 

Therefore, we estimate total annual 

mailing costs to sponsors of $1,710,933 

(2,133,333 hard copy notices * $0.802/ 

notice). 

The total burden for all Part D 

contracts associated with the 

aforementioned requirements is 124,278 

hours with one-time first year cost of 

$14,544,921 and subsequent year costs 

of $1,882,026 (see table 20). The total 

burden for Part D beneficiaries with the 

aforementioned requirements is 93,280 

hours with an on-going annual cost of 

$1,931,829 (see table 20). 


khammond on DSK9W7S144PROD with PROPOSALS2EP10DE24.026</GPH>
Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 99499 

3. ICRs Regarding Medicare Prescription 

Payment Plan Part D Enrollee Targeted 

Outreach (§ 423.137(e)) 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–1475 (CMS– 

10882). 

This rule proposes to require Part D 

sponsors to undertake targeted outreach 

to enrollees who are likely to benefit 

from making an election into the 

Medicare Prescription Payment Plan, 

including notifying a pharmacy when a 

Part D enrollee incurs OOP costs with 

respect to covered Part D drugs that 

make it likely the enrollee may benefit 

from participating in the program, and 

directly outreaching to enrollees likely 

to benefit prior to the plan year and on 

an ongoing basis during the plan year. 

We estimate one-time burden for Part 

D sponsors to develop systems to 

identify ‘‘likely to benefit’’ enrollees 

prior to the plan year and during the 

plan year. On average, we expect that 

for each Part D contract, a three-person 

team consisting of one business 

operations specialist at $85.70/hr, one 

web developer at $91.90/hr, and one 

software developer at $132.80/hr who 

will each spend 20 hours to develop and 

program these systems. In aggregate, we 

estimate a one-time burden of 48,420 

hours (807 Part D contracts * 60 hr/ 

contract) at a cost of $5,009,856 (807 

contracts x [($85.70/hr × 20 hr) + 

($91.90/hr × 20 hr) + ($132.80/hr × 20 

hr)]). 

We estimate annual burden for Part D 

sponsors to review annual updates to 

the ‘‘likely to benefit’’ identification 

criteria and update their systems 

accordingly. On average, we expect that 

for each Part D contract, one business 

operations specialist will spend 2 hours 

at $85.70/hr (see table 16) to review 

annual updates and make corresponding 

systems changes. In aggregate, we 

estimate an annual burden of 1,614 

hours (807 Part D contracts * 2 hr/ 

contract) at a cost of $138,320 (1,614 hr 

* $85.70/hr). 

The total burden for all Part D 

contracts associated with the 

aforementioned requirements is 50,034 

hours with a first-year cost of 

$5,148,176 and a subsequent year cost 

of $138,320 (see table 21). 

4. ICRs Regarding Medicare Prescription 

Payment Plan Termination of Election, 

Reinstatement, and Preclusion 

(§ 423.137(f)) 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–1475 (CMS– 

10882). 

This rule proposes to require Part D 

sponsors to have a process to allow a 

participant who has opted into the 

Medicare Prescription Payment Plan to 

opt out during the plan year. Part D 

sponsors are also required to terminate 

an individual’s Medicare Prescription 

Payment Plan participation if that 

individual fails to pay their monthly 

billed amount. 

We estimate a one-time burden for 

Part D sponsors to develop an opt-out 

process for enrollees who have elected 

into the program. On average, we expect 

that each Part D contract will build a 3- 

person team consisting of one business 

operations specialist at $85.70/hr, one 

web developer at $91.90/hr, and one 

software developer at $132.80/hr who 

will each spend 10 hours to develop and 

program these systems, for a per 

contract burden of 30 hours for the 

team. In aggregate, we estimate a onetime burden of 24,210 hours (807 Part 

D contracts * 30 hr) at a cost of 

$2,504,928 (807 contracts × [($85.70/hr 

× 10 hr) + ($91.90/hr × 10 hr) + 

($132.80/hr × 10 hr)]). 

We also estimate a one-time burden 

for Part D sponsors to develop processes 

to reinstate individual terminated for 

good cause. We note that because this 

provision mirrors existing requirements 

for reinstatements when an enrollee 

fails to pay their Part D premiums, this 

should be a minor systems change. On 

average, we expect that for each Part D 

contract a two-person team consisting of 

one business operations specialist at 

$85.70/hr and one software developer at 

$132.80/hr who will each spend 2 hours 

developing these processes and 

updating plan systems. In aggregate, we 

estimate a one-time burden of 3,228 

hours (807 Part D contracts * 4 hr) at a 

cost of $352,659 (807 contracts × 

[($85.70/hr × 2 hr) + ($132.80/hr × 2 

hr)]). 

Finally, we estimate a one-time 

burden for Part D sponsors to develop 

systems to track individuals with 

outstanding balances who are precluded 

from program participation in 

subsequent plan years. On average, we 

expect that for each Part D contract a 

three-person team consisting of one 

business operations specialist at $85.70/ 

hr, one web developer at $91.90/hr, and 

one software developer at $132.80/hr 

who will each spend 10 hours 

developing these processes and 

updating plan systems for a total of 30 

hours per contract. In aggregate, we 

estimate a one-time burden of 24,210 

hours (807 Part D contracts * 30 hr) at 

a cost of $2,504,928 (807 contracts × 

[($85.70/hr × 10 hr) + ($91.90/hr × 10 hr) 

+ ($132.80/hr × 10 hr)]). 

The total burden for all Part D 

contracts associated with the 

aforementioned requirements is 51,648 

hours with a one-time first year cost of 

$5,362,515. 


khammond on DSK9W7S144PROD with PROPOSALS2EP10DE24.027</GPH>
99500 Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 

5. ICRs Regarding Medicare Prescription 

Payment Plan Pharmacy POS 

Notification Process (§ 423.137(i)) 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–1475 (CMS– 

10882). 

This rule proposes to require Part D 

sponsors to ensure that a pharmacy, 

after receiving such a notification from 

the Part D sponsor, informs the Part D 

enrollee that they are likely to benefit 

from the Medicare Prescription Payment 

Plan. The provision also outlines the 

required claims processing methodology 

for applicable Medicare Prescription 

Payment Plan transactions. 

The burden related to these new 

requirements for pharmacies reflects the 

time and effort needed to process the 

notifications provided by the Part D 

sponsor and include the ‘‘Medicare 

Prescription Payment Plan Likely to 

Benefit Notice’’ with the enrollee’s 

prescription collateral. We estimate a 

one-time burden for pharmacies to 

update their systems for this change, 

which will require 10 hours of time for 

each member of a two-person team 

consisting of one software developer at 

$132.80/hr and one web developer at 

$91.90/hr for a total of 20 hours per 

contract. Assuming approximately 

73,397 pharmacies bill Part D based on 

monthly 2024 pharmacy network 

information, the total burden estimate 

across all pharmacies is 1,467,940 hours 

(73,397 pharmacies × 20 hr) at a cost of 

$164,923,059 (73,397 pharmacies × 

[($91.90/hr × 10 hr) + ($132.80/hr × 10 

hr)]). 

We do not estimate any additional 

burden for pharmacists to print and 

provide the ‘‘Medicare Prescription 

Payment Plan Likely to Benefit Notice’’ 

because we expect this to be integrated 

into the other prescription collateral 

provided to the enrollee under existing 

practices, such as those approved by 

OMB under control number 0938–0975 

(CMS–10147). 

6. ICRs Regarding Medicare Prescription 

Payment Plan Pharmacy Claims 

Processing (§ 423.137(j)) 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–1475 (CMS– 

10882). 

The electronic claims processing 

methodology outlined in this proposed 

rule is utilized today by Part D sponsors 

and pharmacies and therefore the 

addition of the BIN/PCN that is unique 

to the Medicare Prescription Payment 

Plan does not represent new burden that 

is not approved by OMB. However, CMS 

is requiring that Part D sponsors report 

their program-specific PCN starting with 

‘‘MPPP’’ to CMS. We estimate that this 

will require 1 hour at $85.70/hr for a 

business operations specialist to report 

their identifier to CMS. In aggregate, we 

estimate a one-time burden of 807 hours 

(807 Part D contracts * 1 hr/response) at 

a cost of $69,160 (807 hr * $85.70/hr). 

7. ICRs Regarding Part D Coverage of 

Anti-Obesity Medications (§ 423.100) 

and Application to the Medicaid 

Program 

As indicated later in this section, we 

will submit proposed changes to OMB 

under control number 0938–0659 

(CMS–R–153) regarding the 

modification of policies and criteria. We 

will also submit proposed changes to 

OMB under control number 0938–0193 

(CMS–179) regarding the preparation 

and submission of State Plan 

Amendments. 

We are proposing to reinterpret the 

phrase ‘‘[a]gents when used for . . . 

weight loss’’ in section 1927(d)(2) of the 

Act such that AOMs that are used for 

weight reduction or chronic weight 

management for the treatment of obesity 

and otherwise meet the definition of 

Part D drug at § 423.100 would no 

longer be excluded from Part D coverage 

pursuant to the exclusion in paragraph 

(2)(ii) of the definition, for drugs that 

may be excluded from Medicaid 

coverage under section 1927(d)(2) of the 

Act. Our proposed reinterpretation 

would also apply to Medicaid such that 

state Medicaid programs would no 

longer have the discretion to exclude 

these drugs pursuant to section 

1927(d)(2) of the Act from Medicaid 

coverage when used for weight 

reduction or chronic weight 

management for the treatment of 

obesity. States that are not already 

covering AOMs for weight reduction or 

chronic weight management would be 

required to do so to treat obesity in 

Medicaid enrollees. 

Except as indicated later in this 

section, there is no new or revised 

information collection burden for Part D 

plans associated with this proposal to 

allow for Part D coverage of AOMs. The 

Part D plan’s activities related to the 

decision to include AOMs on their Part 

D formularies would be the same as for 

any new drug that comes on the market. 

This burden is currently approved by 

OMB under control number 0938–0964 

(CMS–10141) under the requirement 

that the Pharmacy and Therapeutics 

committee documents its decisions 

regarding formulary development and 

revision. 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–0659 (CMS–R– 

153) using the standard non-rule PRA 

process which includes the publication 

of 60- and 30-day Federal Register 

notices. 

As Medicaid is an operationally 

different program from Medicare Part D, 

there will be a burden for the state 

Medicaid programs that do not already 

cover AOMs when used for weight 

reduction or chronic weight 

management for Medicaid enrollees 

with obesity to modify their existing 

coverage and reimbursement policies 

and criteria to remove such exclusion of 

AOMs. This burden may include the 

time and cost for administrative 

processes and requirements, including 

changes to utilization management 

criteria, claims processing to allow 

coverage of these products for this 

indication, review of stakeholder input, 

change to provider and beneficiary 


khammond on DSK9W7S144PROD with PROPOSALS2EP10DE24.028</GPH>
Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 99501 

documents to reflect this change in 

policy, and state internal operational 

implementation procedures. We believe 

that it will take a business operations 

specialist 40 hours at $85.70/hr to 

modify the state’s policies and criteria. 

In aggregate, we estimate a one-time 

burden of 1,560 hours (39 states × 40 hr) 

at a cost of $133,692 (1,560 hr × $85.70/ 

hr). Once the modifications are 

developed, there should be no 

additional burden. 

The following proposed changes will 

be submitted for OMB review and 

approval under control number 0938– 

0193 (CMS–179) using the standard 

non-rule PRA process which includes 

the publication of 60- and 30-day 

Federal Register notices. 

This new provision may also require 

the submission of a State Plan 

Amendment (SPA) for formal review 

and approval. In such instances, we 

estimate that it would take a Business 

Operations Specialist 20 hours at 

$85.70/hr. In aggregate, we estimate a 

one-time burden of 780 hours (39 states 

× 20 hr) at a cost of $66,846 (780 hr × 

$85.70/hr). 

8. ICRs Regarding Part D Medication 

Therapy Management (MTM) Program 

Eligibility Criteria (§ 423.153(d)) 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–1154 (CMS– 

10396). 

Based on comments we received from 

the December 2022 proposed rule (87 

FR 79452), CMS proposes to revise 

§ 423.153(d)(2)(iii)(A) identifying 

‘‘Alzheimer’s disease’’ as a core chronic 

disease to ‘‘Alzheimer’s disease and 

dementia,’’ to include all other 

dementias in the core chronic diseases 

for targeting beneficiaries for MTM 

program eligibility. We are also revising 

our burden estimates to reflect updated 

data, including up-to-date postage rates 

and using 2023 data. We estimate that 

the proposed change to add dementia to 

the core chronic diseases will increase 

the number (and percentage) of Part D 

enrollees eligible for MTM services by 

71,210 beneficiaries, from 7,882,987 

(14.5 percent × 54,503,892 Part D 

enrollees based on internal data from 

2023) to 7,954,197 (14.6 percent × 

54,503,892 Part D enrollees based on 

internal data from 2023) among 866 Part 

D contracts with an approved MTM 

program in 2023. 

Under § 423.153(d)(1)(vii)(B) and (C), 

all MTM enrollees must be offered a 

comprehensive medication review 

(CMR) at least annually and targeted 

medication reviews (TMRs) no less than 

quarterly. A CMR is an interactive 

consultation, performed by a pharmacist 

or other qualified provider, that is either 

in person or performed via synchronous 

telehealth, that includes a review of the 

individual’s medications and may result 

in the creation of a recommended 

medication action plan as required in 

§ 423.153(d)(1)(vii)(B)(1). An 

individualized, written summary in 

CMS’s Standardized Format must be 

provided following each CMR. For 

ongoing monitoring, sponsors are 

required to perform TMRs for all 

beneficiaries enrolled in the MTM 

program with follow-up interventions 

when necessary. The TMRs must occur 

at least quarterly beginning immediately 

upon enrollment in the MTM program 

and may address specific or potential 

medication-related problems. TMRs 

may be performed to assess medication 

use, to monitor whether any unresolved 

issues need attention, to determine if 

new drug therapy problems have arisen, 

or assess if the beneficiary has 

experienced a transition in care. Under 

§ 423.153(d)(1)(vii)(E), plans are also 

required to provide all enrollees 

targeted for MTM services with 

information about safe disposal of 

prescription medications that are 

controlled substances. Plans may mail 

this information as part of the CMR 

summary, a TMR, or other MTM 

correspondence or service. The 

proposed changes do not impact the 

requirements for MTM services. 

In this section, we estimate the 

additional burden on plan sponsors to 

conduct CMRs (labor cost) and mail the 

written CMR summaries (non-labor cost) 

to the additional beneficiaries that will 

be targeted for MTM enrollment based 

on our proposal to include dementia 

within the required core chronic 

diseases for identifying beneficiaries 

who have multiple chronic diseases. We 

also estimate the cost of sending safe 

disposal information to the beneficiaries 

who will be newly targeted under these 

revised criteria, but do not receive a 

CMR. 

To obtain aggregate burden we 

separately estimate: (1) the burden for 

pharmacists to complete the CMR; (2) 

the mailing costs of the CMRs; and (3) 

the cost of mailing of safe disposal 

instructions to those targeted 

beneficiaries who do not accept the offer 

of a CMR. 

• The burden for pharmacists to 

complete the additional CMRs: Based on 

plan-reported data, we found that 70.9 

percent of MTM program enrollees 

accepted the offer of a CMR in 2023. To 

estimate the cost of conducting the 

additional CMRs, we multiply the 

expected number of additional MTM 

program enrollees (71,210) by 0.709 to 

obtain the number of additional CMRs 

we estimate will actually be conducted 

(50,488). We estimate a pharmacist 

would take 40 minutes (0.6667 hr) at 

$129.62/hr (see table 16) to complete a 

CMR. Thus, the total burden is 33,660 

hours (0.6667 hr/CMR * 50,488 

enrollees who accept the CMR offer) at 

a cost of $4,363,009 (33,660 hr * 

$129.62/hr). 

• Mailing Costs of CMRs: To estimate 

the cost of sending the CMR summaries, 

we assume that the average length of a 

CMR is 7 pages double-sided (including 

1 page for information regarding safe 

disposal). The cost of mailing one CMR 

summary is the cost of postage plus the 

cost of printing one CMR summary. 

First-class postage costs $0.64 per 

metered mailing. Paper costs are $0.007 

per sheet ($3.50 per ream/500 sheets per 

ream), and toner costs $70.00 per 

cartridge and lasts for 10,000 sheets (at 

$0.007 per sheet = $70.00/10,000 

sheets). Bulk envelope costs are $440 for 

10,000 envelopes or $0.044 per 

envelope. Therefore, the cost of printing 

and mailing the average CMR summary 

is $1.022 ([$0.64 postage for the first 

ounce + $0.24 for the second ounce + 

$0.044/envelope] * [7 sheets * ($0.007 

for paper + $0.007 for toner)]). And 

taken as a whole, the annual cost of 

mailing CMRs to the additional 50,488 

beneficiaries expected to accept the 

CMR offer is $51,599 (50,488 enrollees 

× $1.022/mailing). 

• Mailing costs for Safe Disposal 

Information: Out of the 71,210 

additional beneficiaries expected to be 

targeted for MTM based on the revised 

criteria, we expect that 29.1 percent or 

20,722 (71,210 * 0.291) beneficiaries 

will decline a CMR. These beneficiaries 

will still need to receive information 

regarding the safe disposal of 

prescription drugs that are controlled 

substances. For purposes of calculating 

the burden, we assume that any safe 

disposal information that is not 

included in a CMR is either (1) being 

mailed in a TMR, which may be as short 

as one page and may contain private 

health information; or (2) is mailed as a 

standalone document which does not 

contain any private health information. 

For purposes of impact, (1) if one 

additional page is included in the TMR, 

then there is no additional postage; and 

(2) if the safe disposal information is 

mailed separately, there would be no 

private health information, and the 

burden would be the cost of one page 

plus bulk postage. Due to a lack of data 

with regard to what percentage of safe 

disposal information will be mailed as 

part of a TMR or other MTM 

correspondence or service, we are 

assuming that all safe disposal 

information not sent with a CMR will be 


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324Bid submissions from coordinated care plans, 

including regional MA plans and specialized MA 

plans for special needs beneficiaries (described at 

§ 422.4(a)(1)(iv)), and MA private fee-for-service 

plans are subject to these actuarial guidelines. 

325Cost Plans are not required to report 

information for all services in their plan benefit 

package. 

one page that is mailed separately using 

bulk postage in order to project the 

maximum cost of such mailing. If the 

letter does not contain private health 

information and thus bulk mailing 

(which include the envelope, typically a 

fold over paper) is used, the cost to mail 

one page of safe disposal information is 

$0.01495 per enrollee [(1 page * $0.007/ 

sheet) + (1 page * $0.007 toner) + 

($0.19/200 items for bulk postage).] 

Therefore, we estimate that the cost of 

mailing safe disposal information to 

those beneficiaries targeted for MTM 

who do not receive it in a CMR 

summary is $310 ($0.01495 * 20,722). 

Therefore, the total burden associated 

with the proposed revisions to the MTM 

targeting criteria is 33,660 hours and 

$4,414,918 ($4,363,009 for a pharmacist 

to perform the CMRs for beneficiaries 

newly targeted for MTM under the 

revised criteria + $51,599 to mail the 

CMR written summary in the CMS 

Standardized Format with safe disposal 

information + $310 for mailing 

information regarding safe disposal to 

beneficiaries newly targeted for MTM 

who do not receive a CMR). 

9. ICRs Regarding Eligibility for 

Supplemental Benefits for the 

Chronically Ill (SSBCI) 

(§ 422.102(f)(4)(iii)(C)) 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–TBD (CMS– 

10915). At this time the OMB control 

number has yet to be determined (TBD) 

but will be issued by OMB upon their 

clearance of this proposed collection of 

information request. CMS will include 

that number in the subsequent CMS– 

4208–F final rule. OMB will issue the 

control number’s expiration date upon 

their approval of the final rule’s 

collection of information request. The 

issuance of that date can be monitored 

at www.Reginfo.gov. 

As explained in section III.H. of the 

proposed rule, for each SSBCI, the plan 

must list all the written policies and 

objective criteria on which the policies 

are based as noted in 

§ 422.102(f)(4)(iii)(C) on a public facing 

website. For web developers and 

programmers to annually post the 

required information on the plan 

website we estimate it would take 2 

hours at $125.48/hr (see table 16). We 

estimate 761 plans including local and 

regional CCPs, MSA, and PFFS and 

reflects the publicly available CMS 

counts of these plans as of July 2024 

accessible at https://www.cms.gov/ 

research-statistics-data-and-systems/ 

statistics-trends-and-reports/ 

mcradvpartdenroldata/monthly/ 

contract-summary-2024-07. In aggregate 

we estimate an annual burden of 1,522 

hours (761 plans * 2 hr/plan) at a cost 

of $190,981 (1,522 hr * $125.48/hr). 

Medicare Cost plans are excluded from 

the count since they are not permitted 

to offer SSBCI. 

10. ICRs Regarding Ensuring Equitable 

Access to Behavioral Health Benefits 

Through Section 1876 Cost Plan and 

MA Cost Sharing Limits (§§ 417.454 and 

422.100) 

As discussed in section III.M. of this 

proposed rule, we propose to amend the 

existing requirements at §§ 417.454 and 

422.100(j) (that cost sharing for certain 

benefits not exceed cost sharing for the 

same benefits in Original Medicare) to 

add categories of mental health and 

substance use disorder services 

(collectively called ‘‘behavioral health 

services’’). The service categories 

include mental health specialty 

services, psychiatric services, partial 

hospitalization, intensive outpatient 

services, inpatient hospital psychiatric 

services (all length of stay scenarios), 

outpatient substance use disorder 

services, and opioid treatment program 

services. This proposal requires Section 

1876 Cost Plans (Cost Plans) and 

Medicare Advantage (MA) plans 

(including employer group waiver plans 

(EGWPs)) in-network cost sharing for 

these behavioral health services to be no 

greater than that in Traditional 

Medicare, beginning in contract year 

2026. Specifically, this proposal: (1) 

modifies the way that in-network 

service category cost-sharing limits for 

behavioral health services have been set 

by adopting a new cost-sharing standard 

and (2) updates current guidance 

governing organization bid requirements 

about how benefits must be provided by 

plans, which are currently approved by 

OMB under control number 0938–0763 

(CMS–R–262). 

Plans comply with our current 

practice because CMS annually reviews 

bids and organizations have submitted 

supporting documentation (for contract 

year 2024 and prior years) to 

demonstrate compliance with 

§ 422.254(b)(5), (c)(5), and (c)(6), which 

require that MA organization bid 

submissions 324 must be prepared in 

accordance with CMS actuarial 

guidelines. Following these guidelines 

requires use of generally accepted 

actuarial principles, the actuarial bases 

of the bid, a description of cost sharing 

applicable under the plan,325 and the 

actuarial value of the cost sharing. CMS 

relies on our oversight and monitoring 

authority and our longstanding bid 

review policy (and the compliance 

program, recordkeeping, audit and 

access requirements at §§ 422.503 and 

422.504) to request any additional 

information and necessary 

documentation from organizations to 

investigate plan compliance with the 

program and benefit requirements. 

Consequently, CMS asserts that that 

this proposal does not impose any new 

or revised collection of information 

requirements and/or burden and is not 

subject to the requirements of the PRA 

because: (1) this proposal does not 

change how CMS evaluates compliance 

with cost-sharing limits as part of bid 

review; (2) plans comply with our 

current practice; and (3) this proposal 

does not change any bid documentation 

requirements in the CMS issued, annual 

bid instructions. 

11. ICRs Regarding Improving Equitable 

Access—Enhancing the Health Equity 

Analysis (§ 422.137(d)) 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–0964 (CMS– 

10141) using the standard non-rule PRA 

process which includes the publication 

of 60- and 30-day Federal Register 

notices. 

Currently, under § 422.137(d), all MA 

organization utilization management 

committees must conduct an annual 

health equity analysis of the use of prior 

authorization at the plan-level, based on 

specified metrics, aggregated for all 

items and services. The MA 

organizations must make the results of 

the analysis publicly available on their 

plan’s website in a manner that is easily 

accessible and without barriers. As 

explained in section III.N. of this 

proposed rule, CMS is proposing to 

amend the regulation to require that the 

metrics for the health equity analysis be 

reported for each covered item and 

service (in other words, the data in the 

analysis must be presented in a 

disaggregated form). The information 

relevant to this analysis and 

corresponding report is routinely 

collected in plan systems for each 

covered item and service, and therefore 

the data required for the analysis should 

be readily available for plans. Therefore, 

we do not believe there is a burden 

associated with this requirement. We 

estimate an annual burden for the 

requirement that the data must be 


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compiled into a report and posted 

publicly. For web developers and 

programmers of any plan to annually 

post the required information on the 

plan website would require 8 hours at 

$125.48/hr) (see table 16). We estimate 

767 plans including local and regional 

CCP, MSA, PFFS plans and Medicare 

Cost plans and is based on the publicly 

available CMS data on plan type counts 

accessible at: https://www.cms.gov/ 

research-statistics-data-and-systems/ 

statistics-trends-and-reports/mcradvpart

denroldata/monthly/contract-summary2024-07. In aggregate we estimate an 

annual burden of 6,136 hours (8 hr * 

767 contracts) at a cost of $769,945 

(6,136 hr * $125.48/hr) to fulfil the 

requirement that the plans publicly post 

the analysis to their website. 

12. ICRs Regarding Formatting Medicare 

Advantage (MA) Organizations’ 

Provider Directories for Medicare Plan 

Finder (§ 422.120(c)) 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–TBD (CMS– 

10906). 

As indicated in section III.Q. of this 

proposed rule we propose adding new 

requirements at § 422.111(m) for MA 

organizations’ provider directory 

formats. Under this proposal, MA 

organizations would be required to 

provide provider directory data that are 

formatted per CMS/HHS specifications 

to CMS/HHS and attest to the accuracy 

and consistency of their provider 

directory data. The purpose of this 

proposal is to allow for MA 

organizations’ provider directory data to 

be populated into Medicare Plan Finder 

(MPF) so that current and prospective 

MA enrollees would have the ability to 

search for a provider or facility and 

determine whether the provider or 

facility has a contractual relationship 

with the MA plans displayed in MPF. 

We believe this would further CMS’s 

objective to promote informed 

beneficiary choice, efficiency, and 

transparency through online resources 

while advancing health equity. 

Since the production of provider 

directories are part of an automated 

process, the burden associated with this 

provision is a one-time burden for a 

computer programmer for each plan to 

create the proposed functionality within 

their system. We estimate that for each 

plan a computer programmer would 

spend 8 hours at $103.60/hr (see table 

16). In aggregate, we estimate a one-time 

burden of 6,088 hours (761 plans * 8 hr/ 

plan) at a cost of $630,717 (6,088 hr * 

$103.60/hr). The 761 plans include local 

and regional CCP, MSA, and PFFS plans 

and is based on the publicly available 

CMS data on plan type counts 

accessible at https://www.cms.gov/ 

research-statistics-data-and-systems/ 

statistics-trends-and-reports/

mcradvpartdenroldata/monthly/ 

contract-summary-2024-07. Medicare 

Cost plans have been excluded from the 

count since the ultimate goal of the 

provision is a display in Medicare Plan 

Founder, and Medicare Cost plans are 

not currently listed there. 

13. ICRs Regarding Enhancing Review of 

Marketing and Communications (Part 

422, Subpart V, and Part 423, Subpart V) 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–1051 (CMS– 

10260). 

As discussed in section III.R. of this 

proposed rule, in the April 2018 final 

rule, we narrowed the definition of 

‘‘marketing materials’’ under 

§§ 422.2260 and 423.2260 to only 

include materials and activities that aim 

to influence enrollment decisions. As 

noted in section III.R. of this proposed 

rule, these definitions were further 

updated in the January 2021 final rule, 

with the net result of narrowing the 

types of materials CMS required to be 

submitted, to those materials that CMS 

considered, at the time of the January 

2021 final rule, to be the most likely to 

influence a beneficiary’s decision to 

enroll in a plan. However, as indicated 

in this proposed rule, since the time 

these rules were finalized, CMS has 

observed a shifting landscape of 

misleading marketing practices in MA 

and Part D, including television and 

mail ads that, despite not meeting the 

definition of marketing, seemingly draw 

a beneficiary’s attention to a plan or 

influence a beneficiary’s enrollment 

decision. Moreover, CMS has seen a 

steady increase in marketing 

misrepresentation complaints beginning 

after the issuance of the April 2018 final 

rule. Therefore, we believe many 

communications materials excluded 

from the current regulatory definition of 

marketing and, consequently, from the 

submission and review requirements for 

marketing materials in §§ 422.2261(b) 

and 423.2261(b), should in fact be 

collected, as they are likely influencing 

a beneficiary’s enrollment decision even 

when they do not meet the content 

standards of the current regulatory 

definition of marketing. 

The burden of this provision is the 

time and money incurred by plans and 

TPMOs submitting more materials. To 

estimate this burden, we refer to table 

16 of April 2018 final rule (83 FR 16696 

and 16697). This table is based on a year 

of marketing data, from July 2015—June 

2016. We illustrate the effects of the 

current proposal by reviewing what was 

then called (in the April 2018 final 

rule), category 4000 material, which 

dealt with advertisements. Table 16 

indicates that in 2015–2016, we 

received roughly 44,000 advertisements 

of which 11,000 (44,000 * 25%) would 

no longer be submitted once the April 

2018 final rule was finalized as they did 

not meet the updated definition of 

marketing, so that we would continue to 

receive 33,000 (44,000 * 75%) 

advertisements that were still to be 

considered marketing. We assume these 

proportions are stable. If so, in each year 

from 2019–2025, 25 percent of MA and 

Part D plan advertisements were no 

longer submitted while 75% of 

advertisements are still considered 

marketing and continue to be submitted 

to CMS. If the rule is finalized, then 

effective 2026, besides the 75 percent of 

materials that would have been 

collected, we will also collect the 25 

percent of materials that were not 

required to be submitted from 2019 

through 2025. Thus, relative to what 

was submitted in 2019 through 2025, 

that is, relative to 75 percent of the 

advertisements that are potential 

marketing materials, we are adding 25 

percent more advertisements that were 

not collected in 2019–2025. That means 

we are increasing the current 75 percent 

by 33.3 percent resulting in the 25 

percent of the materials (33.3% * 75% 

= 25%) being added. A similar analysis 

applies to all categories of marketing 

affected by this proposal. 

However, we now use a different 

classification system, rather than the 

classification system based on the 

categories mentioned in the April 2018 

final rule. Since we currently only 

collect marketing materials, unless 

directly specified in our regulations, we 

classify most materials by material type 

and whether the material is marketing 

or CMS required material. To illustrate 

this, we point out, that we duplicated 

the sampling of data from July 2015 to 

June 2016 by reviewing marketing 

materials collected from July 2023 to 

June 2024. With this background we can 

illustrate some subtleties associated 

with the comparison of the 2015 to 2016 

and the 2023 to 2024 data. 

To properly compare the two samples, 

we must identify the categories of 

materials in each of them at the time, 

category 1100 (relevant to the 2015 and 

2016 data) included the Annual Notice 

of Change (ANOC) and Evidence of 

Coverage (EOC) documents. After the 

April 2018 final rule, the EOC was no 

longer considered a marketing material 

and was no longer required to be 

submitted to CMS. However, as of 

today, the EOC has been updated to be 


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required for submission to CMS, as per 

§§ 422.2261(c)(1) and 423.2261(c)(1), 

even though it was defined as a 

communications material. The ANOC is 

still a marketing material and continues 

to be collected, and therefore neither 

category will be affected by the update 

to the marketing definition, even though 

one material is marketing and one 

material is communications. Due to the 

differing classification system from the 

April 2018 final rule, and since there 

will be no burden impacts associated 

with the submission of the ANOC or 

EOC, the 1100 category is not relevant 

to the differences between the 2016 to 

2017 data and the 2023 to 2024 data. 

Similarly, category 3000 (from the 

categories of the 2015–2016 data) refers 

to grievance forms, but for the 2023 to 

2024 data, we no longer collect 

grievances forms as they are not 

considered marketing and therefore are 

not included in the data. Additionally, 

under the current proposal, grievance 

forms would not meet the definition of 

marketing and therefore does not have 

any associated burden. Table 23 

contains all categories from the 2015 to 

2016 sample and indicates which ones 

are still relevant to the current proposal. 

BILLING CODE 4120–01–P 

BILLING CODE 4120–01–C 

The sample of marketing data from 

July 2023–June 2024 had 76,170 items. 

These 76,170 items include items 

corresponding to the 2015–2016 

categories with category IDs listed in 

table 23 of 1000 (enrollment and related 

documents), 4000 (advertisements), and 

6000 (Presentations/Scripts/Surveys). 

Table 16 of the April 2018 final rule (83 

FR 16697) indicates the total number of 

marketing items in these categories as 

well as how many were not required to 

be submitted for 2019–2025. This allows 

us to accurately calculate how much the 

76,170 materials from 2023–2024 data 

should be increased. Table 24 

summarizes the numerical details. 

We now make two observations. First, 

the 76,170 items in the 2023–2024 

collection correspond to categories 

1000, 4000, and 6000. Based on the 

April 2018 final rule, only 35,124 

materials would have been collected in 

2015–2016 had the provisions of the 

April 2018 final rule been in effect. 

Additionally, 28,172 items would not 

have been collected. Thus, 80.21% of 

the 35,124 materials (28,172) were not 

collected in 2019–2025; if the current 

proposal is finalized, we would be 

increasing marketing materials by 

80.21%. 

Secondly, the 35,124 materials that 

would have been collected in the 2015– 

2016 sample had the April 2018 final 

rule applied to them correspond to the 

categories of item in the 2023–2024 data 

which had 76,170 items. This indicates 

an annual trend in growth of marketing 

materials of 10.15% (that is, 35,124 * 

1.1015 8 = 76,170). We expect this trend 

to continue in the near future. 

Based on these observations, we can 

calculate the burden of this provision if 

finalized in 2026. The results are 

presented in table 25. 


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326https://www.cms.gov/medicare/health-drugplans/medical-loss-ratio. 

To clarify the meaning of table 25, we 

illustrate the calculation for 2026. For 

2023–2024, we had 76,170 marketing 

materials. That number must be trended 

by a compound increase of 10.15 

percent annually resulting in 101,797.6 

(76,170 * 1.10153) marketing materials 

expected in 2026 if the provision is not 

finalized. If the provision is finalized, 

we must increase this by 81,652 

materials (80.21% * 101,797.6) to a total 

of 183,449.5. The burden of processing 

the first 101,797.6 materials is included 

in the current burden, while the 

proposed provision would add the 

burden of processing an additional 

81,651.9 materials. We estimate 767 

plans will be impacted by these 

changes, including local and regional 

CCP, MSA, PFFS plans and Medicare 

Cost plans and is based on the publicly 

available CMS data on plan type counts 

accessible at: https://www.cms.gov/ 

research-statistics-data-and-systems/ 

statistics-trends-and-reports/

mcradvpartdenroldata/monthly/ 

contract-summary-2024-07.we. 

To calculate the burden, as in the 

April 2018 final rule, we assume it 

would take an average of 30 minutes 

(0.5 hr) to process each material 

resulting in a burden of 40,826 hours 

(81,651.9 additional materials * 0.5 hr) 

in the first year. We also estimate a cost 

of $3,498,788 (40,826 hr * $85.70/hr for 

a business operations specialist) in the 

first year. 

CMS received 76,170 materials in the 

base year of 2023, and that the applied 

trend increase of 10.15 percent would 

have applied in each year between 2023 

and the proposed implementation date 

for this provision in 2026. 

Given the annual increase, we have 

annualized our burden estimates over 3 

years. In this regard, we estimate an 

annual burden of 45,110 hours at a cost 

of $3,865,927. We are also soliciting 

specific comment on the potential or 

alternative financial impacts of this 

proposal. 

14. ICRs Related To Require Clinical or 

Quality Improvement Standards for 

Provider Incentive and Bonus 

Arrangements To Be Included in the 

MA MLR Numerator (§ 422.2420(b)(2)) 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–1232 (CMS– 

10476). 

We propose to amend § 422.2420(b)(2) 

to clarify that only provider incentives 

and bonuses tied to clearly defined, 

objectively measurable, and welldocumented clinical or quality 

improvement standards may be 

included in incurred claims for MA 

MLR reporting and remittance 

calculation purposes. We anticipate that 

implementing this provision would 

require minor changes to the MLR 

Annual Reporting Form Instructions 

and would not significantly increase the 

associated reporting burden of 61.1 

hours per response. 

We estimate that approximately 700 

MA organizations contracts must 

comply with the updated reporting 

requirements based on 2021 reported 

MLR data (the most recent data 

available). We further estimate that it 

would take each MA organization a onetime effort of 1 hour at $85.70/hr (see 

table 16) for a business operations 

specialist to update the financial data 

needed for MLR calculations. In 

aggregate, we estimate a one-time 

burden of 700 hours (700 MA 

organization contracts * 1 hr/response) 

at a cost of $59,990 (700 hr * $85.70/ 

hr).326


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327 https://www.cms.gov/medicare/health-drugplans/medical-loss-ratio. 

328https://www.cms.gov/medicare/health-drugplans/medical-loss-ratio. 

329 https://www.cms.gov/medicare/health-drugplans/medical-loss-ratio. 330 https://www.cms.gov/medicare/health-drugplans/medical-loss-ratio. 

15. ICRs Related to Proposal To Add 

Provider Payment Arrangement 

Reporting in the Medicare MLR Report 

Regulations (§§ 422.2460 and 422.2490) 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–1232 (CMS– 

10476). 

We propose to amend §§ 422.2460 

and 422.2490 to require MA 

organizations to submit data on provider 

payment arrangements through the MLR 

Reporting Tool. This additional 

reporting will not be made public unless 

the data is deidentified and reported as 

aggregate totals. We anticipate that 

implementing this provision would 

require minor changes to the MLR 

Annual Reporting Form and 

Instructions and would not significantly 

increase the associated reporting burden 

of 61.1 hours per response. 

We estimate that approximately 700 

MA organizations contracts must 

comply with the updated reporting 

requirements based on CY 2021 

reported MLR data (the most recent data 

available). We further estimate that it 

would take each MA organization an 

annual effort of 3 hours at $85.70/hr (see 

table 16) for a business operations 

specialist to update the financial data 

needed for MLR calculations given that 

CMS is proposing to use a widely agreed 

upon HCPLAN APM framework. In 

aggregate, we estimate an annual burden 

of 2,100 hours (700 MA organizations 

contracts * 3 hr/response) at a cost of 

$179,970 (2,100 hr * $85.70/hr).327

16. ICRs Related To Prohibit 

Administrative Costs From Being 

Included in Quality Improving 

Activities in the MA and Part D MLR 

Numerator (§§ 422.2430(a) and 

423.2430(a)) 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–1232 (CMS– 

10476). 

We propose to amend §§ 422.2430(a) 

and 423.2430(a) to specify that only 

expenditures directly related to 

activities that improve health care 

quality may be included as quality 

improving activity expenses for MLR 

reporting. We anticipate that 

implementing these provisions would 

require minor changes to the MLR 

Annual Reporting Form Instructions 

and would not significantly increase the 

associated reporting burden of 61.1 

hours per response. We estimate that 

approximately 764 MA organizations 

and Part D sponsors contracts must 

comply with the updated reporting 

requirements based on 2021 reported 

MLR data (the most recent data 

available). We further estimate that it 

would take a business operations 

specialist at each MA organization and 

Part D sponsor a one-time effort of 1 

hour at $85.70/hr (see table 16) to 

update the financial data needed for 

MLR calculations. In aggregate, we 

estimate a one-time burden of 764 hours 

(764 plans * 1 hr/response) at a cost of 

$65,475 (764 hr * $85.70/hr).328

17. ICRs Related to Establish Standards 

for MA and Part D MLR Audit 

Examinations (§§ 422.2480(d), 

423.2480(d), 422.2401, 423.2401, 

422.2450, 423.2450, 422.2452, 423.2452, 

422.2454, and 423.2454) 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–1232 (CMS– 

10476). 

Our proposed amendments would 

establish a process for MLR audit 

examinations and a collection and 

appeals process for MLR audit 

remittances based on MLR audit 

findings. We expect MA organizations 

and Part D sponsors would have to 

retain detailed MLR information for 

auditing purposes. We anticipate that 

implementing this provision would 

require minor changes to the MLR 

Annual Reporting Form Instructions 

and would not significantly increase the 

associated reporting burden of 61.1 

hours per response. 

MA organizations’ and Part D 

sponsors’ current record retention 

practices should already support future 

audits, however, there may be some 

burden associated with confirming 

compliance with record retention 

requirements. We estimate that 

approximately 764 MA organizations 

and Part D sponsors contracts must 

confirm compliance with the record 

retention requirements. We further 

estimate that it would take 1 hour at 

$85.70/hr (see table 16) for a business 

operations specialist to confirm the data 

needed for potential MLR auditing has 

been retained on an annual basis. 

Therefore, we expect approximately 764 

hours (764 plans * 1 hr/year) at a cost 

of $65,475 ($764 hr * $85.70/hr).329

In addition, CMS may conduct up to 

9 MLR audit examinations annually, 

and the compliance actions that result 

from the audits and provisions in this 

rule would take effect in 2026. The 

annual burden would be higher for 

audited contracts, although MA 

organizations and Part D sponsors 

should have all of the materials 

requested by auditors consistent with 

current record retention practices. We 

estimate the burden to be 80 hours for 

the contracts selected for audit. 

Therefore, if 9 audits are conducted in 

a given year we expect the burden to be 

approximately 720 hours (9 contracts * 

80 hr/year) at a cost of $61,704 (720 hr 

* $85.70/hr).330

18. ICRs Regarding Improving Access— 

Enhancing Rules on Internal Coverage 

Criteria (§ 422.101(b)(6)) 

The following proposed changes will 

be submitted to OMB for review under 

control number (0938–0753) (CMS–R– 

267). 

This rule proposes that by January 1, 

2026, MA organizations must publicly 

display on the organization’s website a 

list of all Medicare items and services 

where the MA organization uses 

internal coverage criteria when making 

medical necessity decisions. The list of 

items and services on the website must 

include the information in 

§ 422.101(b)(6)(ii)(A) through (C) (or 

connect directly to that information 

through a hyperlink) and include the 

vendor’s name when using a third-party 

vendor’s criteria. 

The MA organization’s internal 

coverage criteria web page must be 

displayed in a prominent manner and 

clearly identified in the footer of the 

website. The web page must be easily 

available to the public, without barriers, 

including but not limited to ensuring 

the information is available free of 

charge, without having to establish a 

user account or password, without 

having to submit personal identifying 

information, in a machine-readable 

format with the data contained within 

that file being digitally searchable and 

downloadable, and include a txt file in 

the root directory of the website domain 

that includes a direct link to the 

machine-readable file to establish and 

maintain automated access. 

In § 422.101(b)(6)(ii)(A), which 

requires posting the internal coverage 

criteria in use, we are adding that any 

internal coverage criterion used by the 

MA organization in making medical 

necessity decisions on Part A and Part 

B benefits must be clearly identified and 

marked as internal coverage criteria of 

the MA plan within their coverage 

policies. In paragraph (B), we are 

proposing to add that the evidence 

supporting the internal coverage criteria 

must be connected with a corresponding 

footnote. In paragraph (C), we are 


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changing ‘‘criteria’’ to ‘‘criterion’’ to 

make it clear that we require an 

explanation of the rationale that 

supports adoption of each individual 

internal coverage criterion in use. 

We believe that for a business 

operations specialist to make the public 

posting of the new information 

described previously would require on 

average 1.5 hours a month at $85.70/hr 

(see table 16). In aggregate, we estimate 

an annual burden of 13,806 hr (767 

plans * 1.5 hr/month * 12 months) at a 

cost of $1,183,174 (13,806 hr * $85.70/ 

hr). The 767 plans include local and 

regional CCP, MSA, PFFS plans and 

Medicare Cost plans and is based on the 

publicly available CMS data on plan 

type counts accessible at https://

www.cms.gov/research-statistics-dataand-systems/statistics-trends-andreports/mcradvpartdenroldata/monthly/ 

contract-summary-2024-07. 

19. ICRs Regarding Clarifying MA 

Organization Determinations To 

Enhance Enrollee Protections in 

Inpatient Settings (§§ 422.138, 422.562, 

422.566, 422.568, and 422.616) 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–0753 (CMS–R– 

267). 

The proposal to clarify the definition 

of an organization determination is 

intended to enhance enrollee 

protections in inpatient settings. This 

would be accomplished by proposing to 

clarify that an MA organization’s 

refusal, pre- or post-service or in 

connection with a decision made 

concurrently with an enrollee’s receipt 

of services, to provide or pay for 

services, in whole or in part, including 

the type or level of services, that the 

enrollee believes should be furnished or 

arranged for by the MA organization is 

an organization determination subject to 

part 422, subpart M. 

When making an organization 

determination, the plan must issue a 

coverage determination notice. The 

proposed clarification to the definition 

of an organization determination would 

mean that when an MA organization 

downgrades an enrollee from receiving 

inpatient to outpatient services or when 

an MA organization denies payment for 

services after such services were 

rendered but before a request for 

payment is submitted, the MA 

organization would be required to 

provide proper notice of the decision to 

the enrollee. The proposal also includes 

strengthening requirements related to 

notifying providers. The existing notice 

requirements for standard organization 

determinations at § 422.568 specify that 

MA organizations must provide the 

enrollee with notice of its decisions. 

Under existing rules, MA organizations 

are required to use an OMB-approved 

standardized denial notice (CMS Form 

10003–NDMCP/OMB 0938–0829) to 

notify enrollees of adverse decisions. 

We propose to amend requirements 

related to notice of a standard 

organization determination at 

§ 422.568(b)(1) to notify an enrollee’s 

physician or provider, as appropriate, as 

well. As stated in section III.V.3. of this 

proposed rule, we do not believe the 

proposal to strengthen notice 

requirements will have a substantial 

impact on the practices of MA 

organizations as we are codifying 

longstanding requirements and 

guidance that we believe the majority of 

plans already implement based on the 

few complaints we receive on this issue 

from providers and enrollees. In 

addition, we also understand that due to 

the contractual relationship MA 

organizations have with their providers, 

most contracted providers should 

already receive notice of relevant 

organization determinations, including 

those that the provider submitted on 

behalf of the enrollee. 

However, while we acknowledge that 

some plans are complying with the 

existing rules in a manner that is 

consistent with our proposed 

clarification, we do not have the data on 

the number of plans that are complying 

with this requirement. We estimate that 

annually 60,000 inpatient approvals are 

downgraded to observation status. We 

are estimating that of those 60,000 cases, 

approximately 10 percent of those cases 

are being handled appropriately (that is, 

plans are complying with the existing 

regulations). We do not have definitive 

data sources that indicate the number of 

plans that may not be in compliance 

and, therefore, invite stakeholder 

comment on our assumptions. 

The burden associated with the 

proposed provisions are due to: (1) 

additional notices to enrollees and 

providers not currently receiving them; 

and (2) an increase in the number of 

appeals received. Due to lack of data, we 

cannot fully quantify all burden; 

however, we can quantify some and 

perform qualitative estimates. We 

discuss each burden source separately. 

a. Additional Notices 

Under our proposal, there would be 

an increase in the number of notices to 

providers and enrollees regarding 

downgrading inpatient stays to 

observation status. The associated 

burden with this proposal would be the 

increase in costs related to the issuance 

of these notices. Because the issuance of 

these notices is typically automated, 

there could be a one-time first year cost 

to update systems in addition to a 

potential annual mailing cost. We 

estimate that, per plan, it may take a 

programmer 4 to 8 hours to update 

systems. In aggregate we estimate a onetime, first year burden of 5,816 hours (8 

hr/plan * 727 plans) at a cost of 

$602,538 (5,816 hr * $103.60/hr). 

We are basing our estimate for the 

cost of notices on the projected cost of 

postage (the major cost) and the number 

of notices. By examining riskadjustment data for MA plan use of 

Condition Code 44, the code used in 

Traditional Medicare for a downgrade of 

an inpatient stay to observation, we 

estimate there are 60,000 downgrades 

annually. This approach has some 

assumptions, for example, that MA 

plans are using Condition Code 44 to 

indicate downgrades, and that most 

downgrades are being captured. Since 

the information in the notice is 

confidential, they must be mailed via 

first class at a postage rate of $0.73/ 

notice. In addition, we believe that the 

majority of plans are currently not 

complying with our requirements and 

are estimating that there will be a new 

burden for approximately 90% of plans. 

This assumption is based on 

complaints, correspondence with plans, 

and other anecdotal evidence, but we 

acknowledge that it is speculative since 

we do not collect related data. Based on 

our assumptions, the cost of mailing 

notices would be a non-labor cost of 

$39,420 annually (60,000 downgrades * 

90 percent that are not currently 

complying * $0.73/notice). 

We note that besides the other 

assumptions detailed previously, this 

estimate is an over-estimate since some 

enrollees will receive their Integrated 

Denial Notice (IDN) in the hospital and 

hence incur no mailing costs. Because it 

is an over-estimate, we focused on the 

main drivers of cost and did not include 

the cost of paper, toner, and envelopes. 

Had we included toner and paper costs, 

the estimate would increase by a 

maximum of $756 (60,000 maximum 

notices * 90 percent * (0.007 cost of 

paper + 0.007 cost of toner). The 

inclusion of bulk envelopes could raise 

the cost by a maximum of $2,160 

(60,000 maximum notices * 90 percent 

* $0.04 bulk envelope cost). 

b. Increased Appeals 

While we expect an increase in the 

number of organization determinations 

reported, as well as the number of 

appeals received, we do not have data 

to confirm this assumption. Appeals 

data available to CMS is not currently 

broken out by the type of service; 

therefore, we do not know how many 


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MA organizations fail to provide proper 

notification and how many inpatient 

approvals being downgraded to 

outpatient are appealed. There are no 

current appeals going to the 

Independent Review Entity (IRE) level. 

We are unable to estimate (1) how many 

cases of the 60,000 will now receive 

notices (2) how many appeals would 

arise, (3) how many are overturned, and 

(4) how many will go to the IRE. Thus, 

we cannot quantify this, but we can 

qualitatively identify this as a cost. 

We also note that our proposal to 

amend the reopening rules at § 422.616 

will not add to existing plan processes 

or requirements, so we believe any 

overall burden associated with 

processing a reopening of an 

organization determination related to 

inpatient hospital admissions will 

remain unchanged or will possibly be 

reduced (given that we are proposing to 

eliminate the discretion of an MA 

organization to reopen an approved 

authorization for an inpatient hospital 

admission based on new and material 

evidence). The decision to reopen an 

organization determination is at the 

discretion of an MA organization. Our 

proposal to curtail an MA organization’s 

authority to reopen and modify an 

approved authorization for an inpatient 

hospital admission on the basis of good 

cause for new and material evidence 

does not impose any new burden in the 

decision-making process related to prior 

authorization for inpatient hospital 

admissions. Consequently, this 

provision will not have added impact. 

We do not believe the proposed changes 

will adversely impact enrollees or MA 

organizations. Similarly, we do not 

believe the proposed changes would 

have any impact to the Medicare Trust 

Funds. 

Likewise, our proposed clarification 

to § 422.562(c)(2) will not add to 

existing plan processes or requirements, 

so we believe the overall estimated 

burden on MA organizations associated 

with processing organization 

determinations and appeals will be 

unchanged and this provision will not 

have added impact. We do not believe 

the proposed change will adversely 

impact enrollees or MA organizations 

and, further, believe that most MA 

organizations are properly excluding 

provider payment appeals from the 

subpart M administrative appeals 

process when a dispute no longer 

involves enrollee financial liability for 

furnished services. Similarly, we do not 

believe the proposed changes would 

have any impact to the Medicare Trust 

Funds. 

We invite stakeholder comment on 

our approaches to determine the 

potential burden and our estimates. 

20. ICRs Regarding Promoting PersonCenteredness in SNP ICPs and 

Timeliness of HRAs and ICPs 

(§§ 422.101(f) and 422.107(e)) 

In section V.A. of this proposed rule, 

we propose amendments to 

§ 422.101(f)(1) to codify timeliness 

standards, improve the organization of 

the various HRA and ICP requirements, 

and strengthen these requirements. 

These proposals would require that— 

• SNPs conduct the comprehensive 

initial HRA within 90 days (before or 

after) of the effective date of enrollment 

for all new enrollees. This would better 

align with the Medicaid requirement at 

§ 438.208(b)(3) and conform to the 

standard currently described for 

reporting HRA completion in the Part C 

reporting requirements. 

• SNPs make at least three nonautomated phone call attempts, unless 

an enrollee agrees or declines to 

participate in the HRA before three 

attempts are made, on different days at 

different times of day. We also propose 

that for any enrollees that are unable to 

be reached or decline to participate in 

the HRA, the SNP must document the 

attempts to contact the enrollee or the 

enrollee’s choice not to participate. 

These updates would better conform to 

the standard currently described for 

reporting HRA completion in the Part C 

reporting requirements. 

• Within 30 days of conducting a 

comprehensive initial HRA or 30 days 

after the effective date of enrollment, 

whichever is later, SNPs to develop and 

implement a comprehensive ICP that— 

++ Is person-centered and based on 

the enrollee’s preferences, including for 

delivery of services and benefits, and 

needs identified in the HRA; 

++ Is developed through an 

interdisciplinary care team with the 

active participation of the enrollee (or 

the enrollee’s representative, as 

applicable) as feasible; 

++ Identifies person-centered goals 

and objectives (as prioritized by the 

enrollee), including measurable 

outcomes as well as specific services 

and benefits to be provided; and 

++ Is updated as warranted by 

changes in the health status or care 

transitions of enrollees. 

Since SNPs are already required to 

conduct HRAs and ICPs, we do not 

anticipate that the proposed changes to 

§ 422.101(f) would impose any new 

burden on MA organizations offering 

SNPs. However, we would need to 

revise language on timeframes and 

related narrative in the Model of Care 

Matrix that is currently approved by 

OMB under control number 0938–1296 

(CMS–10565). 

In section V.A. of this proposed rule, 

we also propose to add language to the 

D–SNP EAC requirements at § 422.107(f) 

to include updates to MOCs as 

described at § 422.101(f) among required 

EAC discussion topics. While MA 

organizations can already include MOCs 

among their D–SNP EAC topics, adding 

these topics to the D–SNP EAC 

conversations would ensure MA 

organizations solicit feedback directly 

from enrollees to improve the care 

coordination process including HRAs 

and ICPs as described in the MOC. 

We do not anticipate new or 

additional burden from this proposal 

since MA organizations are already 

convening EACs per the existing 

requirements at § 422.107(f) and can 

solicit feedback on MOCs as part of their 

existing convenings. Thus, we would 

not need to revise any of the currently 

approved requirements and/or burden 

under OMB control number 0938–1422 

(CMS–10799). 

We welcome comments on our 

assumptions. 

21. ICRs Regarding Integrating Member 

ID Cards for Dually Eligible Enrollees in 

Certain Integrated D–SNPs 

(§§ 422.2267(e)(30) and 423.2267(e)(32)) 

Our May 2022 final rule noted that 

the Member Identification Card burden 

is exempt from the requirements of the 

PRA since the issuance of Medicare 

Identification Cards is a normal and 

customary practice throughout the 

insurance industry, citing the fact that 

health plans, whether commercial, 

through Medicare or Medicaid, or 

Original Fee-for-Service issue cards that 

inform providers of the enrollee’s 

insurance. The MA requirements were 

previously described in the May 2022 

final rule, and we are simply combining 

these requirements with Medicaid 

requirements for one ID card. Sections 

422.2267(e)(30) and 423.2267(e)(32) 

require D–SNPs to provide member ID 

cards to enrollees. Medicaid managed 

care plans also send member ID cards to 

enrollees. However, when a dually 

eligible individual is enrolled in both an 

MA plan and a Medicaid managed care 

plan, the plans may issue the enrollee 

separate member ID cards—one for their 

MA plan and one for their Medicaid 

managed care plan—to access services 

for each program. Our proposal would 

require that applicable integrated plans 

(AIPs), as defined in § 422.561, provide 

one integrated member ID card to serve 

as the ID card for both the Medicare and 

Medicaid plans in which the enrollee is 

enrolled. Given that issuance of member 


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ID cards is a normal and customary 

practice throughout the insurance 

industry and most States with AIPs 

currently require integrated member ID 

cards in their SMACs, we do not 

estimate any PRA-related burden for the 

proposed requirement. We welcome 

comments on our assumptions. 

22. ICRs Regarding Integrating Health 

Risk Assessments for Dually Eligible 

Enrollees in Certain Integrated D–SNPs 

(§ 422.101(f)(1)(v)) 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–1446 (CMS– 

10825). 

Medicare requirements at 

§ 422.101(f)(1) require D–SNPs to 

conduct a comprehensive HRA for each 

enrollee, both at the time of enrollment 

and annually thereafter. Separately, 

Medicaid managed care regulations at 

§ 438.208(b)(3) require Medicaid 

managed care plans to make a best effort 

to conduct an initial screening of 

enrollee needs within 90 days of their 

effective enrollment date, and State 

requirements may include additional 

assessments such as long-term services 

and supports (LTSS) and home and 

community-based services eligibility 

screenings. While some States have 

implemented their own requirements, 

through SMACs, to reduce burden and 

duplication, not all States have done so. 

In this rule, we propose to require D– 

SNPs that are AIPs to conduct a 

comprehensive HRA that meets all 

Medicare and Medicaid requirements, 

rather than two separate HRAs. 

If this provision is finalized, AIPs in 

seven states (DC, FL, ID, NJ, PR, VA, and 

WI) that do not currently combine their 

HRAs would be required to adhere to 

this new provision. We believe that in 

plan year 2026, a business operation 

specialist associated with each contract 

that has an AIP in these seven states 

would spend an average of 2 hours to 

determine whether the HRA tool 

currently in use meets State 

requirements and make any necessary 

system updates in preparation for 

implementation in plan year 2027. With 

26 unique contracts in the seven States 

that would be required to meet this 

provision, we estimate that half of the 

contracts or 13 contracts (26 contracts * 

1⁄2) will only need to make minor 

administrative changes to comply with 

this provision. This would be a one-time 

burden of 26 hours (13 contracts * 2 hr) 

at a cost of $2,228 (26 hr * $85.70/hr 

(see table 26). We estimate that the other 

half of the contracts (13 contracts) 

would require more extensive updating 

and merging of two separate HRAs (at 

40 hr/response) to comply with this 

provision. We estimate such MA 

organizations would need to merge two 

separate HRAs and implement systems 

updates to operationalize the integrated 

HRA. We estimate that these activities 

would take 40 hours per contract. This 

would be a one-time burden of 520 

hours (13 contracts * 40 hr) at a cost of 

$44,564 (520 hr * $85.70/hr). 

After initial implementation, this 

proposed requirement would reduce 

burden for AIPs in the seven states 

listed earlier with HRAs that are not 

already integrated, as plans would be 

conducting one integrated HRA instead 

of two. As discussed in the prior 

paragraph, we estimate that half of the 

contracts that would be affected by our 

proposal currently administer some 

form of a consolidated HRA. 

Conversely, we estimate that the other 

half of the contracts are currently 

conducting two HRAs. Based on this 

assumption, we are estimating that half 

of the contracts that would be required 

to adhere to this provision if it is 

finalized would see a reduction of 

burden by half. We expect some longterm burden reduction from the 13 

contracts that currently administer two 

HRAs for their enrollees but would only 

administer one HRA under this 

proposal. We welcome comments on 

our assumptions. 

C. Summary of Proposed Information 

Collection Requirements and Associated 

Burden 

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D. Submission of PRA-Related 

Comments 

We have submitted a copy of this 

proposed rule to OMB for its review of 

the rule’s information collection 

requirements. The requirements are not 

effective until they have been approved 

by OMB. 

To obtain copies of the supporting 

statement and any related forms for the 

proposed collections discussed 

previously, please visit the CMS website 

at https://www.cms.gov/regulationsand-guidance/legislation/

paperworkreductionactof1995/pralisting, or call the Reports Clearance 

Office at 410–786–1326. 

We invite public comments on these 

potential information collection 

requirements. If you wish to comment, 

please submit your comments 

electronically as specified in the DATES

and ADDRESSES sections of this 

proposed rule and identify the rule 

(CMS–4208–P), the ICR’s CFR citation, 

and the OMB control number. 

VII. Regulatory Impact Analysis 

A. Statement of Need 

The primary purpose of this proposed 

rule is to amend the regulations for the 

Medicare Advantage (Part C) and 

Medicare Prescription Drug Benefit (Part 

D) programs, and Programs of AllInclusive Care for the Elderly (PACE). It 

is necessary to codify our 

implementation of policies laid out in 

acts of Congress and to improve access, 

transparency, and equity for 

beneficiaries enrolled in MA and Part D 

plans. The rule includes a number of 

new policies from the Bipartisan Budget 

Act of 2018 (BBA) and the IRA, as well 

as policies instituted by those acts that 

have operated under program 

instruction to this point. Further 

explanation of the purpose, methods, 

and expected outcomes of those 

provisions believed to have an 

economic impact on beneficiaries, 

plans, providers, or other entities is 

provided in the Anticipated Effects 

section of this RIA. 

Rulemaking is required for CMS to 

amend its longstanding interpretation of 

the reference in section 1927(d)(2) of the 

Act to ‘‘[a]gents when used for . . . 

weight loss’’ under which coverage for 

anti-obesity medications (AOMs) has 

been excluded from Part D, and is 

subject to state discretion under 

Medicaid, even for treating individuals 

with obesity. 

We believe it would be more 

consistent with current medical views 

of obesity as a disease to propose to 

reinterpret the phrase ‘‘[a]gents when 

used for . . . weight loss’’ to exclude 

AOMs when used for weight loss or 

chronic weight management for the 

treatment of obesity. 

B. Overall Impact Analysis 

We have examined the impacts of this 

proposed rule as required by Executive 

Order 12866 on Regulatory Planning 

and Review (September 30, 1993), 

Executive Order 13563 on Improving 

Regulation and Regulatory Review 

(January 18, 2011), Executive Order 

14094, entitled ‘‘Modernizing 

Regulatory Review’’ (April 6, 2023), the 

Regulatory Flexibility Act (RFA) 

(September 19, 1980, Pub. L. 96–354), 

section 1102(b) of the Act, section 202 

of the Unfunded Mandates Reform Act 

of 1995 (March 22, 1995; Pub. L. 104– 

4), Executive Order 13132 on 

Federalism (August 4, 1999), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

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, distributive impacts, and 

equity). Executive Order 14094 amends 

section 3(f) of Executive Order 12866 

(Regulatory Planning and Review). The 

amended section 3(f) of Executive Order 

12866 defines a ‘‘significant regulatory 

action’’ as an action that is likely to 

result in a rule: (1) having an annual 

effect on the economy of $200 million 

or more in any 1 year, or adversely 

affect in a material way the economy, a 

sector of the economy, productivity, 

competition, jobs, the environment, 

public health or safety, or State, local, 

territorial, or Tribal governments or 

communities; (2) creating a serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 

the budgetary impacts of entitlement 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising legal or policy 

issues for which centralized review 

would meaningfully further the 

President’s priorities. 

A regulatory impact analysis (RIA) 

must be prepared for a regulatory action 

that is significant under section 3(f)(1). 

Based on our estimates of the combined 

impact of the provisions in this 

proposed rule, OIRA has determined 

this rulemaking is significant under 

section 3(f)(1) of E.O. 12866. 

Accordingly, we have prepared a 

Regulatory Impact Analysis that 

presents the costs and benefits of the 

rulemaking to the best of our ability. 

Pursuant to Subtitle E of the Small 

Business Regulatory Enforcement 

Fairness Act of 1996 (also known as the 

Congressional Review Act), OIRA has 

determined that this rule meets the 

criteria set forth in 5 U.S.C. 804(2). 

Therefore, OMB has reviewed this 

proposed regulation, and the 

Department has provided the following 

assessment of its impact. 

Section 202 of UMRA also requires 

that agencies assess anticipated costs 

and benefits before issuing any rule 

whose mandates require spending in 

any 1 year of $100 million in 1995 

dollars, updated annually for inflation. 

In 2024, that threshold is approximately 

$183 million. This proposed rule is not 

anticipated to have an unfunded effect 

on State, local, or Tribal governments, 

in the aggregate, or on the private sector 

of $183 million or more. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has federalism implications. 

Since this proposed rule does not 

impose any substantial costs on State or 

local governments, preempt State law or 

have federalism implications, the 

requirements of Executive Order 13132 

are not applicable. 

If regulations impose administrative 

costs on reviewers, such as the time 

needed to read and interpret this 

proposed rule, then we should estimate 

the cost associated with regulatory 

review. There are currently fewer than 

1,000 contracts (which includes MA, 

MA–PD, and PDP contracts) and 500 

Medicaid MCOs, prepaid inpatient 

health plans (PIHP), and prepaid 

ambulatory health plans (PAHPs), as 

well as 55 State Medicaid Agencies. We 

also expect a variety of other 

organizations to review (for example, 

consumer advocacy groups, major 

PBMs). We expect that each 

organization will designate one person 

to review the rule. A reasonable 

maximal number is 2,000 total 

reviewers. We note that other 

assumptions are possible. 

Using the BLS wage information for 

medical and health service managers 

(code 11–9111), we estimate that the 

cost of reviewing this proposed rule is 

$106.42 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 19 hours for each 

person to review this proposed rule. For 

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estimated cost is therefore $2,022 (19 

hours × $106.42). Therefore, we estimate 

that the maximum total cost of 

reviewing this proposed rule is $4.04 

million ($2,022 × 2,000 reviewers). 

However, we expect that many 

reviewers, for example pharmaceutical 

companies and PBMs, will not review 

the entire rule but just the sections that 

are relevant to them. We expect that on 

average (with fluctuations) 10 percent of 

the rule will be reviewed by an 

individual reviewer; we therefore 

estimate the total cost of reviewing to be 

$0.4 million. 

Note that this analysis assumes one 

reader per contract. Some alternatives 

include 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 argument for 

this is that a parent organization might 

have local reviewers assessing potential 

region-specific effects from this 

proposed rule. 

C. 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 proposed a wide range of policies 

in the proposed rule. These policies 

would codify, modify, and update 

current guidance governing MA 

organization bid requirements. 

This rule has several affected 

stakeholders. They include: (1) MA 

organizations such as HMOs, local and 

regional PPOs, MSAs, PFFS and Part D 

sponsors, PACE plans, and Stand-Alone 

Part D plans (PDP) (2) providers, 

including institutional providers, 

outpatient providers, clinical 

laboratories, and pharmacies; and (3) 

enrollees. Some descriptive data on 

these stakeholders are as follows: 

• Pharmacies and Drug Stores, NAICS 

456110, have a $37.5 million threshold 

for ‘‘small size’’ with 88 percent of 

pharmacies, those with under 20 

employees, considered small. 

• Direct Health and Medical 

Insurance Carriers, NAICS 524114, have 

a $47 million threshold for ‘‘small size,’’ 

with 75 percent of insurers having 

under 500 employees meeting the 

definition of small business. Several 

Medicare Advantage plans (about 30 to 

-40 percent) are not-for-profit resulting 

in a ‘‘small entity’’ status. 

• Ambulatory Health Care Services, 

NAICS 621, including about 2 dozen 

subspecialties, including Physician 

Offices, Dentists, Optometrists, Dialysis 

Centers, Medical Laboratories, 

Diagnostic Imaging Centers, have a 

threshold ranging from $8 to $35 

million (Dialysis Centers, NAICS 

621492, have a $47 million threshold). 

Almost all firms are big, and this also 

applies to sub-specialties. For example, 

for Physician Offices, NAICS 621111, 

receipts for offices with under 9 

employees typically exceed $34 million. 

• Hospitals, NAICS 622, including 

General Medical and Surgical Hospitals 

(NAICS 622110), Psychiatric and 

Substance Abuse Hospitals (NAICS 

622210), and Specialty Hospitals 

(NAICS 622310) have a $47 million 

threshold for small size, with half of the 

hospitals (those with between 20–500 

employees) considered small. 

• Skilled Nursing Facilities (SNFs), 

NAICS 623110, have a $34 million 

threshold for small size, with half of the 

SNFs (those with under 100 employees) 

considered small. 

We are certifying that this rule will 

not have a significant economic impact 

on a substantial number of small 

entities. The RFA does not define the 

terms ‘‘significant economic impact’’ or 

‘‘substantial number.’’ The Small 

Business Administration (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’’ impact to be 3 

to 5 percent or more of the affected 

entities’ costs or revenues. To explain 

our position, we explain certain 

operational aspects of the Medicare 

program. 

Each year, MA organizations, submit 

a bid for each plan for furnishing Part 

A and B (and sometimes D) benefits and 

the entire bid amount is paid by the 

government through the Medicare Trust 

Fund to the plan 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 a small percentage 

of plans bid above the benchmark, 

whereby enrollees pay a basic premium, 

thus this percentage of plans is not 

‘‘significant’’ as defined by the RFA and 

as justified in this section of this rule). 

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 negotiate 

with. 

MA plans can also offer enhanced 

benefits, that is, benefits not covered 

under Traditional Medicare. These 

enhanced benefits are paid for through 

enrollee premiums, rebates or a 

combination. Under the statutory 

payment formula, if the plan bid 

submitted by an MA organization for 

furnishing Part A and B benefits is 

lower than the administratively set 

benchmark, the government pays a 

portion of the difference to the plan in 

the form of a rebate. The rebate must be 

used to provide supplemental benefits 

(that is, benefits not covered under 

Traditional Medicare) and/or to lower 

beneficiary 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 lowincome 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 a variety 

of government funding and in some 

cases by enrollee premiums. As a result, 

MA plans, Part D plans, Prescription 

Drug Plans, and PACE plans 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. 

Small entities that must comply with 

MA regulations, such as those in this 

proposed rule, are expected to include 

the costs of compliance in their bids, 

thus avoiding additional burden, since 

the cost of complying with any 

proposed rule is funded by payments 

from the government and, if applicable, 

enrollee premiums. 

For Direct Health and Medical 

Insurance Carriers, NAICS 524114, 

plans estimate their costs for the 

upcoming year and submit bids and 

proposed plan benefit packages. Upon 

approval, the plan commits to providing 

the proposed benefits, and CMS 

commits to paying the plan either (1) 

the full amount of the bid, if the bid is 

below the benchmark, which is a ceiling 


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331We request comment—especially data or other 

quantitative evidence—on costs, benefits and 

transfers attributable to the provisions of this 

proposed rule. 

on bid payments annually calculated 

from Traditional Medicare data; or (2) 

the benchmark, if the bid amount is 

greater than the benchmark. 

Theoretically, there is additional 

burden if plans bid above the 

benchmark. However, consistent with 

the RFA, the number of these plans is 

not substantial. Historically, only 2 

percent of plans bid above the 

benchmark, and they contain roughly 1 

percent of all plan enrollees. Since the 

HHS criterion for a ‘‘substantial’’ 

number of small entities is 3 to 5 

percent, the number of plans bidding 

above the benchmark is not substantial. 

The preceding analysis shows that 

meeting the direct cost of this proposed 

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 above, 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 Medicare Advantage 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 

and/or lower beneficiary Part B or Part 

D premiums. If the plan’s bid exceeds 

the administratively set benchmark, the 

beneficiary pays the difference in the 

form of a basic premium. However, as 

also noted previously, the number of 

MA plans bidding above the benchmark 

to whom this burden applies does not 

meet the RFA criteria of a significant 

number of plans. If the provisions of 

this proposed rule were to cause bids to 

increase and if the benchmark remains 

unchanged or increases by less than the 

bid does, the result could be a reduced 

rebate. Plans have different ways to 

address this in the short-term, such as 

reducing administrative costs, 

modifying benefit structures, and/or 

adjusting profit margins. These 

decisions may be driven by market 

forces. Part of the challenge in 

pinpointing the indirect effects is that 

there are many other factors combining 

with the effects of this proposed rule, 

making it effectively impossible to 

determine whether a particular policy 

had a long-term effect on bids, 

administrative costs, margins, or 

supplemental benefits. Notwithstanding 

the foregoing, we have requested 

comment on the assessment of this 

outcome in association with this 

proposed rule. 

We next examine in detail each of the 

other stakeholders and explain how 

they can bear cost. Each of the following 

are providers (inpatient, outpatient, or 

pharmacy) that furnish plan-covered 

services to plan enrollees for: (1) 

Pharmacies and Drug Stores, NAICS 

446110; (2) Ambulatory Health Care 

Services, NAICS 621, including about 2 

dozen sub-specialties, including 

Physician Offices, Dentists, 

Optometrists, Dialysis Centers, Medical 

Laboratories, Diagnostic Imaging 

Centers, and Dialysis Centers, NAICD 

621492; (3) Hospitals, NAICS 622, 

including General Medical and Surgical 

Hospitals, Psychiatric and Substance 

Abuse Hospitals, and Specialty 

Hospitals; and (4) SNFs, NAICS 623110. 

If these providers are contracted with 

the plan, their aggregate payment for 

services is the sum of the enrollee cost 

sharing and plan payments. 

The rules for non-contracted 

providers servicing plan enrollees 

depends on the plan type involved. 

Non-contracted providers in both MA 

and MA PD plans are not expected to 

incur burden from a final rule because 

the regulations (42 CFR 422.214 and 

sections 1852(k)(1) and 1866(a)(1)(O) of 

the Act) require they be paid at least the 

FFS Rate. PACE must provide only 

contracted providers to its participants 

(42 CFR 460.70(a)). Similarly noncontracted pharmacies are a sporadic 

issue in stand-alone drug plans which 

are encouraged to limit out of network 

access to those situations when it is 

required (42 CFR 423.124). PACE plan 

participants must obtain services from 

the PACE organization or its contracted 

providers (42 CFR 460.70(a)). 

Consequently, non-contracted providers 

have no additional cost burden above 

the already existing burden in 

Traditional Medicare. 

D. Anticipated Effects 

Many provisions of this proposed rule 

have negligible impact either because 

they are technical provisions, 

clarifications, or provisions that codify 

existing guidance. Other provisions 

have an impact that cannot be 

quantified.331 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 VI. of this proposed rule and in 

this RIA. Where appropriate, when a 

group of provisions have both 

paperwork and non-paperwork impact, 

this RIA cross-references impacts from 

section VI. of this proposed rule in order 

to arrive at the total impact. The 

following table 27 provides a summary 

of the estimated transfers and costs 

associated with the various provisions 

in this proposed rule over a 10-year 

period. Further detail is provided in 

later in this RIA. 

BILLING CODE 4120–01–P 


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BILLING CODE 4120–01–C 


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Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 99517 

332https://www.cbo.gov/system/files/2022-09/ 

PL117-169_9-7-22.pdf 

333https://www.cms.gov/inflation-reduction-actand-medicare/medicare-drug-price-negotiation. 

1. Effects of Coverage of Adult Vaccines 

Recommended by the Advisory 

Committee on Immunization Practices 

under Medicare Part D (§§ 423.100 and 

423.120) 

This proposal would implement 

section 11401 of the IRA which amends 

section 1860D–2 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 cost-sharing for, an adult 

vaccine recommended by the Advisory 

Committee on Immunization Practices 

(ACIP) covered under Part D. 

The cost-sharing limits for ACIPrecommended adult vaccines outlined 

in this proposed rule have been in place 

since CMS implemented the limits in 

2023 through program instruction 

authority. We have annually reviewed 

cost-sharing in plan benefit package 

submissions and believe our proposed 

codification of these requirements 

should have minimal impact on Part D 

sponsors and beneficiaries. All Part D 

enrollees have had zero cost sharing for 

ACIP-recommended adult vaccines 

since 2023. 

Shortly after the IRA was enacted, 

CBO scored the $0 cost-sharing 

requirement for ACIP-recommended 

adult vaccines as a Federal cost of $4.4 

billion from FY 2022 to FY 2031 and, 

therefore, the estimates are not a result 

of this rule.332

2. Effects of Appropriate Cost-Sharing 

for Covered Insulin Products under 

Medicare Part D (§§ 423.100 and 

423.120) 

This proposal would implement 

section 11406 of the IRA, which amends 

section 1860D–2 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 1-month 

supply of each covered insulin product 

must not exceed the statutorily defined 

‘‘applicable copayment amount’’ for all 

enrollees. The applicable copayment 

amount for 2023, 2024, and 2025 was 

$35. For 2026 and each subsequent year, 

in accordance with the statute, we are 

proposing that, with respect to a 

covered insulin product covered under 

a PDP or an MA–PD plan prior to an 

enrollee reaching the annual out-ofpocket threshold, the ‘‘covered insulin 

product applicable cost-sharing 

amount’’ is the lesser of— 

• $35; 

• An amount equal to 25 percent of 

the maximum fair price established for 

the covered insulin product in 

accordance with Part E of subchapter XI; 

or 

• An amount equal to 25 percent of 

the negotiated price, as defined in 

§ 423.100, of the covered insulin 

product under the PDP or MA–PD plan. 

The requirement to provide enrollees 

with an applicable copayment amount 

equal to the lesser of $35, 25 percent of 

the MFP, or 25 percent of the negotiated 

price, has not yet been implemented. As 

described in Part E of subchapter XI of 

the Act, the Secretary must establish a 

Drug Price Negotiation Program and 

negotiate MFPs for selected drugs that 

will go into effect beginning in initial 

price applicability year (IPAY) 2026. 

The selected drug list for IPAY 2026 

includes insulin products that will be 

subject to the cost-sharing requirements 

outlined in this proposal.333 The 

selected drug list under the Drug Price 

Negotiation Program in future years may 

also include additional insulin 

products. As defined in § 423.100, the 

negotiated price is the price for a 

covered Part D drug that 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. A 

negotiated price must meet all of the 

following: (1) includes all price 

concessions from network pharmacies 

or other network providers; (2) includes 

any dispensing fees; and (3) excludes 

additional contingent amounts, such as 

incentive fees, if these amounts increase 

prices. Finally, a negotiated price is 

reduced by non-pharmacy price 

concessions and other direct or indirect 

remuneration that the Part D sponsor 

passes through to Part D enrollees at the 

point of sale. 

Beginning in 2026, the applicable 

copayment amount for a 1-month 

supply of a covered insulin product will 

depend on which of the following is the 

lowest amount: $35, an amount equal to 

25 percent of the insulin product’s MFP 

(if the insulin product is a selected 

drug), or an amount equal to 25 percent 

of the negotiated price of the insulin 

product. If 25 percent of the MFP or 25 

percent of the negotiated price is not 

less than $35, the impact on Part D 

sponsors will be minimal as this $35 

applicable copayment amount has been 

in place since 2023. However, if either 

25 percent of the MFP or 25 percent of 

the negotiated price is less than $35, the 

impact on Part D sponsors will depend 

on (1) the magnitude of difference 

between 25 percent of the MFP or 25 

percent of the negotiated price and $35 

and (2) the number of beneficiaries 

affected. In other words, the greater the 

difference in 25 percent of the MFP or 

25 percent of the negotiated price and 

$35, the greater the impact on Part D 

sponsors. 

We estimated the impact of the 

change in Part D insulin coverage for 

years 2026 through 2035 using a claimlevel simulation model under the 

defined standard benefit before and after 

the application of the change. As the 

beneficiary cost-sharing is reduced, the 

net effect is an increase in benefit costs. 

Additionally, because of the premium 

stabilization provisions of the IRA, 

beneficiary premiums are not impacted 

until 2031. In 2031 and subsequent 

years, we expect beneficiaries will see 

small increase in premiums to account 

for the richer benefit structure. Overall, 

we expect Federal costs to increase by 

approximately $1.2 billion from 2026 to 

2035. 


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99518 Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 

334Lilly. Lilly’s tirzepatide reduced obstructive 

sleep apnea (OSA) severity, with up to 51.5% of 

participants meeting the criteria for disease 

resolution. June 21, 2024. Available from: https:// 

investor.lilly.com/news-releases/news-releasedetails/lillys-tirzepatide-reduced-obstructive-sleepapnea-osa-severity. 

3. Effects of Part D Coverage of AntiObesity Medications (AOMs) (§ 423.100) 

and Application to the Medicaid 

Program 

We are proposing to reinterpret the 

reference to ‘‘[a]gents when used for 

. . . weight loss’’ in section 

1927(d)(2)(A) of the Act to not include 

drugs used for weight loss or chronic 

weight management for the treatment of 

obesity to reflect changes in the 

prevailing medical consensus towards 

recognizing obesity as a disease. As a 

result of this proposed reinterpretation, 

AOMs used for weight loss or chronic 

weight management for the treatment of 

obesity would not be excluded from the 

definition of Part D drug at § 423.100, 

and state Medicaid programs would 

likewise not be permitted to exclude 

AOMs used for weight loss or chronic 

weight management for the treatment of 

obesity from Medicaid coverage 

pursuant to section 1927(d)(2)(A) of the 

Act. 

As we stated in section III.A.1. of this 

proposed rule, while we refer to AOMs 

generally throughout our proposal and 

have included discussion on specific 

classes of AOMs, this proposal is not 

limited to particular drugs or drug 

classes. Older AOMs are significantly 

less costly than newer AOMs in the 

glucagon-like peptide-1 (GLP–1) and 

glucose-dependent insulinotropic 

polypeptide (GIP)/GLP–1 receptor 

agonist classes. AOMs in the GLP–1 and 

GIP/GLP–1 receptor agonist classes have 

emerged as preferred therapies over 

older AOMs and are therefore likely to 

be the driver of overall costs related to 

this proposal. 

The impact of our proposed 

reinterpretation must be considered in 

the context of newly approved 

indications for AOMs that are medically 

accepted indications (MAIs) that are 

coverable under current policy, which 

will increase their coverage under Part 

D regardless of our proposal. 

Additionally, there is a robust pipeline 

for these drugs, which may impact 

pricing and utilization in the future. 

It is also possible that the changes in 

Part D and Medicaid coverage of AOMs 

as a result of our proposal could prompt 

changes in private health plan coverage 

outside of Medicare and Medicaid. This 

could impact premiums for those plans, 

including Affordable Care Act 

marketplace plans, but these impacts are 

not quantifiable without data on 

changes for the private health insurance 

market in response to this proposal. We 

request comment on the potential 

impact of our proposal on the private 

employer insurance market and the 

ACA marketplace. 

Furthermore, for the purposes of this 

impact analysis, when we refer to AOMs 

and their respective FDA-approved 

indications, we are generally referring to 

a drug’s active ingredient(s) and not 

particular formulations or brands. 

Therefore, for the purposes of our 

estimates, if a beneficiary with obesity 

has type 2 diabetes, we assume that 

under current policy the beneficiary 

could obtain coverage for an AOM that 

is FDA-approved for glycemic control in 

type 2 diabetes, but not an AOM that is 

FDA-approved only for weight loss or 

chronic weight management. If the two 

drugs have the same active ingredient, 

then the beneficiary with obesity and 

type 2 diabetes is able to obtain 

coverage for the AOM because under 

current policy they can obtain coverage 

for the drug that is approved for 

glycemic control in type 2 diabetes. 

a. Medicare Impacts 

Currently, Part D enrollees can obtain 

coverage for AOMs only when 

prescribed for an FDA-approved 

indication or for a use that is supported 

by CMS-approved compendia for a 

condition other than weight loss. For 

example, some AOMs are FDAapproved for use in type 2 diabetes and 

cardiovascular risk reduction in 

individuals with established 

cardiovascular disease and either 

obesity or overweight. Existing AOMs 

may potentially receive FDA approval 

for new indications in the future. At 

least one manufacturer has conducted a 

study on sleep apnea that was published 

and met its primary endpoint of 

reducing the severity of sleep apnea for 

the treatment of obesity and is seeking 

regulatory approval.334 Therefore, for 

the purposes of these estimates, we 

consider AOMs to be already coverable 

under current Part D policy for 

individuals with obesity and type 2 

diabetes, established cardiovascular 

disease, or sleep apnea. Our proposal 

would extend AOM coverage to 

Medicare beneficiaries with obesity who 

do not have a condition that is coverable 

by Part D under the current policy. 

We used Medicare claims data from 

2022 to identify Part D enrollees with 

obesity. This was narrowed from those 

with obesity to those with obesity but 

without other conditions (specifically, 

type 2 diabetes, cardiovascular disease, 

or sleep apnea) for which we considered 

AOMs to be coverable under current 

Part D policy for the purposes of these 

estimates. We estimate that 

approximately 7 percent of the Part D 

population would become newly able to 

obtain coverage for these drugs if this 

proposal is finalized. We assumed a 1 

percent annual growth rate. As shown 

in table 29, the majority of Medicare 

beneficiaries with obesity have a 

comorbid condition that we consider 

coverable under current Part D policy 

for the purposes of our estimates. 


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335Rodriguez PJ, Goodwin Cartwright BM, Gratzl 

S, et al. Semaglutide vs Tirzepatide for Weight Loss 

in Adults With Overweight or Obesity. JAMA Intern 

Med. 2024;184(9):1056–1064. doi:10.1001/ 

jamainternmed.2024.2525. 336 Ippolito B, Levy JF. Expanding Medicare 

Coverage Of Anti-Obesity Medicines Could Increase 

Annual Spending By $3.1 Billion To $6.1 Billion. 

Health Aff (Millwood). 2024 Sep;43(9):1254–1262. 

doi: 10.1377/hlthaff.2024.00356. 

Next, we estimated the proportion of 

this population expected to utilize 

AOMs annually. This included the 

effect of treatment discontinuation to 

refine the estimated duration of 

treatment per year. Taking into account 

published discontinuation rates of 

AOMs in the GLP–1 agonist class,335 our 

estimates assume that 52.5 percent of 

those who start treatment with an AOM 

will discontinue treatment after 2 

months. This was combined with an 

assumption that 10 percent of the 

population newly able to obtain AOM 

coverage would initiate treatment with 

an AOM, growing by 0.3 percent each 

year, to determine the total amount of 

Part D utilization per year. We assumed 

a 10 percent rate of initiation of therapy 

in the population newly able to obtain 

AOM coverage since this was an 

approximate mean of the range used in 

a published modeling study.336

The cost per utilization was based on 

2024 prescription drug event (PDE) data 

for the drugs in question. These costs 

were trended forward to each projection 

year and adjusted for estimated 

manufacturer rebates. To account for 

changes in the AOM drug development 

pipeline, the estimates assumed that 

there would be a gradual shift from 

older to newer products. 

The resulting estimated utilization 

cost was used to modify the model for 

projecting Part D benefit costs to 

determine net Federal costs per year. As 

shown in table 30., we estimate an 

increase of $24.8 billion in trust fund 

expenditures over a 10-year period. As 

discussed in section III.A.4. of this 

proposed rule we are soliciting 

comment on an appropriate 

applicability date of the new 

interpretation should our proposal be 

finalized. Therefore, for the purposes of 

this analysis, we report annual costs 

with a placeholder for each year starting 

with the first year the reinterpretation is 

applicable in Medicare Part D. This 

analysis would be updated in any final 

rule for this policy to reflect the 

determined effective date of a final rule 

and the applicability date for Part D 

plans. There is no expected premium 

impact until 2031 due to the premium 

stabilization provisions in section 11201 

of the IRA, so the premium offsets 

shown in table 30. reflect the earliest 

such offsets would be factored into the 

analysis (assuming 2026 notionally as 

year 1 of implementation). The 

estimates do not include medical cost 

savings for this proposal, as the 

magnitude and timing of any potential 

savings is highly uncertain. While we 

expect that there could be offsetting 

medical savings due to treatment of 

obesity, those savings will be much 

slower to emerge, such that in the nearterm, the costs will have a larger impact 

on the overall picture of the estimated 

financial impact of this proposal. These 

estimates also assume that beneficiaries 

for whom these drugs are prescribed for 

a coverable indication under current 

Part D policy will continue to have 

access regardless of whether this 

provision is finalized as proposed; 

therefore, the costs associated with such 

use are not included in our estimates for 

this proposal. Our financial estimates 

include the population dually eligible 

for Medicare and Medicaid. As 

discussed in section III.A.3. of this 

proposed rule, should the proposal be 

finalized, AOM costs for these 

individuals would be borne by Medicare 

when the reinterpretation of section 

1927(d)(2) to no longer exclude AOMs 

from the definition of Part D drug when 

used for weight loss or chronic weight 

management for the treatment of obesity 

becomes applicable under Part D. For 

dually eligible individuals, Medicaid 

provides drug coverage for covered 

outpatient drugs that are Part D 

excluded drugs. As such, state Medicaid 

programs would bear the costs of AOMs 

for dually eligible individuals if the 

applicable date of coverage under the 

Medicaid program is earlier than the 

applicable date of coverage under the 

Medicare program. 

It is possible that our estimates 

significantly underestimate the impact 

of our proposal. These estimates are 

sensitive to the utilization rate, which 

has a high degree of uncertainty. We 

factored in an estimated discontinuation 


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99520 Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 

337 Gleason PP, Urick BY, Marshall LZ, 

Friedlander N, Qiu Y, Leslie RS. Real-world 

persistence and adherence to glucagon-like peptide1 receptor agonists among obese commercially 

insured adults without diabetes. J Manag Care Spec 

Pharm. 2024 Aug;30(8):860–867. doi: 10.18553/ 

jmcp.2024.23332. 

338Cohen, JP. Study Shows 85% Of Patients 

Discontinue GLP-1s For Weight loss After 2 Years. 

Forbes. July 11, 2024. Available from: https://

www.forbes.com/sites/joshuacohen/2024/07/11/ 

study-shows-85-of-patients-discontinue-glp-1s-forweight-loss-after-2-years/. 

339 Do D, Lee T, Peasah SK, Good CB, Inneh A, 

Patel U. GLP-1 Receptor Agonist Discontinuation 

Among Patients With Obesity and/or Type 2 

Diabetes. JAMA Netw Open. 2024 May 

1;7(5):e2413172. doi: 10.1001/ 

jamanetworkopen.2024.13172. 

340Stierman, B., et al. National Health and 

Nutrition Examination Survey 2017—March 2020 

Prepandemic Data Files—Development of Files and 

Prevalence Estimates for Selected Health Outcomes. 

2021. Available from https://stacks.cdc.gov/view/ 

cdc/106273. 

341https://www2.ccwdata.org/web/guest/ 

condition-categories-chronic and https://

www2.ccwdata.org/web/guest/condition-categoriesother. 

342Lincoff AM, Brown-Frandsen K, Colhoun HM, 

et al. Semaglutide and Cardiovascular Outcomes in 

Obesity without Diabetes. N Engl J Med. 2023 Dec 

14;389(24):2221–2232. doi: 10.1056/ 

NEJMoa2307563. 

343Under the Medicaid program, section 

1902(a)(54) of the Act provides states with the 

option of providing coverage of prescribed drugs as 

described in section 1902(a)(12) of the Act. All 

states have elected to do so. 

344 Section 1927 of the Act governs the Medicaid 

Drug Rebate Program and payment for covered 

outpatient drugs. In general, for payment to be 

made available for covered outpatient drugs, 

manufacturers must enter into a national drug 

rebate agreement as set forth in Section 1927(a) of 

the Act. Pursuant to that agreement, manufacturers 

must pay rebates to states which are determined 

according to a formula set forth in section 1927(c) 

of the Act. In addition, states may have authority 

to enter into supplemental rebate agreements with 

the manufacturers through which states may obtain 

additional rebates. 

345 Mylona EK, Benitez G, Shehadeh F, Fleury E, 

Mylonakis SC, Kalligeros M, Mylonakis E. The 

association of obesity with health insurance 

coverage and demographic characteristics: a 

statewide cross-sectional study. Medicine 

(Baltimore). 2020 Jul 2;99(27):e21016. doi: 10.1097/ 

MD.0000000000021016. 

346 https://www.niddk.nih.gov/healthinformation/health-statistics/overweight-obesity. 

rate based on published literature, but 

discontinuation rates and duration of 

therapy before treatment is discontinued 

vary in the literature.337 Our assumption 

may not fully reflect patients who 

discontinue but subsequently resume 

treatment with AOMs. Discontinuation 

rates vary across studies and are 

influenced by a variety of factors 

including cost, adverse effects, or 

successful weight loss.338 339 Some 

factors contributing to discontinuation 

may be mitigated, for example, if AOMs 

approved in the future have more 

favorable tolerability profiles. Our 

estimates rely on available claims data 

and therefore a limitation in our 

estimates is whether a diagnosis of 

obesity was reliably reported. Available 

National Health and Nutrition 

Examination Survey (NHANES) data 

from 2017 to March 2020 indicates that 

the prevalence of obesity in the U.S. 

population age 60 and older was 41.5 

percent,340 which is much higher than 

the 25 percent prevalence observed in 

Medicare claims data. Additionally, the 

definition of cardiovascular disease that 

we applied to perform the analysis was 

based on CMS’s pre-determined chronic 

condition algorithms for Ischemic Heart 

Disease, Stroke/Transient Ischemic 

Attack, and Peripheral Vascular Disease 

(PVD).341 This definition is broader than 

the definition of cardiovascular disease 

in a recent clinical trial investigating 

major adverse cardiovascular events in 

adults with established cardiovascular 

disease and either obesity or 

overweight, in which established 

cardiovascular disease was defined as 

prior myocardial infarction, prior stroke, 

or peripheral arterial disease.342

Therefore, our calculation may 

overestimate the proportion of 

beneficiaries with cardiovascular 

disease for whom AOMs are already 

coverable under current policy and, 

correspondingly, underestimates the 

number of beneficiaries who will be 

newly able to obtain AOM coverage 

under the proposed policy. Finally, for 

the purposes of our financial estimates, 

we included sleep apnea as a coverable 

indication under current policy since 

this new indication for an approved 

AOM has been submitted to FDA for 

approval. This assumption increases the 

number of Part D enrollees who we 

considered to already have a coverable 

indication under current policy. Part D 

enrollees with obesity and sleep apnea 

only (that is, enrollees with sleep apnea 

who do not have type 2 diabetes or 

cardiovascular disease as a coverable 

indication) would be considered part of 

the population newly able to obtain 

AOM coverage until sleep apnea meets 

the definition of an MAI coverable 

under current Part D policy. 

We analyzed the population of Part D 

enrollees with obesity to determine if 

there were disparities between the 

population with comorbid conditions 

that are coverable MAIs under the 

current Part D policy and the population 

without such comorbid conditions for 

whom AOMs would become coverable 

under Part D if our proposal is finalized. 

We examined beneficiary characteristics 

to determine if our proposal would 

disproportionately affect underserved 

racial and ethnic minority groups, rural 

communities, individuals with lower 

incomes, or other disadvantaged groups. 

The population of Medicare 

beneficiaries with obesity but without 

type 2 diabetes, cardiovascular disease, 

or sleep apnea was more likely to be 

female (68 percent vs. 57 percent, 

respectively) or have a disability (22 

percent vs. 18 percent, respectively) 

than the population of Medicare 

beneficiaries with obesity who had one 

or more of those conditions. 

b. Medicaid Impacts 

Currently, state Medicaid programs 

have discretion to cover the drugs or 

classes of drugs listed in section 

1927(d)(2) of the Act, including ‘‘agents 

used for . . . weight loss . . .’’ As 

discussed in section III.A.3. of this 

proposed rule, should our proposal be 

finalized as proposed, state Medicaid 

programs providing coverage of 

drugs 343 would be required to provide 

coverage of AOMs under Medicaid 

when used for weight loss or chronic 

weight management for treatment of 

obesity. That is, state Medicaid 

programs would no longer be permitted 

to consider AOMs to be excludable 

agents under section 1927(d)(2)(A) of 

the Act when they are used for weight 

loss or chronic weight management for 

treatment of obesity. States do have the 

discretion to utilize preferred drug lists 

and implement prior authorization 

processes to establish certain limitations 

on the coverage of these drugs as long 

as such practices are consistent with the 

requirements of section 1927(d) of the 

Act to ensure appropriate utilization. 

We estimate financial impact to the 

Federal Government and state Medicaid 

programs if this proposal is finalized. 

For Medicaid, estimates were 

developed first by determining the 

current amount of spending and claims 

on AOMs, including GLP–1 and GIP/ 

GLP–1 agonists used for the treatment of 

other indications (for example, type 2 

diabetes or cardiovascular disease). 

Gross spending on these drugs in 

Medicaid was $7.5 billion in 2023 based 

on analysis of Transformed Medicaid 

Statistical Information System (T–MSIS) 

data. According to Medicaid Drug 

Rebate Program data, net spending was 

significantly less, $2.5 billion in 2023, 

due to the significant rebates Medicaid 

collects on these drugs.344

There is limited data on the number 

of Medicaid enrollees with obesity. One 

study found that 44 percent of adult 

Medicaid enrollees in Rhode Island, for 

example, had obesity in 2017 to 2018.345

According to data from the NHANES, 

42.4 percent of all adults in the United 

States had obesity in 2017 to 2018.346

For the purposes of our financial 


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estimates, we assumed that 45 percent 

of adult Medicaid enrollees have 

obesity. We also assumed the Medicaid 

population with obesity had the same 

proportion of other conditions which, 

for the purposes of our estimates, we 

considered AOMs to be already 

coverable (type 2 diabetes, 

cardiovascular disease, or sleep apnea), 

as the Medicare population. Therefore, 

should our proposal be finalized, 

approximately 12 percent of the adult 

Medicaid population would be newly 

able to obtain coverage for AOMs. 

Twelve percent was derived by taking 

26 percent (Medicaid enrollees with 

obesity and at least one coverable 

condition) of 45 percent (proportion of 

Medicaid enrollees with obesity). 

To estimate the financial impact of 

our proposal, we developed 

assumptions on how much expanding 

coverage of these drugs would increase 

usage and spending. Fifteen states 

already cover AOMs for weight loss (in 

addition to other indications). We 

compared the number of AOM claims 

per enrollee in states covering AOMs for 

weight loss to the number in states that 

do not and found that the number of 

AOM claims per enrollee was 18 

percent higher in states that cover 

AOMs for weight loss. Since some 

AOMs are FDA-approved for use in 

pediatric populations, these claims 

include current pediatric use. We also 

assumed that expanding AOM coverage 

to the 12 percent of Medicaid enrollees 

with obesity and no other conditions 

would also expand coverage to the 33 

percent of Medicaid enrollees with 

obesity and at least one other condition 

(45 percent of Medicaid enrollees with 

obesity minus 12 percent of Medicaid 

enrollees with obesity and no coverable 

conditions) due to general increased 

awareness of AOM coverage in the 

Medicaid program. That is, we 

anticipated that there could be an 

increase in prescribing of these drugs for 

weight loss in Medicaid enrollees with 

obesity and other coverable conditions 

when a prescriber may not have 

otherwise prescribed the drugs for these 

individuals, despite coverage already 

being available. We assumed that use of 

these drugs would increase 30 percent 

because of the proposal—this could also 

include expanded access among 

Medicaid enrollees in states already 

covering these drugs for weight loss. 

Medicaid costs are typically split 

between the Federal Government and 

the states. The Federal Medical 

Assistance Percentage (FMAP) can vary 

by state, by enrollment group, and by 

service. We arrived at an estimated the 

Federal share of 72 percent based on the 

average Federal share for prescription 

drugs and rebates. This Federal share is 

higher than the regular average FMAP in 

large part because this includes adults 

enrolled in Medicaid due to the 

Medicaid expansion under the 

Affordable Care Act, for whom the 

Federal share is 90 percent. As shown 

in table 31, we estimate that spending 

net of rebates on these drugs would 

increase by $14.8 billion over 10 years, 

with the Federal Government paying 

$11.0 billion and states paying $3.8 

billion. As discussed in section III.A.4. 

of this proposed rule we are soliciting 

comment on an appropriate 

applicability date of the new 

interpretation should our proposal be 

finalized. Therefore, for the purposes of 

this analysis, we report annual costs 

with a placeholder for each year starting 

with the first year the new 

interpretation is applicable in Medicaid. 

This analysis would be updated in any 

final rule for this policy to reflect the 

determined effective date of a final rule 

and the applicability date for state 

Medicaid programs. 

Costs may be significantly higher or 

lower than projected. Our estimates 

relied on assumptions about rates of 

obesity and other conditions in the 

Medicaid population since T–MSIS 

does not contain complete diagnosislevel data. It is possible that a larger 

proportion of the Medicaid population 

has obesity without other conditions 

since the Medicaid population is 

younger than the Medicare population 

and therefore may not yet have 

developed other conditions that are 

coverable under the current policy. The 

AOM utilization in states already 

covering AOMs for weight loss may 

include some utilization by Medicaid 

enrollees with overweight with weightrelated comorbidities, if states permit 

such coverage. We were unable to 

determine if a claim was used for weight 

loss for treatment of obesity or in 

individuals with overweight with 

weight-related comorbidities. Using 

AOM utilization data from states that 

have not expanded AOM coverage 

approximates the baseline level of AOM 

coverage for conditions other than 

obesity. There is some additional 

uncertainty in the baseline costs under 

current policy given the limited data on 

the current state-by-state coverage rules 

and utilization of AOMs for other 

conditions. Spending on AOMs is 

already increasing significantly due to 

use for treatment of other conditions, 

and it is difficult to predict how many 

people may use these drugs in the 

future. States may take steps to limit use 

of these drugs even if they are covered 

by imposing utilization management 

restrictions or seek to lower the net 

price of these drugs by negotiating 

supplemental rebates by using preferred 

drug lists. We have not considered the 

impact of the use of AOMs on other 

medical costs. 

4. Part D Medication Therapy 

Management (MTM) Program Targeting 

Requirements (§ 423.153) 

We propose modifying the regulatory 

text at § 423.153(d)(2)(iii)(A) identifying 

‘‘Alzheimer’s disease’’ as a core chronic 

disease to ‘‘Alzheimer’s disease and 

dementia,’’ which would expand the 

targeting criteria to include Alzheimer’s 

disease and all other causes of 

dementias. We anticipate that this 

change would allow beneficiaries with 

other causes of dementia who could 

potentially benefit from MTM services 

to be targeted for MTM enrollment. 

We estimate that this proposal would 

increase the number and percentage of 

Part D enrollees eligible for MTM 

services from 7.9 million (14.5 percent) 

to 8 million (14.6 percent). Although the 

increase in MTM program enrollment is 


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347McGinty, Beth. ‘‘Medicare’s Mental Health 

Coverage: What’s Included, What’s Changed, and 

What Gaps Remain,’’ Commonwealth Fund, Mar. 2, 

2023. Retrieved from: https://

www.commonwealthfund.org/publications/ 

explainer/2023/mar/medicare-mental-healthcoverage-included-changed-gaps-remain. 

348For example, MA plans are not required to 

provide hospice services—a service covered in 

Traditional Medicare. 

349CMS. Contract Summary 2024. Data as of July 

2024. Retrieved from: https://www.cms.gov/ 

research-statistics-data-and-systems/statisticstrends-and-reports/mcradvpartdenroldata/monthly/ 

contract-summary-2024-07. 

350We note that enrollees in Cost Plans can 

access basic benefits out-of-network at cost sharing 

in Traditional Medicare. 

351Cost Plans may not have to adjust their benefit 

designs for all behavioral health service categories 

as these plans are not required to report information 

for all services in the plan benefit package, 

including for inpatient hospital psychiatric 

services. 

estimated to cost $4,414,918 for the 

provision of required MTM services to 

beneficiaries with dementia who 

become eligible for MTM enrollment 

under this proposal, there is uncertainty 

in the estimates of effects of this 

proposal because there may be other 

administrative costs attributable to 

MTM, and MTM program costs are not 

a specific line item that can be easily 

extracted from the bid. Additionally, 

published studies have found that MTM 

services may generate overall medical 

savings, for example, through reduced 

adverse outcomes including reduced 

hospitalizations and readmissions, 

outpatient encounters, or nursing home 

admissions. CMS is unable to generate 

reliable savings estimates from the 

published studies due to limitations in 

potential study design, including the 

lack of a control group and numerous 

intervening variables. The burden 

associated with these proposed changes 

is addressed in section VI. of this 

proposed rule (in the ICR section for 

MTM targeting criteria. 

5. Effects of Ensuring Equitable Access 

to Behavioral Health Benefits Through 

Section 1876 Cost Plan and MA CostSharing Limits (§§ 417.454 and 422.100) 

Traditional Medicare benefits under 

Parts A and B include a wide range of 

mental health and substance use 

disorder services (collectively called 

‘‘behavioral health services’’).347 Per 

section 1876(c)(2)(A) of the Act and 

§§ 422.100 and 422.101, respectively, 

section 1876 Cost Plans (Cost Plans) and 

Medicare Advantage (MA) plans must 

cover the same set of services, subject to 

limited exclusions.348 As discussed in 

section III.M. of this proposed rule, CMS 

believes the affordability of behavioral 

health services is especially crucial for 

MA enrollees as they (1) represent a 

significant proportion of Medicareeligible beneficiaries and (2) pay 

between $7 and $47 more on average in 

in-network cost sharing per visit for one 

or more professional behavioral health 

service categories in comparison to 

beneficiaries in Traditional Medicare (as 

shown in table 32). In addition, while 

enrollment in Cost Plans represents a 

small proportion of all Medicare-eligible 

beneficiaries (approximately 169,000 as 

of July 2024) 349 we believe extending 

this proposal to Cost Plan enrollees is 

appropriate because: (1) CMS wants to 

improve equitable access to behavioral 

health services across all Medicare 

program choices and (2) enrollees in 

these plans pay between $5 and $13 

more on average in in-network cost 

sharing per visit for one or more 

professional behavioral health service 

categories in comparison to 

beneficiaries in Traditional Medicare (as 

shown in table 32).350 To this end, CMS 

is proposing behavioral health costsharing standards in MA and Cost Plans 

that strike a balance between: (1) 

improving the affordability of 

behavioral health services for enrollees 

in a timely manner and (2) minimizing 

disruption to enrollees’ access to care 

and coverage options. 

As part of CMS’s behavioral health 

strategy and to improve the affordability 

of behavioral health services, we 

propose to require—beginning in 

contract year 2026—that in-network cost 

sharing for behavioral health service 

categories be no greater than that in 

Traditional Medicare for Cost Plans and 

MA plans (including employer group 

waiver plans (EGWPs)). The behavioral 

health service categories subject to this 

proposal include mental health 

specialty services, psychiatric services, 

partial hospitalization, intensive 

outpatient program services, inpatient 

hospital psychiatric services (all length 

of stay scenarios), outpatient substance 

use disorder services, and opioid 

treatment program services. We also 

propose some clarifying amendments at 

§§ 417.454 and 422.100, including the 

applicability of the 50% coinsurance (or 

actuarially equivalent copayment) 

standard for Cost Plans. These proposed 

amendments primarily continue current 

policy with minor updates (such as, to 

annually update copayment limits CMS 

sets for Cost Plans based on the most 

recent Medicare FFS data projections). 

If this proposal is finalized, CMS 

would not experience additional burden 

as we could, as needs arise, adjust the 

plan benefit package as part of normal 

business operations. In addition, CMS 

expects this proposal would prompt 

some— 

• Organizations to adjust their plan 

benefit designs,351 primarily to come 

into compliance with this proposal, if: 

(1) any of their contract year 2025 plan 

benefits are not compliant with the 

proposed behavioral health cost-sharing 

standard for contract year 2026 and (2) 

they submit a bid to continue that plan 

offering for contract year 2026; and 

• Enrollees who remain in those 

continuing plans to experience changes 

in cost that will change over time based 

on their health status and service 

utilization (such as, behavioral health 

services or other service categories). 

These potential impacts to 

organizations and enrollees are 

discussed in greater detail in the 

following section. In brief, CMS expects 

that this proposal to make in-network 

cost sharing for behavioral health 

services no greater than that in 

Traditional Medicare will increase 

utilization of these services and thus 

reduce: (1) enrollee disparities in health 

outcomes and health care costs formerly 

arising because of affordability issues 

related to behavioral health care; and (2) 

program costs due to better behavioral 

health disease management, health 

outcomes, and fewer high-cost services 

(such as, emergency room visits for lifethreatening behavioral health condition 

complications). 

a. Potential Impacts From Behavioral 

Health Cost-Sharing Limits No Greater 

Than Traditional Medicare to 

Organizations and Enrollees 

From an aggregate perspective, CMS 

assumes that this proposal will not 

result in: (1) additional out of pocket 

costs for MA enrollees compared to 

beneficiaries in Traditional Medicare; or 

(2) significant losses for MA 

organizations. This is because there is a 

statutory requirement for MA 

organizations to submit bids that are at 

least actuarially equivalent to coverage 

in Traditional Medicare. This statutory 

requirement is operationalized through 

an actuarial equivalence test based on a 

projection of MA cost sharing under 

each plan. At the time that the 

actuarially equivalent cost sharing 

amounts are calculated, the expectation 

is that there will be no costs or savings 

for the policy year in question. As a 

result, the plan will cover—and MA 

enrollees would receive—the same level 

of total benefits on average in each 

contract year prior to and after 

implementation. However, CMS also 

expects lower behavioral health costsharing limits will pose varying 


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individual impacts to MA organizations 

and enrollees that change over time. 

Cost Plans are not required to submit 

a bid that is at least actuarially 

equivalent to coverage in traditional 

Medicare. As a result, if this proposal is 

finalized enrollees in these plans could 

receive a different level of total benefits 

on average after its implementation. 

However, CMS expects this proposal 

will not result in significant additional 

out of pocket costs for Cost Plan 

enrollees because our analysis of cost 

sharing for the applicable professional 

behavioral health service categories 

demonstrates that: (1) most of these 

plans already established cost sharing 

for these services that is equal to or less 

than cost sharing in Traditional 

Medicare (as shown in table 32; and (2) 

plans with cost sharing greater than cost 

sharing in Traditional Medicare should 

not have to vastly change their cost 

sharing designs to come into 

compliance (as shown in table 33). For 

example, as shown in table 33, only 5 

percent of Cost Plans have cost sharing 

greater than Traditional Medicare for 

the ‘‘outpatient substance abuse 

services’’ service category. Of those 

plans, as shown in table 34, the average 

in-network cost sharing is $40, or $10 

more than cost sharing in Traditional 

Medicare. Finally, we also note that 

Cost Plan enrollees may continue to 

receive basic benefits at cost sharing in 

Traditional Medicare by going out-ofnetwork. As such, beneficiary choice 

will continue to act as an incentive for 

Cost Plan organizations to offer 

favorable benefit designs. As a result, 

we believe Cost Plans should not be 

incentivized to either drastically 

increase overall costs for their enrollees 

or leave the market as a direct result of 

this proposal. 

BILLING CODE 4120–01–P 


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BILLING CODE 4120–01–C 

CMS expects in the first applicable 

contract year when lower behavioral 

health cost-sharing limits would apply 

(contract year 2026), MA and Cost Plan 

organizations may or may not have 

increased costs to provide behavioral 

health services. This is because, as 

discussed in section III.M. of this 

proposed rule, plans incorporate 

varying cost sharing arrangements for 

behavioral health services—with 

amounts less than, greater than, or equal 

to cost sharing in Traditional Medicare 

for these services. As a result, 

continuing plans that previously 

established cost sharing for behavioral 

health services at amounts that are equal 

to or less than Traditional Medicare may 

not have any cost impacts as a direct 

result of this proposal. In contrast, for 

organizations that do reduce plan cost 

sharing for one or more behavioral 

health service categories in response to 

this proposal, CMS expects they will 

initially have increased costs to provide 

those behavioral health services. 

However, plan bids must: (1) remain at 

least actuarially equivalent to 

Traditional Medicare if it is an MA plan; 

and (2) satisfy Traditional Medicare 

coverage requirements for both MA and 

Cost Plans. As a result, CMS expects 

that the reduction in cost sharing for 

behavioral health services in contract 

year 2026 will lead organizations to— 

• Predict the impacts that lower cost 

sharing will have on their cost to 

provide behavioral health benefits and 

profit margins (primarily based on planlevel total financial liability to provide 

behavioral health services and actuarial 

expectations of changes in enrollee 

utilization of behavioral health services 

based on the population served) and; 

• Potentially adjust aspects of their 

bid design and allocation of rebate 

dollars (such as changes to cost sharing 

amounts for other service categories, 

premiums, deductibles, or supplemental 

benefits). 

In contract year 2027 and subsequent 

years, organizations may become better 

aware of the cost impact of this proposal 

as potential cost savings from improved 

enrollee behavioral health outcomes 

become more apparent. As a result, as 

part of normal business operations, 

organizations may make additional 

adjustments based on their initial 

experience of actual changes to their 

cost of providing behavioral health 

benefits and profit margins. For 

example, each year organizations may 

adjust case management strategies and 

behavioral health provider contracting 

(and thus their total plan financial 

liability for behavioral health services). 

MA plans have significant plan design 

flexibility and multiple levers they can 

use to inform how they make these 

adjustments and develop bids that 

continue to remain actuarially 

equivalent to Traditional Medicare in 

contract year 2026 and subsequent 

years. CMS expects these types of 

adjustments and implementation 

timeframe would vary between 

organizations and influence how an 

organization chooses to design their 

plan bid(s) in subsequent contract years. 

The specific adjustments 

organizations make in response to this 

proposal would in turn determine the 

varying short- and long-term individual 

financial impacts enrollees would 

experience. Specifically, CMS expects 

enrollees would experience different 

out-of-pocket impacts that change 

annually based on: (1) how 

organizations evolve their plan benefit 

designs; (2) their health conditions and 

utilization of services; and (3) 

enrollment switching patterns, if 

applicable. As an illustrative example, 

in response to this proposal, a 

continuing MA plan for contract year 

2026 may have: (1) reduced cost sharing 

for behavioral health services; and (2) 

increased cost sharing for a few nonbehavioral health benefits. In this 

scenario, enrollees that continue 

enrollment in this plan and utilize (to 

the same extent) the following: 

• Behavioral health services—may 

experience cost savings. 


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352Trivedi AN, Swaminathan S, Mor V. Insurance 

parity and the use of outpatient mental health care 

following a psychiatric hospitalization. JAMA. 2008 

Dec 24;300(24):2879–85. doi: 10.1001/ 

jama.2008.888. PMID: 19109116; PMCID: 

PMC4757896. 

353Cook, Benjamin & Flores, Michael & Zuvekas, 

Samuel & Newhouse, Joseph & Hsu, John & Sonik, 

Rajan & Lee, Esther & Fung, Vicki. (2020). The 

Impact Of Medicare’s Mental Health Cost-Sharing 

Parity On Use Of Mental Health Care Services: An 

assessment of whether Medicare cost-sharing 

reductions for outpatient mental health services 

was associated with changes in mental care visits 

to physicians and psychotropic medication fills. 

Health Affairs. 39. 819–827. 10.1377/ 

hlthaff.2019.01008. 

• Non-behavioral health services that 

have increased cost sharing—may 

experience an increase in costs. 

• Behavioral and non-behavioral 

health services with and without 

changes in cost sharing—may 

experience cost savings, increases, or 

neutral effects depending on how they 

allocate their utilization of these 

services. 

However, the extent to which 

organizations may shift costs to services 

utilized by certain groups of enrollees is 

limited to ensure that beneficiaries— 

regardless of their health condition— 

can access needed health services. 

Consistent with statutory requirements, 

CMS would do the following: 

• Not approve a plan bid if its 

proposed benefit design substantially 

discourages enrollment in that plan for 

certain Medicare-eligible individuals. 

• Continue evaluations and 

enforcement of its current authority 

prohibiting plans from misleading 

beneficiaries in their marketing and 

communication materials and continue 

efforts to improve plan offerings and 

plan comparison tools and resources 

(for example, Medicare & You and 1– 

800–MEDICARE). 

Over time, as plans continue to evolve 

their plan benefit designs and the longterm effects of lower behavioral health 

cost sharing begin to show, the out-ofpocket impacts individual enrollees 

experience may change. For example, 

potential long-term impacts for 

enrollees with behavioral health 

conditions may include the following: 

• Improved aggregate health 

outcomes and health care costs from 

increased utilization of high-value 

behavioral health services (such as, 

regular check-ins with a behavioral 

health provider). 

• Decreased utilization of high-cost 

services related to poor behavioral 

health management (such as, emergency 

psychiatric admissions). 

Given the breadth of potential impacts 

to enrollees from changes organizations 

may make to their plan benefit designs 

in response to this proposal, changing 

the behavioral health cost-sharing 

standards could create savings or losses 

for certain organizations or groups of 

enrollees at different times after its 

implementation. For this reason, there is 

a possibility that this proposal may be 

of substantial magnitude. A discussion 

of possible quantification of these 

potential effects follows. 

b. Impact Analysis: Behavioral Health 

Cost-Sharing Limits No Greater Than 

Traditional Medicare 

Ideally, we would justify this 

proposal quantitatively but lack 

sufficient data. To accurately quantify 

this proposal’s potential impacts to 

similarly situated organizations (such as 

those that lower behavioral health 

service category cost sharing amounts 

by a substantive or nominal amount as 

a direct result of this proposal) or by 

certain groups of enrollees (such as 

those with or without behavioral health 

conditions) the Office of the Actuary 

(OACT) would need sufficient data for 

the following: 

• Contract year 2026—MA and Cost 

Plan organization and enrollee cost 

impacts based on: (1) expected decrease 

in behavioral health service category 

cost sharing amounts; (2) estimates of 

potential cost impacts to other nonbehavioral health benefits to meet 

actuarial equivalence requirements for 

MA plans; (3) estimates of plans’ total 

financial liability to provide services 

with a change in cost directly related to 

this proposal; and (4) the expected 

change in frequency of enrollee 

utilization of the impacted benefits 

(behavioral health services and nonbehavioral health service categories or 

benefits). 

• Contract year 2027 and subsequent 

years—annual MA and Cost Plan 

organization and enrollee cost impacts 

based on: (1) estimate of changes to 

plans’ total financial liabilities to 

provide impacted behavioral health and 

non-behavioral health benefits; (2) 

revised estimates of potential cost 

impacts to other non-behavioral health 

benefits to continue meeting actuarial 

equivalence requirements for MA plans; 

(3) expected change in frequency of 

enrollee utilization of impacted benefits; 

(4) estimate of cost savings per enrollee 

from better behavioral health outcomes; 

and (5) enrollee migration patterns 

between plans. 

OACT lacks sufficient data on these 

topics and as a result, cannot 

quantitatively project the financial 

impacts for certain organizations or 

groups of enrollees if this proposal is 

finalized. As noted previously, the 

aggregate, short term impact to MA 

organizations should be minimal due to 

the statutory requirement that plans 

remain actuarially equivalent to 

Traditional Medicare. While there are 

possible impacts due to the 

redistribution of cost sharing to 

compensate for the proposed limits on 

behavioral health cost sharing, these 

impacts would depend on which other 

services had corresponding changes in 

cost sharing. The affected service 

categories are unknown until bid 

submission, so the impacts are not 

currently quantifiable. 

While there is uncertainty in the 

impact analysis of this proposal to lower 

behavioral health cost-sharing standards 

is not currently possible, existing 

studies clarify potential implications 

from this proposal for organizations and 

enrollees with and without a need for 

behavioral health services. For example, 

a study 352 comparing the rate of 

beneficiary follow-up within 30 days 

after a psychiatric hospitalization 

between plans with equivalent mental 

and physical health cost sharing 

amounts and plans with mental health 

cost sharing amounts that were greater 

than their primary and specialty care 

cost sharing found that beneficiaries in 

plans with equivalent cost sharing— 

• Were significantly more likely to 

have follow-up visits after a psychiatric 

hospitalization; and 

• This important service primarily 

benefited affected enrollees with lower 

education and in rural areas. 

Another study 353 assessed the impact 

of the Medicare Improvements for 

Patients and Providers Act (MIPPA) of 

2008 (which lowered beneficiaries’ 

coinsurance from 50 percent to 20 

percent for mental health visits) on 

changes to specialty and primary care 

outpatient mental care visits and 

psychotropic medication fills. They 

found that Medicare beneficiaries’ use 

of psychotropic medication increased 

after the implementation of cost-sharing 

parity, without a detected change in 

visits. The greater use of psychotropic 

medications was primarily among 

people with probable serious mental 

illness and among Medicare 

beneficiaries who did not report having 

supplemental coverage. The article 

concluded that— 

• Increased psychotropic medication 

fills could signal improvements in 

mental health care access among 

Medicare beneficiaries, especially 

among the subgroups most likely to 

benefit from the policy change; and 

• A lack of changes to mental care 

visits may suggest other, nonfinancial 

barriers are impacting beneficiaries from 

receiving mental health treatment (for 

example, barriers related to 

transportation, the availability of 


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99526 Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 

354Egizi, Alison Muckle; Blasco, Gwen; Collins, 

Helen. A human-centered vision for improving the 

mental health care ecosystem. July 2022. Retrieved 

from: https://www2.deloitte.com/us/en/insights/ 

industry/public-sector/mental-health-equity-andcreating-an-accessible-system.html. 

355Milliman. Potential economic impact of 

integrated medical-behavioral healthcare: Updated 

projections for 2017. February 2018. Retrieved from: 

https://www.milliman.com/en/insight/potentialeconomic-impact-of-integrated-medical-behavioralhealthcare-updated-projections. 

356These actuarial requirements do not apply to 

Cost Plans. 

providers, or community- or personlevel stigma). 

As a result, CMS believes this 

proposal (which would also reduce the 

coinsurance limit for several 

professional behavioral health standards 

from 50 to 20 percent coinsurance) in 

conjunction with other provisions 

focused on addressing nonfinancial 

barriers for enrollees to receive 

behavioral health services described in 

section III.M. of this proposed rule 

would work together to improve access 

to, and utilization of, behavioral health 

services in MA and Cost Plans. 

Another intended consequence of this 

proposal is a higher level of integration 

for medical and behavioral health 

services. Integrating medical and 

behavioral healthcare is one method 

some payers use to improve enrollee 

health outcomes while reducing the 

growth rate of healthcare claim 

expenditures. As lower behavioral 

health cost sharing limits may increase 

utilization of these services, we expect 

this proposal may provide additional 

financial incentive for MA plans to 

integrate these services. Specifically, 

there should be incentive through 

capitated payments to the MA 

organization to ensure beneficiaries 

receive efficient and effective care 

despite changes in cost sharing and 

utilization patterns. Medical and 

behavioral healthcare integration has 

been studied both qualitatively and 

quantitatively in several contexts. One 

such study 354 reviewed relevant 

literature, conducted interviews, and 

held a workshop to develop a humancentered vision for the mental health 

ecosystem, reinforced by the 

experiences of those with mental 

illness, behavioral health providers, and 

efforts already underway by state, local, 

and Federal health leaders. This vision 

hinges upon five major shifts for better 

mental health care access, with one 

major shift being reform of payment 

systems. This study cites numerous 

attempts to improve mental health both 

in the U.S. and in the United Kingdom. 

Several of the attempts cited had 

significant reductions in 

hospitalizations, emergency room visits, 

and overall costs. Milliman,355 in a 2018 

update to a report originally made to the 

American Psychiatric Association in 

2014 on the efficiencies of integrating 

behavioral and medical health, 

estimated savings to Medicare of $6 to 

$12 billion, for calendar year 2017, if 

behavioral health services were 

integrated into lower cost medical 

services. 

Based on these existing studies we 

believe that lowering cost sharing for 

behavioral health services could lead to 

significant savings for MA and Cost Plan 

organizations, enrollees, and Medicare 

over time. 

c. Comment Solicitation: Behavioral 

Health Cost-Sharing Limits No Greater 

Than Traditional Medicare 

CMS also considered how the 

proposed cost-sharing standard may 

impact the flexibility MA organizations 

have in preparing a plan bid that meets 

the existing actuarial equivalence 

requirements at § 422.100(j)(1) and 

(2).356 To assess this, the Office of the 

Actuary (OACT) first estimated what 

percentage of total 2023 Medicare FFS 

cost sharing is represented by the MA 

service categories currently subject to 

cost sharing no greater than Traditional 

Medicare (2023 was the most recently 

available data at the time of developing 

this proposal). The OACT then 

estimated the percentage representing 

the additional behavioral health MA 

service categories subject to this 

proposal. We note that this approach is 

from the perspective of an MA plan 

having to meet the Traditional Medicare 

cost-sharing standards for all the service 

categories listed in paragraph (j)(1) even 

though only a subset MA plans with 

certain MOOP types are subject to that 

standard for certain service categories. 

This approach is intended to assess the 

minimum level of flexibility MA 

organizations would have to structure 

cost sharing differently from Traditional 

Medicare, regardless of their MOOP 

type (that is, most plans would have 

more flexibility). The OACT’s analysis 

found that— 

• Existing MA cost-sharing standards 

with limits above cost sharing in 

Traditional Medicare represent about 51 

percent of total 2023 Medicare FFS cost 

sharing; and 

• The proposed addition of 

behavioral health service categories to 

the list of services for which cost 

sharing must be no greater than 

Traditional Medicare would nominally 

increase the percentage of total 2023 

Medicare FFS cost sharing that MA costsharing standards represent from 49 to 

51 percent. 

In assessing the results of this 

analysis, there are several limitations. 

First, these percentages are only 

estimates based on how Traditional 

Medicare pays by service and not 

differently by provider. Second, the 

OACT does not have a statistical 

method to determine how high a 

percent threshold would result in 

insufficient flexibility for MA 

organizations to design cost sharing that 

is different from Traditional Medicare 

while fulfilling the actuarial 

equivalence requirements in 

§ 422.100(j)(1) and (2). However, the 

OACT generally expects an approximate 

2 percent decrease to the proportion of 

total cost sharing that can be raised 

above what Traditional Medicare 

requires (from 51 to 49 percent) is not 

likely to result in insufficient flexibility 

for MA organizations when designing 

their plan benefits. As a result, we 

believe that this proposal, if finalized, 

will not require MA organizations to 

make disruptive changes to their plan 

benefit designs so their plans meet the 

existing actuarial equivalence 

requirements to Traditional Medicare 

while complying with the proposed 

behavioral health cost-sharing limits. 

Nevertheless, we solicit comment on 

this supposition. 

In summary, we expect this proposal 

to make in-network behavioral health 

service category cost-sharing limits no 

greater than Traditional Medicare will 

result in both increased savings and 

higher quality of health care in the MA 

and Cost Plan program over time. A 

detailed analysis of these effects would 

require additional data that are not 

available at this time. We solicit public 

comment on the economic cost and 

benefits of this proposal, which may 

include comments on data sources and 

available analyses of behavioral health 

service utilization impacts on health 

care savings and costs that could offer 

additional insight into the likely 

impacts of this proposal. 

6. Proposal To Enhance Review of 

Marketing and Communications 

(§§ 422.2260 and 423.2260) 

CMS is proposing to expand the 

definition of marketing under 

§§ 422.2260 and 423.2260 to broaden 

CMS oversight of certain categories of 

MA and Part D communications 

materials and activities in order to 

strengthen beneficiary protections. The 

updated definition would ensure all 

communications materials and activities 

that intend to draw a beneficiary’s 

attention to an MA plan, Part D Plan or 

other plan, influence a beneficiary’s 

decision-making process when making a 

MA or Part D plan selection or influence 


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357https://www.govinfo.gov/content/pkg/FR2022-01-05/pdf/2021-28317.pdf, page 133. 

358https://www.govinfo.gov/content/pkg/FR2023-05-03/pdf/2023-08961.pdf, page 139. 

a beneficiary’s decision to stay enrolled 

in a plan (as described in the current 

intent standard of the marketing 

definition in §§ 422.2260(1) and 

423.2260(1)) are submitted to CMS and 

subject to review under the more 

comprehensive marketing material 

review requirements. While CMS does 

expect this proposed change will result 

in an increase in the volume of 

materials submitted to CMS, most of 

those materials are, and will continue to 

be, designated as File & Use per 

§§ 422.2261(b) and 423.2261(b) and 

therefore, only those materials which 

are prospectively reviewed will directly 

impact CMS time and cost burden. 

Under this provision, CMS estimates 

that if this provision is finalized based 

on the trend estimates in the COI, CMS 

will receive 80.21 percent more 

marketing materials. Of those submitted 

marketing materials, CMS estimates that 

10 percent of those materials will be 

prospectively reviewed by health 

insurance specialists. Therefore, we take 

the hour burden of a single review (0.5 

hour) and multiply that by the number 

of materials that we expect to be 

reviewed (10 percent of submitted 

materials as estimated in table F10) and 

the hourly wage of a health insurance 

specialist ($64.06). For CY 2026, the 

estimated cost burden for CMS would 

be $261,531.36 (0.5*8165.20*64.06). For 

CY 2027, the estimated cost burden for 

CMS would be $288,077.82 

(0.5*8994*64.06). For CY 2028, the 

estimated cost burden for CMS would 

be $317,314.80 (0.5*9906.80*64.06). 

CMS notes that it has not collected 

the materials currently categorized as 

communications since prior to the April 

2018 final rule, and therefore these 

estimates could vary depending on how 

the advertising landscape has changed 

and how frequently plans and TPMOs 

have been utilizing communications 

materials which are not currently 

required to be submitted for CMS 

review. In addition, it is possible that, 

based on concerns brought to CMS’ 

attention through data such as 

complaints, surveillance activities, or 

retrospective reviews, CMS could 

increase the percentage of materials that 

are prospectively reviewed. 

7. Proposal To Require Clinical or 

Quality Improvement Standards for 

Provider Incentive and Bonus 

Arrangements To Be Included in the 

MA MLR Numerator (§ 422.2420(b)(2)) 

We propose to amend § 422.2420(b)(2) 

to clarify that only provider incentives 

and bonuses tied to clearly defined, 

objectively measurable, and welldocumented clinical or quality 

improvement standards may be 

included in incurred claims for MA 

MLR reporting. Due to the proposed 

change, if MA organizations report 

fewer provider incentives and bonuses 

in the MLR numerator and their MLR 

percent decreases, remittances paid 

could increase. While we do not know 

exactly how many incentives and 

bonuses would be impacted by this 

change, using information from prior 

Marketplace and Medicaid Regulatory 

Impact Analyses,357 358 we estimate that 

with a 1 percent decrease in incurred 

medical incentive pools and bonuses in 

the Medicare MLR numerator based on 

the Medicare MLR data for contract year 

2017 (when detailed incentive and 

bonus data were last reported), the 

proposed clarification would have 

almost no impact on remittances paid 

by MA organizations, an estimated 

approximately $4 million per year. To 

arrive at this estimate, we calculated 

updated Medicare MLR remittances 

based on the assumptions outlined 

previously, subtracted those amounts 

from the actual Medicare MLR 

remittances and estimate a 1.8 percent 

increase per year in remittances paid by 

MA organizations. 

8. Proposal To Prohibit Administrative 

Costs From Being Included in Quality 

Improving Activities in the MA and Part 

D MLR Numerator (§§ 422.2430(a) and 

423.2430(a)) 

We also propose to amend 

§§ 422.2430(a) and 423.2430(a) to 

specify that only expenses directly 

related to activities that improve health 

care quality may be included in quality 

improving activity expenses for MA and 

Part D MLR reporting. We expect this 

proposed change could result in an 

increase in remittances from MA 

organizations and Part D sponsors that 

currently include indirect expenses in 

quality improving activities. Although 

we do not know how many MA 

organizations and Part D sponsors 

include indirect expenses in quality 

improving activities, we estimate the 

impact of the proposed change by 

assuming that indirect expenses inflate 

quality improving activities by 41.5 

percent (the midpoint of the 33 percent 

to 50 percent range we have observed 

during commercial and Medicaid MLR 

audit examinations) for half of the 

organizations that report quality 

improving activity expenses (sorted 

based on lowest to highest and highest 

to lowest MA organization and Part D 

sponsor revenue). To determine the 

amount in remittances that we expect 

based on the proposed change, we 

reviewed the MLR data for contract year 

2017 (when detailed health care quality 

improvement expenses were last 

reported). Using the assumption that 

indirect expenses improve the quality 

improving activities by 41.5 percent, we 

multiplied the quality improving 

activity expenses for each plan contract 

by 41.5 percent and subtracted these 

expenses from the numerator. Next, we 

updated the MLR for each contract and 

determined the change in remittances 

for contracts that fell below the 85 

percent threshold. Using these 

calculations and steps, we determined 

the proposed clarification would 

increase remittances paid by MA 

organizations and Part D sponsors by a 

range of approximately $13 million to 

$189 million per year (sorted lowest to 

highest). Extrapolating the estimated 

transfers to the Treasury General Fund 

over 10 years, we expect the policy 

change to transfer an average of 

approximately $101 million per year, 

and $1.01 billion between 2026 and 

2035. 

9. Proposal To Establish Standards for 

MA and Part D MLR Audit 

Examinations (§§ 422.2480(d), 

423.2480(d), 422.2401, 423.2401, 

422.2450, 423.2450, 422.2452, 423.2452, 

422.2454, and 423.2454) 

Our proposed amendments to the MA 

and Part D MLR regulations, including 

the addition of or modification to 

§§ 422.2401, 423.2401, 422.2450, 

423.2450, 422.2452, 423.2452, 422.2454, 

and 423.2454, would increase the MLR 

reporting burden by requiring that MA 

organizations and Part D sponsors to 

provide auditors with detailed MLR 

data and any underlying records that 

can be used to substantiate amounts 

included in the calculation of each 

contract’s MLR and any remittance 

determined to be owed. We anticipate 

the level of effort related to record 

retention, responding to record requests, 

and preparing and mailing MLR audit 

remittances would vary by MA 

organization and Part D sponsor and 

their potential audit findings and is 

therefore difficult to quantify. 

The proposed update would primarily 

impose additional costs on the Federal 

government. To conduct MLR audit 

examinations in Medicare we would 

pay a contractor to perform the audits to 

identify suspected inaccuracies and 

communicate findings to the MA 

organizations and Part D sponsors. We 

anticipate that we would pay a 

contractor to perform audits 

approximately equal to the number we 

are currently paying them to perform 


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99528 Federal Register / Vol. 89, No. 237 / Tuesday, December 10, 2024 / Proposed Rules 

359https://www.cms.gov/medicare/health-drugplans/medical-loss-ratio. 

360https://www.cms.gov/CCIIO/Programs-andInitiatives/Health-Insurance-Market-Reforms/MLR_

examinations_reports. 

361https://www.cms.gov/data-research/statisticstrends-reports/marketplace-products/2024- 

marketplace-open-enrollment-period-public-usefiles. 

362https://www.cms.gov/data-research/statisticstrends-and-reports/medicare-advantagepart-dcontract-and-enrollment-data/monthly-contractand-enrollment-summary-report. 

363https://hcp-lan.org/workproducts/apmmethodology-2023.pdf. 

pilot MLR audit examinations, which is 

consistent with commercial MLR audits 

previously conducted (approximately $1 

million to $1.5 million per year). 

MA organizations and Part D sponsor 

MLR audits are expected to lead to more 

MLR remittances to the Treasury 

General Fund. These additional 

payments are transfers since no goods or 

services are being created. The impact to 

the Medicare Trust Funds is $0. To 

estimate the potential total increase in 

MLR remittances because of MA and 

Part D MLR audit examinations, first we 

accessed the total remittances paid for 

the most recent contract years available. 

Based on Medicare Part C and D MLR 

data, the average of total remittances 

paid for CYs 2017–2021, excluding 

2020, which was significantly impacted 

by the COVID–19 pandemic with 

unusually large remittances collected, 

was $194,032,540.30.359

Then we reviewed the results of eight 

commercial MLR audit examination 

reports, which approximates the annual 

number of MA and Part D MLR 

examinations CMS expects to conduct. 

The commercial MLR audit examination 

reports from CYs 2015 to 2019, the most 

recent publicly available reports, 

reported $11,691,450 in rebates were 

distributed back to policyholders.360 To 

compare MLR remittance amounts we 

determined that the MA and Part D 

programs are 2.7 times larger than the 

enrollment size of the commercial 

Marketplace. As of January 2024, 21.3 

million consumers signed up for 

coverage through the commercial 

Marketplaces.361 As of August 2024, 

57.2 million people were enrolled in 

Medicare Part C and D, excluding PACE 

organizations, which do not report 

MLR.362 Therefore, we multiplied the 

$11,691,450 in commercial MLR audit 

rebates by 2.7 to estimate MA and Part 

D MLR audit remittances, which would 

total approximately $31,566,915. 

Extrapolating the estimated transfers to 

the Treasury General Fund over 10 

years, we expect the MLR audit 

examinations to transfer an average of 

approximately $32 million per year, and 

$320 million between 2026 and 2035. 

10. Proposal To Add Provider Payment 

Arrangement Reporting in the Medicare 

MLR Reporting Regulations 

(§§ 422.2460 and 422.2490) 

Our proposal to require separate 

reporting amounts for provider payment 

arrangements would increase the 

Medicare MLR reporting burden by 

requiring MA organizations to compile 

additional information in the MLR 

Reporting Tool. We anticipate the level 

of effort to compile this information 

would vary based on the size of the MA 

organization, how they submit the 

existing Medicare Part C reporting 

requirements to report payments to 

providers, and whether they have ever 

responded to the HCPLAN APM 

measurement survey. The 2023 APM 

Measurement Methodology and Results 

report stated a total of 64 health plans, 

four FFS Medicaid states, and 

Traditional Medicare participated in the 

2023 LAN Measurement Effort 

representing almost 264 million or 

86.7% of people covered by an 

insurance plan in the Commercial, 

Medicare Advantage, Medicaid, or 

Traditional Medicare markets.363 While 

the level of effort is difficult to quantify, 

in the COI we estimate an annual 

burden of 2,100 hours (700 MA 

organizations * 3 hr/response) at a cost 

of $179,970 (2,100 hours * $85.70/hr). 

The proposed update would also 

impose additional costs on the Federal 

government related to analyzing the 

additional data. However, given that the 

additional reporting will not change the 

Medicare MLR calculation we do not 

expect the proposal to increase MLR 

remittances or create significant 

additional costs for the Federal 

government. 

11. Clarifying MA Organization 

Determinations To Enhance Enrollee 

Protections in Inpatient Settings 

(§§ 422.138, 422.562, 422.566, 422.568, 

and 422.616) 

We are proposing modifications to 

existing regulations at 42 CFR part 422, 

subpart M, to clarify and strengthen 

existing rules related to organization 

determinations. The intent of this 

proposal is to clarify the definition of an 

organization determination to enhance 

enrollee protection in inpatient settings. 

We want to ensure enrollees and 

providers acting on their behalf receive 

notice of an inpatient/outpatient 

downgrade and are aware of their 

appeal rights. The intent of this 

provision is also to increase awareness 

when inpatient stays are downgraded 

with the expectation that there would be 

more appeals and some overturns. Thus, 

qualitatively, we expect this proposal to 

generate increased costs to the MA 

organizations and ultimately to the 

Medicare Trust Fund since inpatient 

stays are more expensive than 

observations. 

In section VI.B.18. of this proposed 

rule, we estimated that there are 

annually 60,000 downgrades of 

inpatient to observation. Although we 

can estimate 60,000 affected enrollees, 

we do not have any way to estimate the 

following: (1) what percent of the 

enrollees are already receiving required 

written notification and what percent of 

them will receive a notice due to change 

in the provision; (2) of those receiving 

the notice, what percent will appeal; (3) 

of those appealing the downgrade, what 

percent will be overturned by the plan; 

(4) of those appeals upheld by the plan 

what percent will be overturned by the 

Independent Review Entity (IRE) (given 

that 100 percent of upheld plan 

decisions are forwarded to IRE). If this 

data was available, we could obtain 

average costs of inpatient stays and 

observation days and estimate the cost 

to the trust fund. In the absence of this 

data, we are estimating this as a nonquantified cost to the plans that is 

passed on to the Trust Fund. 

E. Alternatives Considered 

In this section, CMS includes 

discussions of alternatives considered. 

Several provisions of this proposed rule 

reflect a codification of existing policy 

where we have evidence, as discussed 

in the appropriate preamble sections, 

that the codification of this existing 

policy would not affect compliance. In 

such cases, the preamble typically 

discusses the effectiveness metrics of 

these provisions for public health. 

1. Proposal for Medicare Prescription 

Payment Plan (§§ 423.137(e), 423.137 

(d), 423.137(f), 423.137(i), and 

423.137(j)) 

a. Auto Renewal 

As Medicare Prescription Payment 

Plan participation is tied to drug 

expenditures in a given plan year, CMS 

considered how to address year-overyear program participation. 

• Option #1: Implement an automatic 

election renewal process that requires a 

Part D sponsor to automatically renew a 

Part D enrollee’s participation in the 

Medicare Prescription Payment Plan, 

provided the participant remains in the 

same Plan Benefit Package (PBP) in the 

upcoming year, unless the program 

participant indicates otherwise. This 

option would minimize burden for Part 

D enrollees, who would not need to 


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complete additional paperwork to 

remain in the program, and Part D 

sponsors, which would not be required 

to process new election forms for active 

program participants or conduct ‘‘likely 

to benefit’’ analyses for the upcoming 

plan year for those participants. The 

primary impact of this approach is the 

burden and cost on Part D sponsors 

associated with annual notifications 

alerting participants that their 

participation in the program is 

continuing into the next year. 

• Option #2: Require Part D enrollees 

to re-elect into the program each plan 

year. This option would allow Part D 

enrollees to actively choose to 

participate in the program each year but 

would place additional burden on both 

enrollees and Part D sponsors. In 

addition to requiring Part D sponsors to 

send annual notifications alerting 

participants that their participation in 

the program is ending and that 

participation renewal is required, this 

option would also require enrollees to 

complete a new election request form 

annually and require plan sponsors to 

review election requests from the same 

enrollee each year and send new notices 

of election approval following the 

renewal request. 

As noted in the earlier in this rule, 

CMS proposed an automatic election 

renewal process requiring Part D 

sponsors to alert program participants 

no later than December 7 that their 

participation in the program will 

continue into the next year unless they 

indicate they would like to opt out. We 

believe this approach minimizes burden 

for both enrollees and plan sponsors. 

b. Point-of-Sale Enrollment 

Timely effectuation of election 

requests is important to prevent 

dispensing delays and potential 

prescription abandonment. For 

enrollees who trigger the likely to 

benefit threshold with a new high-cost 

prescription and receive the ‘‘Medicare 

Prescription Payment Plan Likely to 

Benefit Notice’’ informing them about 

the Medicare Prescription Payment Plan 

at the point of sale, a real-time or point 

of sale election mechanism could allow 

them to pay $0 at the point of sale and 

still leave the pharmacy with their 

medication. We considered the 

following three options for point-of-sale 

enrollment: 

• Option #1: Permit point of sale 

enrollment by establishing a new value 

in an existing NCPDP data field for the 

Medicare Prescription Payment Plan. If 

a Part D enrollee indicates to the 

pharmacist that they would like to opt 

into the program, the pharmacist would 

reverse the claim and resubmit it with 

a specific clarification code indicating 

that the individual has agreed to opt 

into the program. The PBM would then 

accept the clarification code value, add 

the individual to the relevant eligibility 

file, and return a message to the 

pharmacy providing the plan-specific 

BIN/PCN. The pharmacist would 

process the claim like a COB claim, bill 

any other applicable OHI, and bill the 

plan-specific BIN/PCN for the Medicare 

Prescription Payment Plan. The new 

program participant would be able to 

collect their prescription without paying 

any OOP cost sharing at the POS. The 

PBM would then communicate to the 

Part D sponsor that the individual has 

opted into the program. 

• Option #2: Permit real-time 

enrollment by telephone or mobile or 

web-based application. If a Part D 

enrollee wanted to elect into the 

Medicare Prescription Payment Plan, 

they could call their plan’s telephone 

number or submit a web-based 

application. The Part D sponsor would 

manually effectuate the individual’s 

election into the program and 

communicate the election to the PBM in 

real time. The PBM would then add the 

individual to the relevant eligibility file. 

Once the individual’s election is 

effectuated, the pharmacist would either 

reverse and resubmit the claim to 

receive the plan-specific Medicare 

Prescription Payment Plan BIN/PCN, or 

the new program participant would 

receive a verbal confirmation via the 

phone call with the Part D sponsor 

providing the plan-specific BIN/PCN. 

• Option #3: Require Part D sponsors 

to process election requests within 24 

hours. If a Part D enrollee wishes to 

elect into the Medicare Prescription 

Payment Plan, they may use any of the 

plan’s election mechanisms. During the 

plan year, Part D sponsors must process 

the election request within 24 hours. 

The Part D sponsor would then 

communicate the effectuation to the 

enrollee and to the PBM. 

As noted earlier in this rule, CMS 

proposed to codify the 24-hour 

timeframe for election requests made 

during the plan year, as required in 

2025, and requested comment on realtime election. We believe that the 24- 

hour timeframe, paired with the 

required process to retroactively apply 

the program to those meeting criteria for 

a retroactive election, reduces the 

likelihood of dispensing delays and 

prescription abandonment while 

avoiding the operational burden that 

would be required for Part D sponsors, 

PBMs, and pharmacies to develop and 

implement mechanisms to support realtime or POS election. We are continuing 

to explore the operational feasibility of 

a real-time election mechanism for 2026 

and subsequent years. 

b. Pharmacy Processes 

Section 1860D–2(b)(2)(E)(v)(III)(ff) of 

the Act states that an individual’s 

participation in the Medicare 

Prescription Payment Plan does not 

affect the amount paid (or the timing of 

such payments) to pharmacies. 

Accordingly, we proposed that the Part 

D sponsor must pay the pharmacy for 

the final amount the individual would 

have otherwise paid at the POS. Because 

an individual’s OOP costs are net of any 

contributions made by supplemental 

payers to Part D to which the individual 

may be entitled and that reduce the 

OOP amount due, this requires the 

Medicare Prescription Payment Plan to 

be integrated into current COB 

transactions for program participants. 

We proposed to require pharmacies 

and Part D sponsors to utilize an 

additional BIN/PCN that is unique to 

the Medicare Prescription Payment Plan 

to facilitate electronic processing of 

supplemental COB transactions for 

program participants. 

We also considered the use of a prefunded card, which would keep the 

pharmacy whole and could allow for 

COB with other payers supplemental to 

Part D; however, we are concerned this 

approach does not provide the same 

level of Part D sponsor oversight to 

ensure that payments are only made for 

covered Part D drugs for the participant 

cardholder. Additionally, there are other 

concerns surrounding timeliness of 

issuing payment cards and participants 

needing to present a physical card at the 

POS, which could be forgotten, lost, or 

stolen, potentially causing delays in 

obtaining prescription drugs, elevated 

risk of fraud, additional costs to the Part 

D program, and potential card 

processing fees for pharmacies. We are 

also aware that not all organizations 

have the financial capabilities 

established to enable a prefunded 

payment card system. Moreover, 

interested parties have also expressed a 

desire to have a single, uniform method 

of adjudicating and managing the 

patient liability for the Medicare 

Prescription Payment Plan at the POS; 

we determined the use of unique BIN/ 

PCNs for the final transaction to the 

Medicare Prescription Payment Plan 

best accomplishes that objective. 

2. Part D Coverage of Anti-Obesity 

Medications (AOMs) (§ 423.100) and 

Application to the Medicaid Program 

In this section, we discuss the 

alternative considered when developing 

our proposal to reinterpret section 

1927(d)(2)(A) of the Act such that drugs 


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364https://www.niddk.nih.gov/healthinformation/health-statistics/overweight-obesity. 

used for weight loss or chronic weight 

management for treatment of obesity 

would no longer be excluded from the 

definition of Part D drug to reflect 

changes in the prevailing medical 

consensus towards recognizing obesity 

as a disease. FDA-approved indications 

for available AOMs generally include 

weight loss or chronic weight 

management in both individuals with 

obesity and individuals with overweight 

and at least one weight-related 

comorbid condition. We considered an 

alternative proposal to extend our 

reinterpretation of the statutory 

exclusion to no longer consider drugs 

used for weight loss or chronic weight 

management for individuals with 

overweight and at least one weightrelated comorbidity as excluded from 

the definition of Part D drug. This 

alternative proposal would expand Part 

D coverage of AOMs to Medicare 

beneficiaries with overweight and a 

weight-related comorbidity other than 

type 2 diabetes or cardiovascular 

disease, since those conditions are 

already coverable MAIs under current 

policy. See section III.A.2. of this 

proposed rule for further discussion 

regarding our rationale not to extend our 

reinterpretation of the statutory 

exclusion such that individuals with 

overweight and at least one weightrelated comorbidity could receive 

coverage of AOMs under Part D. 

These estimates follow a similar 

methodology to the estimates of our 

proposal to permit AOM coverage for 

weight loss or chronic weight 

management for treatment of obesity as 

described in section VII.D.6. of this 

proposed rule. For Medicare, the 

estimates expanded the population 

newly able to obtain AOM coverage 

from 7 percent to approximately 9 

percent of total Part D enrollees based 

on 2022 data, which includes the 

number of Part D enrollees with obesity 

(7 percent) and with overweight and 

weight-related comorbidities (2 

percent). As shown in table 35, the 

alternative proposal would result in 

expenditures of $35 billion over a 10- 

year period for the Part D trust fund 

(increased from $24.8 billion for the 

proposal discussed in section VII.D.1.a. 

to provide coverage for obesity only). 

For the purposes of this alternative 

analysis, we report annual costs with a 

placeholder for each year starting with 

the first year the reinterpretation would 

be applicable in Medicare Part D. 

Premium offsets reflect the earliest such 

offsets would be factored into the 

analysis due to premium stabilization 

provisions in section 11201 of the IRA 

(assuming 2026 notionally as year 1 of 

implementation). 

It is possible that our estimates 

significantly underestimate the impact 

of our alternative proposal. Our 

estimates rely on available claims data 

and therefore a major limitation in our 

estimates is whether a diagnosis of 

overweight was reliably reported. 

Available NHANES data from 2017 to 

2018 indicates that the prevalence of 

overweight in the U.S. adult population 

was 30.7 percent 364 which is more than 

triple the prevalence observed in 

Medicare claims data (8.1 percent). 

NHANES data did not report the 

proportion of overweight in adults age 

60 and older, but the prevalence of 

obesity in the overall U.S. adult 

population is similar to the prevalence 

in adults age 60 and older; therefore, we 

think it is reasonable to assume that the 

proportion of overweight in the 

Medicare population should be similar 

to the proportion of overweight in the 

overall U.S. adult population. 

We were unable to estimate the 

financial impact of the alternative 

proposal on the Medicaid program due 

to lack of available data on the 

proportion of Medicaid enrollees with 

overweight and weight-related 

comorbidities. 

3. Ensuring Equitable Access to 

Behavioral Health Benefits Through 

Section 1876 Cost Plan and MA CostSharing Limits (§§ 417.454 and 422.100) 

In this section, CMS discusses 

alternatives we considered when 

developing our proposal to add 

behavioral health service categories to 

the list of services for which MA and 

Section 1876 Cost Plan (Cost Plan) innetwork cost sharing must be no greater 

than that in Traditional Medicare, 

beginning in contract year 2026. We do 

not include alternatives for the proposal 

to clarify the applicability of the 50 

percent coinsurance (or actuarially 

equivalent copayment) standard for Cost 

Plans and other proposals that primarily 

continue current policy with minor 

updates. For example, this includes our 

proposed revision to § 417.454(a)(1) 

which would allow for CMS to annually 

update copayment limits for basic 

benefits that apply to Cost Plans based 

on the most recent Medicare FFS data 

projections. 

a. Cost Estimation 

As noted in section VII.D.4. of this 

proposed rule, because of multiple 

factors affecting bids and our 

longstanding actuarially equivalent MA 

plan bid requirements, we have not 

estimated a cost for this proposal and 

acknowledge a possible combination of 

savings and costs for individual 

organizations and enrollees. Similarly, 

we would not be able to quantify 

potential impacts from these alternative 

behavioral health cost-sharing standards 

considered for MA and Cost Plans. 

However, potential impacts from the 

alternatives on average MA and Cost 

Plan cost-sharing amounts for these 

services are noted in section VII.E.3.d. 

of this proposed rule. In addition, as the 

actuarial equivalence tests are applied 

to MA plans for each alternative 

presented in this section, the 

implication is that—in aggregate—the 

expected enrollee cost-sharing expenses 

will remain the same for those enrollees 

in MA and for beneficiaries in 

Traditional Medicare. This actuarial 

requirement does not apply to Cost 

Plans; however, we do not expect major 

effects from this proposal on these 

plans, primarily because: (1) only a 


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365CMS. Contract Summary 2024. Data as of July 

2024. Retrieved from: https://www.cms.gov/ 

research-statistics-data-and-systems/statisticstrends-and-reports/mcradvpartdenroldata/monthly/ 

contract-summary-2024-07. 

366 Cost Plans are not required to report 

information for all services, including Part A 

inpatient hospital psychiatric services. Due to this 

lack of data, from a Cost Plan perspective we are 

only able to evaluate potential impacts to inpatient 

hospital psychiatric services cost-sharing limits (for 

all length of stay scenarios) and not to plan cost 

sharing amounts. In contrast, for MA plans we are 

able to evaluate potential impacts to both costsharing limits and plan amounts for this service 

category. 

367Beginning January 1, 2024, Medicare started 

allowing marriage, family, and mental health 

counselors to bill independently for their 

professional services and made changes to payment 

for certain mental health specialty services 

including services involving community health 

workers and outpatient psychotherapy for crisis 

services. At the time of drafting this proposed rule, 

the OACT did not have sufficient utilization data 

available for these services to incorporate their costs 

into the projected weighted average allowed 

amount that we use to calculate illustrative ‘‘mental 

health specialty services’’ service category 

copayment limits that could result from the 

alternatives discussed in this section. As a result, 

the illustrative ‘‘mental health specialty services’’ 

service category copayment limits in this section 

are based on a projected weighted average allowed 

amount calculated using the same provider 

specialties that were used to calculate the 

copayment limits for this service category for 

contract year 2025, including: clinical psychologist, 

licensed clinical social worker, and psychiatry. 

Regardless of whether this proposal is finalized or 

not, CMS plans to update the Medicare FFS data 

used to inform the calculation of copayment limits 

for the ‘‘mental health specialty services’’ service 

category for contract year 2026 and future years to 

include covered services from marriage, family, and 

mental health counselors and new payment rates 

for certain mental health specialty services. As a 

result, CMS expects actual ‘‘mental health specialty 

services’’ service category copayment limits that 

would result from each alternative discussed in this 

section would be different from the illustrative 

copayment limits provided in this section. 

368Beginning January 1, 2024, Medicare started 

covering Intensive Outpatient Program services. 

This benefit provides the same services as the 

partial hospitalization program benefit but requires 

fewer hours of therapy per week (a minimum of 9 

hours versus over 20 hours). At the time of drafting 

this proposed rule, the OACT did not have 

sufficient utilization data available for this service 

type to project an allowed amount for these 

Intensive Outpatient Program services that is 

separate from partial hospitalization program 

services. As a result, in evaluating the alternatives 

discussed in this section, CMS considered that the 

illustrative partial hospitalization copayment limits 

in this section would also apply to the Intensive 

Outpatient Program services. Regardless of whether 

this proposal is finalized or not, CMS plans to set 

cost-sharing limits specific to Intensive Outpatient 

Program services for contract year 2026 and future 

years that are separate from the cost-sharing limits 

applicable to partial hospitalization program 

services and establish separate data entry for this 

benefit in the PBP bid tool. As a result, CMS 

expects actual copayment limits that would result 

from each alternative discussed in this section for 

Intensive Outpatient Program services would be 

different from the illustrative partial hospitalization 

program services copayment limits provided in this 

section. 

369Excludes employer, D–SNPs, and MSAs. 

small proportion of these plans (20% or 

fewer) have established cost sharing 

greater than the alternatives considered; 

(2) in most cases plans with cost sharing 

greater than the alternatives considered 

should not have to vastly change their 

cost sharing designs to come into 

compliance (less than $20.00 per service 

category in most cases); and (3) Cost 

Plans represent a small proportion of all 

Medicare-eligible beneficiaries 

(approximately 169,000 as of July 

2024 365). In addition, we expect 

beneficiary choice will continue to act 

as an incentive for Cost Plan 

organizations to offer favorable benefit 

designs. Consequently, we expect no 

material changes to the Medicare Trust 

Fund expenditures since aggregate 

enrollee cost sharing remains 

unchanged or minimally affected under 

the proposed or alternative scenarios 

discussed in section VII.E.3.d. of this 

proposed rule. 

b. Applicability Date 

All alternatives in section VII.E.3.d. of 

this proposed rule consider specific 

behavioral health cost-sharing standards 

that would apply beginning in contract 

year 2026. If this proposal is finalized 

and issued within an expected 

timeframe, we believe changes to the 

behavioral health cost-sharing standards 

should be applicable beginning no 

earlier than contract year 2026 to 

provide sufficient time between the 

publication of the final rule and the 

behavioral health cost-sharing 

compliance date (operationally this 

would be the bid deadline for the first 

contract year in which the cost-sharing 

limits would apply). Specifically, 

sufficient time between these dates is 

necessary for: (1) CMS to implement the 

finalized policy (which may include 

creating validations in the PBP 

functionality and issuing subregulatory 

operational guidance for MA 

organizations); and (2) organizations to 

ensure their benefit designs align with 

the finalized behavioral health costsharing policies and any operational 

guidance issued by CMS. However, as 

discussed in section III.M. of this 

proposed rule, we solicit comments on 

aspects of our proposal including 

whether a transition period from the 

existing contract year 2026 behavioral 

health cost-sharing standards in current 

regulations to the proposed cost-sharing 

standard (alternative 3) is necessary and 

if so, how long the transition should be. 

c. Evaluation Approach of Alternatives 

Considered 

In section VII.E.3.d. of this proposed 

rule, we evaluate which alternative may 

best strike a balance between: (1) 

improving the affordability of 

behavioral health services for enrollees 

in a timely manner; and (2) minimizing 

disruption to enrollees’ access to care 

and coverage options. This evaluation is 

supported by narratives and tables that 

indicate how each alternative may 

impact future contract year: (1) 

behavioral health service category costsharing (copayment and coinsurance) 

limits set by CMS; and (2) behavioral 

health cost sharing amounts established 

by MA and Cost Plans. Specifically, we 

evaluate these potential consequences 

for the following behavioral health 

service categories that are subject to this 

proposal: 

• Inpatient hospital psychiatric 

services 366

• Mental health specialty services 367

• Psychiatric services 

• Partial hospitalization 368

• Outpatient substance use disorder 

services 

• Opioid treatment program services 

Tables indicating potential 

consequences to the cost-sharing limits 

and plan cost-sharing amounts for these 

service categories are included in 

section VII.E.3.e. of this proposed rule. 

To develop the illustrative dollar values 

in these tables, we used: (1) analyses of 

the most recent and relevant data 

sources CMS had at the time of 

developing this proposal: contract year 

2025 Medicare FFS data projections 

(based on 2019–2023 Medicare FFS 

data, respectively) and contract year 

2024 MA and Cost Plan data 369 and (2) 

application of the existing rounding 

rules in current regulation 

(§ 422.100(f)(6)(ii)) that apply to MA 

copayment limits and are proposed to 

apply to Cost Plan copayment limits per 

§ 417.454(e). Additional detail about the 

specific Traditional Medicare FFS data 

projections used in the calculations to 

develop these amounts are available in 

the footnotes of tables 3 and 4 in section 

III.L. of this proposed rule. For example, 

this includes the provider specialties 

that informed the projected total 

weighted average allowed amount per 

visit for mental health specialty 

services. 

• The consequences discussed and 

shown in the tables in sections 

VII.E.3.d. and e. of this proposed rule 

are uncertain because: 

• Final behavioral health copayment 

and dollar limits set in future contract 

years (under the existing cost-sharing 

standards in current regulations, the 

proposed cost-sharing standard, or the 

other alternative cost-sharing standards 

considered) would likely be different 

than the illustrative behavioral health 

copayment and dollar limits in this 


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370As discussed in the April 2022 final rule, most 

professional cost-sharing standards were the same 

for all MOOP types before contract year 2023. The 

cost-sharing standards established by the April 

2022 final rule created differentiated professional 

and inpatient hospital cost-sharing limits (including 

for some behavioral health service categories) by 

MOOP type beginning in contract year 2023 to 

encourage plans to adopt lower MOOP amounts. 

371Contract year 2024 plan weighted average cost 

sharing values reflect maximum cost sharing for 

each behavioral health service category (including 

plans with copayment and coinsurance 

percentages). Specifically, plan coinsurance values 

were converted into equivalent copayment dollar 

amounts and vice versa to calculate a weighted 

average coinsurance and copayment value for each 

category that reflects all cost sharing designs. These 

plan cost sharing conversions were based on the 

OACT’s contract year 2025 projected total Medicare 

FFS allowed amount for each professional service 

category. This approach allows for a consistent 

comparison between plan cost sharing amounts and 

the potential cost-sharing standard that could apply 

if a particular alternative was finalized. As a result, 

contract year 2024 plan weighted average cost 

sharing values consistently reflect dollar values that 

are normalized based on the same and most recent 

data available, contract year 2025 Medicare FFS 

projections. The OACT developed the contract year 

2025 projected total Medicare FFS allowed amounts 

using 2022 Medicare FFS cost and utilization data 

and their projections of cost changes between 2022 

to 2025. The OACT employed generally accepted 

actuarial principles and practices in calculating 

these projected amounts (per § 422.100(f)(7)). 

proposed rule based on using updated 

Traditional Medicare FFS data 

projections and coverage rules to 

calculate the limits. 

• Plan behavioral health cost-sharing 

amounts established by organizations in 

future contract years cannot be precisely 

predicted because: (1) organizations 

may establish plan cost sharing amounts 

up to the applicable final limit set by 

CMS, regardless of any prior trend in 

establishing cost sharing for that service 

category; (2) organizations establish 

plan cost sharing amounts based on 

many variables that may change 

annually (including provider 

contracting arrangements, managed care 

practices, and scope of supplemental 

benefit offerings); (3) if CMS does not 

set a copayment limit for a behavioral 

health service category, the plan’s 

copayment amount may be actuarially 

equivalent to, or less than, the 

applicable cost-sharing standard based 

on data specified in the regulation 

which may include their total financial 

liability for that benefit (which may be 

greater or less than the illustrative 

copayment limits in this section); and 

(4) Cost Plans are not required to report 

information for all services. 

However, the consequences each 

alternative poses to the behavioral 

health coinsurance limits and percent of 

estimated Traditional Medicare FFS cost 

sharing (which determine dollar costsharing limits for inpatient hospital 

psychiatric services) are characterized 

by a relatively high degree of certainty 

because these values are not subject to 

the influencing factors discussed 

previously. 

CMS considered both the 

consequences discussed in this section 

to guide our decision making among the 

alternative behavioral health costsharing standards considered. We 

believe the data used to develop the 

potential consequences to future year 

behavioral health copayment limits and 

plan cost sharing amounts is sufficiently 

accurate for this purpose. Tables 32 to 

34 and 36 to 55 indicate these 

consequences of each alternative. Next, 

we provide an overview of tables 32 to 

34 and 36 to 55 to avoid repetitive text 

in the discussion of specific 

alternatives. 

Tables 36 to 40 specify contract year 

2026 and future year MA behavioral 

health cost-sharing standards that 

would apply to specific service 

categories based on: (1) the current (or 

baseline) cost-sharing standard from 

§ 422.100(f)(6) and (j)(1); (2) the costsharing standard posed by each 

alternative (percent coinsurance or 

percent of estimated Medicare FFS cost 

sharing); and (3) illustrative dollar 

limits that reflect actuarially equivalent 

values to the baseline and alternative 

cost-sharing standards, based on 

contract year 2025 Traditional Medicare 

FFS data projections and application of 

the regulatory rounding rules. These 

comparisons are completed for 

categories from each group of behavioral 

health services that have different costsharing standards in current regulations. 

Specifically, tables 36 to 40 present 

information for the following MA 

behavioral health service categories: 

• Mental health specialty services 

(table 36) and partial hospitalization 

program services (table 37) currently 

subject to a range of cost-sharing limits 

for professional services in paragraph 

(f)(6)(iii)). 

• Inpatient hospital psychiatric 

services for the 15-day length of stay 

scenario (table 38) currently subject to 

dollar limits based on specific 

percentages of Medicare FFS cost 

sharing in paragraph (f)(6)(iv). 

• Opioid treatment program services 

(table 39) and outpatient substance use 

disorder services (table 40) currently 

subject to the 50 percent coinsurance (or 

actuarially equivalent copayment) cap 

on cost sharing in paragraph (f)(6)(i). 

CMS uses the information in tables 36 

to 40 to assess each alternative’s 

potential impact to MA behavioral 

health cost-sharing limits on an overall 

and service category specific basis. 

Tables 41 to 45 use similar data for Cost 

Plans for this same purpose. Substantive 

differences in table 41 to 45 from tables 

36 to 40 include the following: 

• A lack of a range of cost-sharing 

limits considered under Alternative 1 

for Cost Plans (as they are not subject to 

setting one of three MOOP types as MA 

plans are) instead, the lowest costsharing limit under Alternative 1 is 

considered for all Cost Plans (as shown 

in tables 41 and 42). 

• The illustrative dollar limits only 

reflect actuarially equivalent values to 

the alternative cost-sharing standards, 

not the baseline standards. This is 

because the current (baseline) standards 

derive from § 417.454 and longstanding 

dollar limits applied to Cost Plans for 

behavioral health services (as shown in 

tables 41 to 45). 

Tables 46 and 47 specify—by service 

category—the number and percent of 

contract year 2023 and 2024 MA plans 

that: (1) established cost sharing 

amount(s) exceeding the cost-sharing 

limit applied to plans with a mandatory 

MOOP type for that contract year and 

service category; and (2) switched to a 

lower or intermediate MOOP type from 

a mandatory MOOP type in the prior 

contract year. CMS developed these 

tables to assess how each alternative 

may impact the number of MA plans 

that offer lower MOOP amounts in 

future contract years. We make this 

assessment for each alternative based on 

our evaluation in the narratives of how 

and to what extent tables 41 and 42 

suggest that differentiated behavioral 

health cost-sharing limits (beginning in 

contract year 2023 370) may have 

incentivized MA plans to adopt lower 

MOOP amounts for contract year 2023 

and 2024. Corresponding tables for Cost 

Plans are not applicable under this 

proposal. 

Tables 33, 48, 49, 52 A through C, and 

53 (MA plans and enrollees) and tables 

34, 50, 51, 54, and 55 (Cost Plans and 

enrollees) evaluate contract year 2024 

plan and enrollee data 371 by behavioral 

health service category. Specifically— 

• Tables 48 and 49 (MA) and tables 

50 and 51 (Cost Plans) identify the 

percent of plans and enrollees with cost 

sharing amounts that are greater than 

the cost-sharing limits considered by 

each alternative. 

• Tables 33, 52A through C, and 53 

(MA) and tables 34, 54, and 55 (Cost 

Plans) specify: (1) the weighted average 

plan cost sharing amount for the plans 

identified with cost-sharing amounts 

that are greater than the cost-sharing 

limits considered by each alternative; 

and (2) the difference between those 

weighted average plan cost sharing 

amounts and the cost-sharing standards 

posed by each alternative. 

In essence, tables 33, 47,48, 52A 

through C, and 53 (MA plans and 


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372While this alternative continues current policy 

to set the ‘‘inpatient hospital psychiatric services’’ 

service category cost-sharing limits for the 

intermediate MOOP type, this approach effectively 

lowers the cost-sharing limits for this MOOP type 

because the numeric midpoint would reflect a 

lower value from the changes considered to the 

cost-sharing standards for the mandatory and lower 

MOOP types. 

enrollees) and tables 34, 50, 51, 54, and 

55 (Cost Plans and enrollees) 

approximate the: (1) proportion of plans 

that may lower cost sharing; (2) 

proportion of enrollees that may be in 

those plans and experience that lower 

cost sharing; and (3) weighted average 

reduction in plan cost sharing that may 

occur for each behavioral health service 

category (as possible) and alternative. 

As a result, in the narratives in section 

VII.E.3.d. of this proposed rule, we 

consider the information in these tables 

to reflect an estimate of each 

alternative’s potential impact on MA 

and Cost Plans and enrollees based on 

the most recent Medicare FFS and plan 

data available. 

d. Alternatives Considered for 

Behavioral Health Service Category 

Cost-Sharing Limits 

In this section CMS summarizes the 

MA and Cost Plan cost-sharing 

standards considered by each 

alternative, evaluates the potential and 

definitive consequences of each 

alternative in comparison to the other 

alternatives, and provides rationale for 

our decision to propose the behavioral 

health cost-sharing standards 

considered under Alternative 3. 

(1) Alternative 1 

In this alternative, CMS considered 

MA behavioral health service category 

cost-sharing standards for contract year 

2026 and future years that would: (1) 

maintain or increase the amount of costsharing incentive MA plans have to 

offer lower MOOP types; and (2) result 

in lower behavioral health cost-sharing 

limits for all MOOP types in comparison 

to the limits that would apply based on 

the existing cost-sharing standards in 

current regulations. As discussed in the 

April 2022 final rule, CMS set a 

transition to a range of cost-sharing 

limits for professional services 

proportionate to each MOOP type by 

contract year 2026 to incentivize MA 

organizations to offer plans with lower 

MOOP amounts. This alternative takes a 

similar approach by applying behavioral 

health service category cost-sharing 

standards that are unique to each MOOP 

type, with the lower MOOP types 

retaining the most cost-sharing 

flexibilities. To apply this alternative to 

Cost Plans (which lack MOOP types), 

we considered applying the lowest costsharing standard that was considered for 

MA plans (those with a mandatory 

MOOP type). 

(a) Specific Cost-Sharing Standards 

Considered 

This alternative considers the 

following MA cost-sharing standards for 

the professional behavioral health 

service categories (mental health 

specialty services, psychiatric services, 

partial hospitalization, outpatient 

substance use disorder services, and 

opioid treatment program services): 

• Lower MOOP Type: Cost sharing no 

greater than Traditional Medicare 

(which is 20 percent coinsurance or an 

actuarially equivalent copayment, 

except for the ‘‘opioid treatment 

program services’’ service category 

which has no cost sharing in Traditional 

Medicare). 

• Intermediate MOOP Type: 15 

percent coinsurance (or an actuarially 

equivalent copayment). 

• Mandatory MOOP Type: 10 percent 

coinsurance (or an actuarially 

equivalent copayment). 

The 10 percent coinsurance (or an 

actuarially equivalent copayment) 

would apply to all Cost Plans for the 

same professional behavioral health 

service categories under this alternative. 

In addition, this alternative considers 

setting the ‘‘inpatient hospital 

psychiatric services’’ service category 

dollar limits (all length of stay 

scenarios) for MA plans based on the 

following: 

• Lower MOOP Type: Cost sharing no 

greater than Traditional Medicare (100 

percent of estimated Medicare FFS cost 

sharing). 

• Intermediate MOOP Type: the 

numeric midpoint between the costsharing limits set for the lower and 

mandatory MOOP types (continuing 

current policy 372). 

• Mandatory MOOP Type: 50% of 

estimated Medicare FFS cost sharing. 

The 50 percent estimated Medicare 

FFS cost sharing amount for MA plans 

with a mandatory MOOP type would 

also apply to all Cost Plans for the same 

‘‘inpatient hospital psychiatric services’’ 

service categories under this alternative. 

As a result, this alternative results in: 

(1) proportionate cost-sharing limits for 

each MOOP type for MA plans; and (2) 

meaningful decreases to the existing 

behavioral health cost-sharing standards 

in current regulations for contract year 

2026 and future years (which in some 

cases go up to 50 percent coinsurance or 

an actuarially equivalent copayment) for 

MA and Cost Plans. For example, the 

professional behavioral health MA costsharing standards consistently decrease 

by a coinsurance increment of 5 percent 

between MOOP types (with the 

mandatory MOOP type receiving the 

least cost-sharing flexibility) under this 

alternative. 

(b) Evaluation 

In comparison to the existing costsharing standards in current regulations 

and the other alternatives in this 

section, this alternative considers the 

lowest behavioral health cost-sharing 

limits for MA and Cost Plans (with one 

exception for the opioid treatment 

program service category where 

alternative 3 results in a lower, zerodollar cost-sharing requirement as 

shown in tables 39 and G18). For 

example, as shown in table 36 for MA 

plans, this alternative results in a $25 

copayment limit for the ‘‘mental health 

specialty services’’ service category. 

This is $10 to $45 less than the 

copayment limits that would result for 

that service category and MOOP type if 

the existing MA cost-sharing standards 

or other alternatives were used. As 

another example, as shown in table 38 

for MA plans, this alternative decreases 

the dollar limit for the 15-day length of 

stay scenario of the ‘‘inpatient hospital 

psychiatric services’’ service category 

and intermediate MOOP type by $826 in 

comparison to the current regulatory 

MA cost-sharing standard. This is the 

most significant decrease because 

alternatives 2 and 3 reflect decreases 

from the current regulatory MA costsharing standard of only $55 and $275, 

respectively—for the same service 

category, length of stay, and MOOP 

type. Tables 37, 39, and 40 (MA plans) 

and tables 41 to 43, and 45 (Cost Plans) 

reflect similar findings for additional 

behavioral health service categories. 

This alternative improves upon the 

existing cost-sharing incentives for MA 

plans to offer lower MOOP types 

because it considers— 

• Adding two service categories that 

have differentiated cost-sharing limits 

by MOOP type (opioid treatment 

program services and outpatient 

hospital substance use disorder 

services), 

• Increasing the value of each 

inpatient hospital psychiatric services 

cost-sharing incentive by: (1) lowering 

all the cost-sharing limits; and (2) 

increasing the cost-sharing limit 

differentiation between the MOOP types 

from a coinsurance increment of 25 to 

50 percent; and 

• Nominal reductions to the costsharing limit differentiation between the 

MOOP types for the professional service 

categories from a coinsurance increment 

of 10 to 5 percent. 


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373As discussed in section VII.E.3.c. of this 

proposed rule, in this context utilizing a cost 

sharing flexibility means the plan established a cost 

sharing amount for a service category that is greater 

than the applicable cost-sharing limit set for the 

mandatory MOOP type. 

374The number and percentage of plans that 

utilized each service category cost sharing 

flexibility do not total to 100% as most plans that 

switched utilized cost-sharing flexibilities from 

multiple service categories. 

In contrast, the other alternatives 

consider cost-sharing standards that 

apply to all MOOP types equally and 

thus do not retain or improve the 

existing behavioral health cost-sharing 

incentives for MA plans to establish 

lower MOOP amounts. 

Despite these improvements to the 

cost-sharing incentives, CMS believes 

this alternative would not result in 

substantially more MA plans choosing 

to establish lower MOOP amounts in 

future contract years in comparison to 

the effects that alternative 2 and 3 might 

pose. This is because, as supported by 

tables 41 and 42, the driving force for 

MA plans to switch to lower MOOP 

types in contract year 2023 and 2024 

seems to be the ability to utilize costsharing flexibilities for emergency 

services. For example, as shown in table 

41, of the MA plans that switched from 

a mandatory MOOP type to a lower or 

intermediate MOOP type in contract 

year 2024, the percent of plans that 

utilized 373 cost-sharing flexibilities was 

about—: 

• 86 percent: emergency services; 

• 39 percent: partial hospitalization; 

• 20 percent: skilled nursing 

facility—first 20 days; 

• 19 percent: inpatient hospital 

psychiatric—8-day length of stay 

scenario; 

• 12 percent: urgently needed 

services; and 

• Less than percent for all other 

service categories. 

CMS takes these percentages 374 of 

utilization as evidence that the costsharing flexibilities for emergency 

services and other non-behavioral 

health service categories may, by 

themselves, offer sufficient incentive for 

a similar proportion of MA plans to 

offer lower MOOP types in future years. 

Based on tables 33, 48, 49, 52, and 53, 

CMS expects this alternative, in 

comparison to the potential effects from 

the other alternatives, would result in: 

(1) the most MA plans and enrollees 

experiencing lower behavioral health 

cost sharing than prior contract years; 

and (2) the greatest decreases in plan 

cost sharing for most behavioral health 

service categories. For example, based 

on contract year 2024 MA plan data and 

the cost-sharing standards posed by this 

alternative, we estimate that—for the 

‘‘psychiatric services’’ service 

category—of MA plans that continue in 

contract year 2026 and maintain a 

mandatory MOOP type are as follows: 

• About 48 percent of plans would 

have to reduce their cost sharing (as 

shown in table 48). 

• About 45 percent of enrollees could 

experience this reduction in cost 

sharing (as shown in table 49). 

• The enrollees in those plans could 

experience a reduction in cost sharing— 

on average—of about $19 per visit (as 

shown in table 52C, from about $34 to 

$15 per visit). 

In comparison, as shown in tables 33, 

48, 49, and 53, the cost-sharing limits 

considered in alternatives 2 and 3 for 

this service category may impact fewer 

MA plans and enrollees and require less 

significant cost sharing decreases based 

on contract year 2024 plan data. 

Specifically, for the ‘‘psychiatric 

services’’ service category, we estimate 

that in response to alternative 2 and 3 

that of MA plans that continue in 

contract year 2026: 

• Less than 1 percent and about 25 

percent of plans would have to reduce 

their cost sharing, respectively (as 

shown in table 48). 

• About 1 percent and 22 percent of 

enrollees could experience this 

reduction in cost sharing, respectively 

(as shown in table 49). 

• The enrollees in those plans could 

experience a reduction in cost sharing— 

on average—of about $10 per visit for 

alternative 2 (as shown in table 53) or 

about $7 per visit for alternative 3 (as 

shown in table 33). 

Based on tables 34, 50, 51, 54, and 55, 

CMS also expects this alternative, in 

comparison to the potential effects from 

the other alternatives, would result in 

the most Cost Plans and enrollees 

experiencing: (1) lower behavioral 

health cost sharing than prior contract 

years; and (2) greater decreases in plan 

cost sharing for most behavioral health 

service categories. For example, based 

on contract year 2024 Cost Plan data 

and the cost-sharing standards posed by 

this alternative, we estimate that—for 

the ‘‘mental health specialty services’’ 

service category—of Cost Plans that 

continue in contract year 2026: 

• About 20 percent of plans would 

have to reduce their cost sharing (as 

shown in table 50). 

• About 13 percent of enrollees could 

experience this reduction in cost 

sharing (as shown in table 51). 

• The enrollees in those plans could 

experience a reduction in cost sharing— 

on average—of about $17 per visit (as 

shown in table 54, from about $32 to 

$15 per visit). 

In comparison, as shown in tables 34, 

50, 51, and 55, the cost-sharing limits 

considered in alternatives 2 and 3 for 

this service category may impact fewer 

Cost Plans and enrollees and require 

less significant cost sharing decreases 

based on contract year 2024 plan data. 

Specifically, for the ‘‘mental health 

specialty services’’ service category, we 

estimate that in response to alternative 

2 and 3 that of Cost Plans that continue 

in contract year 2026: 

• 0 percent and about 8 percent of 

plans would have to reduce their cost 

sharing, respectively (as shown in table 

50). 

• 0 percent and about 3 percent of 

enrollees could experience this 

reduction in cost sharing, respectively 

(as shown in table 51). 

• The enrollees in those plans could 

experience a reduction in cost sharing— 

on average—of about $0 per visit for 

alternative 2 (as shown in table 55) or 

about $5 per visit for alternative 3 (as 

shown in table 34). 

Given the information in tables 33, 48, 

49, 52, and 53 (MA plans) and tables 34, 

50, 51, 54, and 55 (Cost Plans), this 

alternative (in comparison to the other 

alternatives in this section) has the most 

potential to improve the affordability of 

behavioral health services for enrollees. 

However, CMS believes this potential 

could pose significant disruption to MA 

plans’ bidding process. This is because, 

the contract year 2024 plan data 

findings in these tables suggest that 

most continuing plans would have to 

significantly change their benefit 

designs to come into compliance with 

the cost-sharing standards posed by this 

alternative. We are also concerned that 

setting behavioral health service 

category cost-sharing limits for multiple 

MOOP types at amounts that are less 

than the cost sharing in Traditional 

Medicare for those benefits would 

impact an MA plan’s ability to meet all 

other cost-sharing requirements 

(including overall bid actuarial 

equivalence to Traditional Medicare, as 

discussed in section III.L. of this 

proposed rule). In combination, this 

alternative could result in a proportion 

of MA and Cost Plans leaving the 

market. 

(c) CMS Decision 

We reject this alternative because 

CMS has concerns about whether this 

alternative would pose disruption 

significant enough to possibly cause MA 

and Cost Plan exits to the detriment of 

the overall market. 

(2) Alternative 2 

In this alternative, CMS considered 

proposing behavioral health costVerDate Sep<11>2014 17:31 Dec 09, 2024 Jkt 262001 PO 00000 Frm 00196 Fmt 4701 Sfmt 4702 E:\FR\FM\10DEP2.SGM 10DEP2

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375The existing contract year 2026 and future 

years inpatient hospital psychiatric cost-sharing 

limit for MA plans with an intermediate MOOP 

type in current regulations is based on the numeric 

midpoint of the dollar limits set for the lower and 

mandatory MOOP types for each length of stay 

scenario. In assessing the midpoint of the 

methodology to set the dollar limits for the lower 

and mandatory MOOP types we note this is 

approximately 112.5% of estimated Medicare FFS 

cost sharing and above the 110% value posed under 

this alternative. 

376The existing contract year 2026 and future 

years inpatient hospital psychiatric cost-sharing 

limit for the mandatory MOOP type in current 

regulations is based on 100% of estimated Medicare 

FFS cost sharing while this alternative calculates 

dollar limits for all MOOP types using 110% of 

estimated Medicare FFS cost sharing. 

sharing standards that would: (1) be less 

likely to result in MA and Cost Plans 

exiting the market in comparison to 

alternative 1 (by considering limits 

greater than those considered by 

alternative 1); and (2) still represent a 

decrease in comparison to the existing 

contract year 2026 and future year 

behavioral health cost-sharing standards 

in current regulations. 

(a) Specific Cost-Sharing Standards 

Considered 

Specifically, CMS considered the 

following behavioral health service 

category cost sharing limits for all MA 

and Cost Plans under this alternative: 

• 30 percent coinsurance or 

actuarially equivalent copayment for 

mental health specialty services, 

psychiatric services, partial 

hospitalization, opioid treatment 

program services, and outpatient 

hospital substance use disorder services. 

• 110 percent of estimated Medicare 

FFS cost sharing, including the 

projected Part A deductible and related 

Part B costs, to set the cost sharing 

dollar limits for each inpatient hospital 

psychiatric length of stay scenario. 

These values (30 percent coinsurance 

and 110 percent of estimated Medicare 

FFS cost sharing) are lower than the 

existing contract year 2026 and future 

year behavioral health cost-sharing 

regulatory requirements for both MA 

plans (with lower and intermediate 

MOOP types) and Cost Plans.375

However, for MA plans with a 

mandatory MOOP type compared to 

current regulations this alternative 

results in: (1) increases to the inpatient 

hospital psychiatric dollar limits (all 

length of stay scenarios); (2) a reduction 

in cost sharing from 50 percent 

coinsurance to 30 percent coinsurance 

for opioid treatment program services 

and outpatient hospital substance use 

disorder services; and (3) no change to 

the cost-sharing standards for the other 

three service categories.376 This is 

because this alternative considers costsharing standards that are greater than 

alternative 1 (which went up to 100 

percent of estimated Medicare FFS cost 

sharing to set the inpatient hospital 

psychiatric service category dollar limits 

and up to 20 percent for the other 

behavioral health service categories for 

the lower MOOP type). 

(b) Evaluation 

In most cases, this alternative 

considers the smallest decreases from 

the behavioral health service category 

cost-sharing limits that exist in the 

current regulations for MA and Cost 

Plans. For example, as shown in table 

37 for MA plans, this alternative results 

in a $90 copayment limit for the partial 

hospitalization service category (all 

MOOP types) which is $0 to $60 less 

than the copayment limits that would 

result for that service category 

(depending on MOOP type) if the 

existing cost-sharing standards were 

used. In comparison, alternative 1 

would result in copayment limits 

ranging from $30 to $60 depending on 

MOOP type and alternative 3 would 

result in a $60 copayment limit for the 

same service category (all MOOP types). 

Using another example from table 40 

(for MA plans), the $45 copayment limit 

for the ‘‘outpatient substance use 

disorder services’’ service category 

posed by this alternative reflects a 

decrease of $30 from the current 

regulatory cost-sharing standard ($75, 

all MOOP types). In comparison, the 

copayment limits resulting from 

alternatives 1 and 3 ($15 to $30, 

depending on MOOP type and $30 all 

MOOP types, respectively) reflect more 

significant decreases from the current 

regulatory cost-sharing standard for the 

same service category (decreases 

between $60 to $45, depending on 

MOOP type and $45 all MOOP types, 

respectively). Tables 36 and 39 (MA 

plans) and tables 43 to 45 (Cost Plans) 

reflect similar findings for additional 

service categories. 

In contrast, table 38 highlights a case 

where this alternative would result in 

an increase to the existing inpatient 

hospital psychiatric cost-sharing 

standards in current regulations for MA 

plans. For example, as shown in table 

38, this alternative would increase the 

percent of estimated Medicare FFS cost 

sharing that determines the dollar limits 

for the 15-day length of stay scenario of 

the ‘‘inpatient hospital psychiatric 

services’’ service category for an MA 

plan that establishes a mandatory 

MOOP amount from 100 percent (or a 

$2,204 dollar limit based on the current 

regulations at § 422.100(f)(6)(iv)) to 110 

percent or $2,424. As shown in table 38 

for the same length of stay scenario and 

MOOP type, alternative 1 would lower 

the percent of estimated Medicare FFS 

cost sharing to 50 percent or $1,102 and 

alternative 3 would retain the current 

regulatory standard of 100 percent 

estimated Medicare FFS cost sharing or 

$2,204. As a result, tables 36 to 40 show 

that this alternative would create some 

decreases and increases to the 

behavioral health service category costsharing limits (depending on the MA 

plan’s MOOP type) in comparison to the 

existing contract year 2026 and future 

year MA cost-sharing standards in 

current regulations. 

While this alternative applies costsharing limits consistently across all 

MOOP types, we expect this alternative 

would not substantially impact the 

number of MA plans switching to lower 

MOOP types in future years for multiple 

reasons. First, as discussed in relation to 

alternative 1 in this section, tables 46 

and 47 show that most MA plans that 

switched from a mandatory MOOP type 

to lower MOOP types in contract year 

2023 and 2024 did not utilize the 

behavioral health cost-sharing 

flexibilities available to them. Second, 

the most utilized cost-sharing flexibility 

by the plans that switched to lower 

MOOP types in those contract years— 

emergency services—would not be 

impacted by this alternative and 

increasing flexibility in the dollar limits 

for this category in future years are 

memorialized in § 422.113(b)(2)(v). As a 

result, we expect the emergency services 

cost-sharing flexibility will continue to 

be a significant incentive for MA plans 

to consider switching to lower MOOP 

types. Thirdly, we believe other factors 

such as principles and incentives 

inherent in managed care, effective 

negotiations between MA organizations 

and providers, and competition are 

considered by MA organizations when 

making determinations for their plan’s 

design, including MOOP type. As a 

result, we do not believe the potential 

concern about this alternative adversely 

impacting the number of plans offering 

lower MOOP amounts in future years is 

as significant as it might otherwise be. 

Tables 48 and 49 show that less than 

5 percent of MA plans and enrollees 

would have lower cost sharing for the 

majority of the behavioral health service 

categories if this alternative was 

selected based on the cost sharing 

amounts plans established for contract 

year 2024. For example, based on 

contract year 2024 MA plan data and 

the cost-sharing standards posed by this 

alternative, we estimate that—for the 

partial hospitalization service 

category—of MA plans that continue in 

contract year 2026: 


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• About 3 percent of plans would 

have to reduce their cost sharing (as 

shown in table 48). 

• About 3 percent of enrollees could 

experience this reduction in cost 

sharing (as shown in table 49). 

• The enrollees in those plans could 

experience a reduction in cost sharing— 

on average—of about $10 per day (as 

shown in table 53, from $100 to $90). 

As shown in tables 33, 48, 49, and 52, 

the cost-sharing limits considered in 

alternatives 1 and 3 for this service 

category may impact substantially more 

MA plans and enrollees and require 

more substantive cost sharing decreases 

based on contract year 2024 MA plan 

data. Specifically, for the partial 

hospitalization service category, we 

estimate that in response to alternative 

1 and 3 that of MA plans that continue 

in contract year 2026 are as follows: 

• About 59 percent and 23 percent of 

plans would have to reduce their cost 

sharing, respectively (as shown in table 

48). 

• About 50 percent and 16 percent of 

enrollees could experience this 

reduction in cost sharing, respectively 

(as shown in table 49). 

• The enrollees in those plans could 

experience a reduction in cost sharing— 

on average—between $17 and $35 

(depending on their plan’s MOOP type 

for alternative 1 as shown in tables 52A 

through 52C) or $21 for alternative 3 (as 

shown in table 33). 

A similar comparison can be made for 

Cost Plans. Tables 41 and 42 show that 

0 percent of Cost Plans and enrollees 

would have lower cost sharing for all of 

the behavioral health service categories 

if this alternative was selected based on 

the cost sharing amounts plans 

established for contract year 2024. In 

contrast, as shown in tables 34, 50, 51, 

and 54, the cost-sharing limits 

considered in alternatives 1 and 3 for 

this service category may impact 

substantially more Cost Plans and 

enrollees and require more substantive 

cost sharing decreases based on contract 

year 2024 Cost Plan data. For example, 

for the ‘‘outpatient substance use 

disorder services’’ service category, we 

estimate that in response to alternative 

1 and 3 that of Cost Plans that continue 

in contract year 2026 are as follows: 

• About 20 percent and 5 percent of 

plans would have to reduce their cost 

sharing, respectively (as shown in table 

50). 

• About 13 percent and 1 percent of 

enrollees could experience this 

reduction in cost sharing, respectively 

(as shown in table 51). 

• The enrollees in those plans could 

experience a reduction in cost sharing— 

on average—of $15 (for alternative 1 as 

shown in table 54) or $10 for alternative 

3 (as shown in table 34). Based on our 

evaluation of tables 33, 48, 49, 52, and 

53 (MA plans) and tables 34, 50, –51, 

54, and –55 (Cost Plans), CMS expects 

this alternative: (1) would result in 

nominal decreases to plan cost sharing 

for most behavioral health cost sharing 

services for a small proportion of plans 

and enrollees; and (2) has the least 

potential to improve the affordability of 

behavioral health services for enrollees 

in comparison to the other alternatives. 

(c) CMS Decision 

We reject this alternative to apply 

another approach that would better 

address the potential financial barriers 

enrollees may face to access equitable 

and high-quality behavioral health 

services while still minimizing the 

potential for MA plans’ exits to the 

overall detriment of the market. 

(3) Alternative 3 (Proposed) 

In this alternative and proposed 

approach, CMS considered behavioral 

health cost-sharing standards that 

would— 

• Be more likely to result in a greater 

proportion of enrollees experiencing 

lower behavioral health cost sharing 

than alternative 2 (based on contract 

year 2024 plan data); and 

• Not be as significantly different as 

alternative 1 in comparison to: (1) the 

existing cost-sharing standards in 

current regulations for contract year 

2026 and future years; and (2) plan cost 

sharing amounts based on the contract 

year 2024 weighted average plan cost 

sharing of plans with cost sharing 

amounts above the standards considered 

for the behavioral health service 

categories. 

In essence, this proposed alternative 

aims to strike a better balance in 

comparison to alternative 1 and 2 

between: (1) improving the affordability 

of behavioral health services for 

enrollees in a timely manner; and (2) 

minimizing disruption to MA and Cost 

Plan enrollees’ access to care and 

coverage options. 

(a) Specific Cost-Sharing Standards 

Considered 

This alternative (proposal) considers 

adding categories of behavioral health 

services to the list of services at 

§§ 417.454(e) and § 422.100(j)(1) for 

which Cost Plans and MA plans 

(including EGWPs) in-network cost 

sharing must be no greater than that in 

Traditional Medicare. Specifically, the 

following Traditional Medicare cost 

sharing amounts would apply as a costsharing limit to all MA and Cost Plans 

under this alternative: 

• 20 percent coinsurance or 

actuarially equivalent copayment for 

mental health specialty services, 

psychiatric services, partial 

hospitalization, opioid treatment 

program services, and outpatient 

hospital substance use disorder services. 

• 100 percent of estimated Medicare 

FFS cost sharing, including the 

projected Part A deductible and related 

Part B costs, to set the cost-sharing 

dollar limits for each inpatient hospital 

psychiatric length of stay scenario. 

• Zero cost sharing for the ‘‘opioid 

treatment program services’’ service 

category. 

This proposed alternative results in 

cost-sharing limits that are lower than 

the existing cost-sharing limits for 

contract year 2026 and future years in 

the current regulations for all service 

categories and MA MOOP types (with 

one exception). The exception is that 

continuing MA plans with a mandatory 

MOOP type would retain a cost-sharing 

limit equal to cost sharing under 

Traditional Medicare for inpatient 

hospital psychiatric services (all length 

of stay scenarios) and experience no 

changes if this proposed alternative is 

finalized. However, if this proposal is 

finalized and Traditional Medicare 

changes the cost sharing amount for one 

of the behavioral health service 

categories subject to § 417.454(e) or 

§ 422.100(j)(1), the new Traditional 

Medicare cost sharing amount would 

apply as the limit for that category. 

(b) Evaluation 

This alternative considers—with a 

few exceptions—behavioral health costsharing limits that are: (1) less than the 

existing cost-sharing standards for 

contract year 2026 and future years and 

the standards considered by alternative 

2; and (2) greater than the standards 

considered by alternative 1. 

Specifically, applying either this 

alternative or alternative 1 result in the 

same cost-sharing limits for MA plans 

with the lower MOOP type in the 

‘‘mental health specialty services’’, 

partial hospitalization, ‘‘inpatient 

hospital psychiatric services’’, and 

‘‘outpatient substance use disorder 

services’’ service categories. However, 

as shown in tables 27 to 31, the 

differences between this alternative and 

alternative 1 are substantive for MA 

plans with one of the other MOOP 

types. For example, as shown in table 36 

(MA plans), this alternative results in a 

$35 copayment limit for the ‘‘mental 

health specialty services’’ service 

category—a decrease of $15 to $50 

(depending on the MA plan’s MOOP 

type) in comparison to the copayment 

limits that would result for that service 


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377 Kelly JF, Greene MC, Bergman BG, White WL, 

Hoeppner BB. How Many Recovery Attempts Does 

it Take to Successfully Resolve an Alcohol or Drug 

Problem? Estimates and Correlates From a National 

Study of Recovering U.S. Adults. Alcohol Clin Exp 

Res. 2019 Jul;43(7):1533–1544. doi: 10.1111/ 

acer.14067. Epub 2019 May 15. PMID: 31090945; 

PMCID: PMC6602820. 

378Substance Abuse and Mental Health Services 

Administration (US); Office of the Surgeon General 

(US). Facing Addiction in America: The Surgeon 

General’s Report on Alcohol, Drugs, and Health 

[internet]. Washington (DC): US Department of 

Health and Human Services; 2016 Nov. CHAPTER 

7, VISION FOR THE FUTURE: A PUBLIC HEALTH 

APPROACH. Available from: https://www.ncbi.nlm.

nih.gov/books/NBK424861/. 

379See table 9 and 10 on page 25850 and 25851 

from, ‘‘Patient Protection and Affordable Care Act, 

HHS Notice of Benefit and Payment Parameters for 

2024’’ final rule published April 27, 2023. Retrieved 

from: https://www.federalregister.gov/documents/ 

2023/04/27/2023-08368/patient-protection-andaffordable-care-act-hhs-notice-of-benefit-andpayment-parameters-for-2024. 

category if the existing cost-sharing 

standards were used ($85 to $50). In 

contrast, the copayment limits for this 

service category resulting from 

alternatives 1 and 2 are $35 to $15 

(depending on the MA plan’s MOOP 

type) and $50, respectively. As a result, 

this alternative results in a copayment 

limit for the ‘‘mental health specialty 

services service category’’ that is: (1) 

less than the existing cost-sharing 

standards in current regulations and the 

standards considered by alternative 2 

for all MA MOOP types; and (2) greater 

than the standards considered by 

alternative 1—excluding the lower 

MOOP type (where the standards are 

equivalent). In addition, as shown in 

tables 41 to 45, this alternative results 

in cost-sharing standards for Cost Plans 

that are greater than the standards 

considered by alternative 1 for all 

behavioral health service categories— 

excluding opioid treatment program 

services. 

As shown in tables 38 and 43, this 

alternative results in a dollar limit of 

$2,204 for the 15-day length of stay 

scenario of the ‘‘inpatient hospital 

psychiatric services’’ service category 

(for MA and Cost Plans). In comparison, 

the dollar limits that would result for 

this service category and length of stay 

scenario using the existing cost-sharing 

standards or alternative 1 or 2 are: 

$2,204 to $2,755 (depending on MOOP 

type or $2,204 for Cost Plans), $1,102 to 

$2,204 (depending on MOOP type or 

$1,102 for Cost Plans), and $2,424 (MA 

and Cost Plans), respectively. As a 

result, this alternative results in a dollar 

limit for the 15-day length of stay 

scenario of the ‘‘inpatient hospital 

psychiatric services’’ service category 

that is: (1) less than the existing MA 

cost-sharing standards in current 

regulations—excluding the mandatory 

MOOP type (where the standards are 

equivalent); (2) different from the 

longstanding 50 percent coinsurance (or 

actuarially equivalent copayment) 

standard applied to Cost Plans; (3) less 

than the standard considered by 

alternative 2 for MA and Cost Plans; and 

(4) greater than the standards 

considered by alternative 1—excluding 

the lower MOOP type (where the 

standards are equivalent). 

Based on tables 36 through 38 and 40 

(MA plans) and tables 41 through 43 

and 45, this alternative does not pose as 

significant a decrease from the existing 

contract year 2026 and future year 

behavioral health cost-sharing 

regulatory requirements as alternative 1 

(which considered, at the lowest, costsharing limits of 10 percent coinsurance 

for the professional behavioral health 

service categories and 50 percent of 

estimated Medicare FFS cost sharing for 

inpatient hospital psychiatric services 

for the mandatory MOOP type). The 

exception to this finding is for the 

‘‘opioid treatment program services’’ 

service category. As shown in tables 39 

and 44, this alternative presents the 

most substantial decrease from the 

existing cost-sharing standards for the 

‘‘opioid treatment program services’’ 

service category cost-sharing limit in 

comparison to the other alternatives. 

Specifically, based on the current 

regulations for contract year 2026 and 

future years, this alternative would 

lower the ‘‘opioid treatment program 

services’’ service category cost-sharing 

limit from 50 percent coinsurance (or a 

$155 actuarially equivalent copayment 

limit for all MA plans) to zero cost 

sharing. In contrast, for the same service 

category, the other alternatives would 

result in the following: 

• MA plans: alternative 1 would 

lower the cost-sharing limit to 20 

percent coinsurance (or $60) to 10 

percent coinsurance (or $30), depending 

on MOOP type, and alternative 2 would 

lower it to 30 percent coinsurance or 

$95. 

• Cost Plans: alternative 1 would 

lower the cost-sharing limit to 10 

percent coinsurance (or $30) and 

alternative 2 would lower it to 30% 

coinsurance or $95. 

While this decrease is substantial in 

comparison to the other alternatives, 

research finds that patients with severe 

alcohol and other drug problems report 

completing only two serious recovery 

attempts (median) before remission.377

In addition, a study shows that every 

dollar spent on substance use disorder 

treatment saves $4 in health care 

costs.378 As a result, CMS believes that 

the cost liability to cover opioid 

treatment program services with zero 

cost sharing is not as much of a concern 

as it otherwise would be for a highly 

utilized service (such as physical 

therapy) and applying zero cost sharing 

could have a significant positive impact 

on enrollees’ ability to access those 

services. We also note the illustrative 

dollar limits for the behavioral health 

service categories in tables 36 to 45 are 

similar to cost sharing for these services 

in qualified health plans (QHPs) in the 

marketplace. For example, QHPs are 

required to offer standardized options 

for 2024 with set copayments for mental 

health and substance use disorder 

outpatient office visits that range 

between $0 and $50 based on the plan 

level (for example, bronze or silver).379

Similar to alternative 2, this 

alternative does not retain or improve 

the existing cost-sharing incentives for 

MA plans to establish lower MOOP 

amounts because the proposed 

behavioral health cost-sharing standards 

would apply equally to all MOOP types. 

However, as discussed in detail in 

section VII.E.3.d.(2). of this proposed 

rule, we believe the cost-sharing 

standards considered by alternative 2 or 

this proposal will not significantly affect 

the number of plans choosing to offer 

lower MOOP amounts in future years. 

Our primary rationale for this belief is 

because, as supported by tables 46 and 

47, the driving factor for contract year 

2023 and 2024 plans to switch to lower 

MOOP types seems to focus on the 

ability to access cost-sharing flexibilities 

for emergency services more so than any 

other service category. 

The percent of contract year 2024 MA 

plans and enrollees that have higher 

behavioral health service category cost 

sharing compared to this alternative is 

shown in tables 48 and 49. In summary, 

we note the following: 

• Less than 5 percent of MA plans 

and enrollees have cost sharing that is 

greater than this proposal for the 

inpatient hospital psychiatric service 

category (including all length of stay 

scenarios). 

• About a quarter of MA plans (23 to 

25 percent), representing between 16 

and 22 percent of enrollees, have cost 

sharing greater than this alternative for 

most of the professional health service 

categories (mental health specialty 

services, psychiatric services, partial 

hospitalization), depending on the 

specific service category. 

• About half of MA plans and 

enrollees (42 and 41 percent, 

respectively), have cost sharing greater 

than this proposal for outpatient 

substance use disorder services. 

• Most MA plans (71 percent), 

representing approximately 62 percent 


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of enrollees, have cost sharing that is 

greater than this alternative for the 

‘‘opioid treatment program services’’ 

service category. 

In comparison, as shown in tables 48 

and 49—for most behavioral health 

service categories—over 40 percent of 

MA plans and enrollees have cost 

sharing amounts greater than alternative 

1 and less than 5 percent of MA plans 

and enrollees have cost sharing amounts 

greater than alternative 2. 

The percent of contract year 2024 Cost 

Plans and enrollees that have higher 

behavioral health service category cost 

sharing compared to this alternative 

(proposal) is shown in tables 50 and 51. 

In summary, we note the following: 

• No Cost Plans have cost sharing 

greater than this alternative for partial 

hospitalization. 

• Approximately 8 percent of plans, 

representing about 3 percent of 

enrollees, have cost sharing greater than 

this alternative for mental health 

specialty services. 

• About 13 percent of plans and 

enrollees, have cost sharing greater than 

this proposal for psychiatric services. 

• Fifty percent of plans, representing 

approximately 61percent of enrollees, 

have cost sharing that is greater than 

this alternative for the ‘‘opioid treatment 

program services’’ service category. 

In comparison, as shown in tables 50 

and 51—for most behavioral health 

service categories—over 12 percent of 

plans and enrollees have cost sharing 

amounts greater than alternative 1 and 

no plans or enrollees have cost sharing 

amounts greater than alternative 2. 

Table 33 demonstrates that this 

alternative may require plans to reduce 

cost sharing by nominal and more 

substantive amounts based on the 

service category, with one exception. 

This exception is that CMS does not 

expect MA plans would have to reduce 

cost sharing for the inpatient hospital 

psychiatric 60-day length of stay 

scenario because, as shown in table 39, 

no contract year 2024 plans established 

cost sharing for this category that is 

greater than this alternative’s limit. For 

example, based on contract year 2024 

MA plan data and the cost-sharing 

standards posed by this alternative, we 

estimate that—for the ‘‘outpatient 

substance use disorder services’’ service 

category—of MA plans that continue in 

contract year 2026: 

• About 42 percent of plans would 

have to reduce their cost sharing (as 

shown in table 48). 

• About 41 percent of enrollees could 

experience this reduction in cost 

sharing (as shown in table 49). 

• The enrollees in those plans could 

experience a reduction in cost sharing— 

on average—of about $30 per day (as 

shown in table 33, from $60 to $30). 

In comparison, as shown in tables 48, 

49, 52A through 52C, and 53 for the 

same service category, we estimate that 

in response to alternative 1 and 2 that 

of MA plans that continue in contract 

year 2026: 

• About 68 percent and 13 percent of 

plans would have to reduce their cost 

sharing, respectively (table 48). 

• About 64 percent and 17 percent of 

enrollees could experience this 

reduction in cost sharing, respectively 

(table 49). 

• The enrollees in those plans could 

experience a reduction in cost sharing— 

on average—between $22 and $38 per 

day (depending on their plan’s MOOP 

type for alternative 1 as shown in tables 

52A through 52C) or $44 per day for 

alternative 2 (as shown in table 53). 

Based on our evaluation of tables 33 

through 34 and tables 48 through 55, 

this alternative results in a more 

substantial proportion of MA and Cost 

Plan enrollees likely having lower 

behavioral health cost sharing in 

comparison to alternative 2 while not 

proposing such significant changes as to 

be more likely to disrupt coverage 

options in comparison to alternative 1. 

For example, CMS does not expect a 

majority of MA or Cost Plans would 

have to decrease their cost sharing 

amounts by a significant amount for 

most of the behavioral health service 

categories if this alternative/proposal is 

finalized. As a result, we expect these 

cost sharing changes would not directly 

result in a significant number of plans 

leaving the market and reducing 

coverage options for Medicare-eligible 

beneficiaries. 

(c) CMS Decision 

After considering alternatives 1 

through 3, we chose to propose applying 

cost sharing no greater than Traditional 

Medicare for the behavioral health 

service categories (alternative 3) as the 

cost-sharing standard for MA and Cost 

Plans beginning in contract year 2026. 

CMS’s goal, as indicated in the 

introduction of this section, is to 

propose a cost-sharing standard that 

strikes a balance between: (1) improving 

the affordability of behavioral health 

services for enrollees in a timely 

manner; and (2) minimizing disruption 

to MA enrollees access to care and 

coverage options. For the reasons 

discussed in this section and section 

III.L. of this proposed rule, we believe 

this alternative best strikes this balance. 

e. Summary Tables 

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4. Proposal To Require Clinical or 

Quality Improvement Standards for 

Provider Incentive and Bonus 

Arrangements To Be Included in the 

MA MLR Numerator (§ 422.2420(b)(2)) 

For our proposal to require clinical or 

quality improvement standards for 

provider incentive and bonus 

arrangements to be included in the MA 

MLR numerator, we considered two 

alternatives. 

First, we considered requiring MA 

organizations to submit documentation 

with their annual MLR Report 

demonstrating how bonuses and 

incentives included in the MLR 

numerator were tied directly to 

improved care quality. This approach 

would result in at least as many 

additional hours as our proposal, using 

the assumptions previously discussed, 

to produce the documentation necessary 

to justify the bonuses and incentives 

included in the MLR numerator. We 

estimate that it would take double the 

number of hours to prepare and submit 

such documentation, which would 

result in $105,672 ($52,836 × 2) 

additional aggregate burden for MA 

organizations. 

Second, we considered auditing 

bonuses and incentives included in the 

annual MLR Report for select MA 

organizations to confirm these expenses 

were tied directly to improved care 

quality. This approach would result in 

at least as many additional hours as our 

proposal, using the assumptions 

previously discussed, to prepare for and 

undergo an audit for these expenses. We 

estimate that it would take four times 

the number of hours to prepare and 

submit such documentation and work 

with auditors to validate the 

information provided in the MLR 

Report, which would result in $211,344 

($52,836 × 4) additional aggregate 

burden for MA organizations. This 

approach would also involve hiring 

additional staff or securing a contractor 

to complete this work on an annual 

basis. We estimate that it would take 

approximately one tenth the audit 

budget for a single MA organization 

($1,500,000 total budget/9 MA 

organizations budgeted = $166,666.67 

for a single audit) to audit these specific 

expenses, which would result in 

$16,666.67 additional aggregate burden 

for CMS per MA organization per year. 

We are not proposing the first 

alternative because we do not believe 

adding a requirement to our current 

MLR reporting process is beneficial. 

This additional step of preparing and 

submitting documentation on bonuses 

and incentives would create additional 

burden for MA organizations to generate 

and for CMS to review. MA 

organizations already attest to the 

accuracy of their MLR report, and the 

desk review process provides oversight 

of submissions on an annual basis that 

may or may not use this additional 

documentation depending on issues 

identified and addressed through the 

desk review process. 

CMS has the authority to conduct 

audits of MA organizations’ MLR 

reports. However, we are not proposing 

the second alternative because we 

believe conducting full audits of select 

MA organizations’ MLR reports would 

provide more information than auditing 

specific data elements alone. Smaller, 

more focused audits of bonuses and 

incentives would create additional 

burden for MA organizations to generate 

and for CMS to conduct, and this 

additional burden could outweigh the 

potential significance of findings and 

impact to MLR calculations reported. 

5. Proposal To Prohibit Administrative 

Costs From Being Included in Quality 

Improving Activities in the MA and Part 

D MLR Numerator (§§ 422.2430(a) and 

423.2430(a)) 

For our proposal to prohibit 

administrative costs from being 

included in quality improving activities 

in the MA and Part D MLR numerator, 

we considered two alternatives. 

First, we considered requiring MA 

organizations to submit documentation 

with their annual MLR Report 

describing all quality improving activity 

costs included in the MLR numerator. 

This approach would result in at least 

as many additional hours as our 

proposal, using the assumptions 

previously discussed, to produce the 

documentation necessary to describe all 

costs spent on quality improving 

activities included in the MLR 

numerator. We estimate that it would 

take double the number of hours to 

prepare and submit such 

documentation, which would result in 

$105,672 ($52,836 × 2) additional 

aggregate burden for MA organizations 

and Part D sponsors. 

Second, we considered auditing 

quality improving activity costs 

included in the annual MLR Report for 

select MA organizations and Part D 

sponsors to confirm these costs were not 

administrative in nature. This approach 

would result in at least as many 

additional hours as our proposal, using 

the assumptions previously discussed, 

to prepare for and undergo an audit for 

these costs. We estimate that it would 

take four times the number of hours to 

prepare and submit such documentation 

and work with auditors to validate the 

information provided in the MLR 

Report, which would result in $211,344 

($52,836 × 4) additional aggregate 

burden for MA organizations and Part D 

sponsors. This approach would also 

involve hiring additional staff or 

securing a contractor to complete this 

work on an annual basis. We estimate 

that it would take approximately one 

tenth the audit budget for a single MA 

organization or Part D sponsor 

($1,500,000 total budget/9 MA 

organizations and Part D sponsors 

budgeted = $166,666.67 for a single 

audit) to audit these specific costs, 

which would result in $16,666.67 

additional aggregate burden for CMS per 

MA organization or Part D sponsor per 

year. 

We are not proposing the first 

alternative because we do not believe 

adding a requirement to our current 

MLR reporting process is beneficial. 

This additional step of preparing and 

submitting documentation on quality 

improving activities would create 

additional burden for MA organizations 

and Part D sponsors to generate and for 

CMS to review. MA organizations and 

Part D sponsors already attest to the 

accuracy of their MLR report, and the 

desk review process provides oversight 

of submissions on an annual basis that 

may or may not use this additional 

documentation depending on issues 

identified and addressed through the 

desk review process. 

CMS has the authority to audit MA 

organizations and Part D sponsor’s MLR 

reports. However, we are not proposing 

the second alternative because we 

believe conducting full audits of select 

MA organizations and Part D sponsors’ 

MLR reports would provide more 

information than auditing specific data 

elements alone. Smaller, more focused 

audits of quality improving activities 

would create additional burden for MA 

organizations to generate and for CMS to 

conduct, and this additional burden 

could outweigh the potential 

significance of findings and impact to 

MLR calculations reported. 

6. Proposal To Establish Standards for 

MA and Part D MLR Audit 

Examinations (§§ 422.2480(d), 

423.2480(d), 422.2401, 423.2401, 

422.2450, 423.2450, 422.2452, 423.2452, 

423.2454, and 423.2454) 

For our proposal to establish 

standards for MA and Part D MLR audit 

examinations, we considered two 

alternatives. 

First, we considered requiring MA 

organizations and Part D sponsors to 

submit with the MLR Report 

documentation that details how the 

MLR calculation and remittances owed 

were determined each year. This 


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approach would result in at least as 

many additional hours as our proposal, 

using the assumptions previously 

discussed, to produce the 

documentation necessary to outline the 

entire MLR calculation. We estimate 

that it would take four times the number 

of hours to prepare and submit such 

documentation, which would result in 

$211,344 ($52,836 × 4) additional 

aggregate burden for MA organizations 

and Part D sponsors. 

Second, we considered auditing all 

MLR Reports for MA organizations and 

Part D sponsors that owed remittances 

for the previous reporting year. This 

approach would result in at least as 

many additional hours as our proposal, 

using the assumptions previously 

discussed, to prepare for and undergo 

an MLR audit. We estimate that it would 

take four times the number of hours to 

prepare and submit such documentation 

and work with auditors to validate the 

information provided in the MLR 

Report, which would result in $211,344 

($52,836 × 4) additional aggregate 

burden for MA organizations and Part D 

sponsors. This approach would also 

involve hiring additional staff or 

securing a contractor to complete this 

work on an annual basis. We estimate 

that it would take approximately three 

to four times the full audit budget 

($1,500,000 total budget) to audit all MA 

organizations and Part D sponsors that 

owed remittances for the previous 

reporting year, since 60 MA 

organizations and Part D sponsors owed 

remittances in contract year 2022 (about 

six times the number of MA 

organizations and Part D sponsors 

budgeted), which would result in 

$9,000,000 additional aggregate burden 

for CMS per year. 

We are not proposing the first 

alternative because we do not believe 

adding a requirement to our current 

MLR reporting process is beneficial. 

This additional step of preparing and 

submitting documentation on all MLR 

data elements would create additional 

burden for MA organizations and Part D 

sponsors to generate and for CMS to 

review. MA organizations and Part D 

sponsors already attest to the accuracy 

of their MLR report, and the desk review 

process provides oversight of 

submissions on an annual basis that 

may or may not use this additional 

documentation depending on issues 

identified and addressed through the 

desk review process. 

We are not proposing the second 

alternative because this approach would 

require significant funding and effort on 

behalf of MA organizations, Part D 

sponsors, and CMS. Our option to audit 

up to 9 MA organizations’ and Part D 

sponsors’ MLR reports contracts would 

take approximately 9 months to 1 year 

to complete. Auditing up to 60 MA 

organizations and Part D sponsors’ MLR 

reports would take, given the estimates 

above, at least 6 years to complete for 

a single contract year’s reporting. The 

number of MA organizations and Part D 

sponsors that ultimately owe 

remittances for failing to meet the 85 

percent threshold also changes year to 

year, making the ability to plan and 

conduct audits difficult. 

7. Proposal To Add Provider Payment 

Arrangement Reporting in the Medicare 

MLR Reporting Regulations 

(§§ 422.2460 and 422.2490) 

For our proposal to require separate 

reporting amounts for provider payment 

arrangements, we considered three 

alternatives. First, we considered 

keeping the status quo in reporting so 

MA organizations do not have to submit 

any detail on their provider payment 

arrangements. 

Second, we considered requiring MA 

organizations to submit documentation 

with their annual MLR Report 

describing each of their provider 

payment arrangements in detail. We 

estimate that it would take double the 

number of hours to prepare and submit 

such documentation, which would 

result in $359,940 ($179,970 * 2) 

additional aggregate burden for MA 

organizations. 

Third, we considered asking what 

provider payment arrangement 

information MA organizations may be 

able to share through the vertical 

integration request for information. This 

approach would have provided CMS 

with more information before proposing 

a policy change. However, we obtained 

recommendations from several 

stakeholders through the MA data 

request for information that CMS collect 

similar data that is reported through the 

HCPLAN survey to support access to 

additional data on APM adoption. 

We are not proposing the first 

alternative because CMS and 

stakeholders will benefit from increased 

transparency in provider payment 

arrangement types. Such reporting will 

help policymakers understand more 

about the prevalence of different 

provider payment arrangements and 

consider whether and how MLR reports 

might vary based on different patterns 

in provider payment arrangements. 

In addition, we are not proposing the 

second alternative because we were 

concerned about the additional 

reporting burden associated with 

requiring MA organizations to submit 

documentation with their annual MLR 

Report describing each of their provider 

payment arrangements in detail. CMS is 

proposing provider payment 

arrangement reporting in aggregate 

dollar amounts and limited categories to 

enable MA organizations to 

operationalize additional provider 

payment arrangement reporting and to 

see if we obtain enough data to better 

understand the different types of APM 

arrangements in MA. 

Finally, we are not proposing the 

third alternative to ask what kind of 

provider payment arrangement 

information we should collect from MA 

organizations because the HCPLAN 

survey has standardized definitions 

widely agreed upon by industry 

stakeholders. In addition, through the 

MA data request for information CMS 

has already received feedback from 

many stakeholders advocating for the 

collection of more APM information. 

CMS is also asking for feedback on 

proposed provider payment 

arrangement categories in the proposed 

policy, which enables stakeholders to 

propose alternative data collection 

methods. 

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://obamawhitehouse.

archives.gov/omb/circulars_a004_a-4/), 

in table 56, we have prepared an 

accounting statement showing the 

transfers and costs associated with the 

provisions of this proposed rule over a 

10-year period or for contract years 2026 

through 2035. 


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G. Conclusion 

This proposed rule would result in 

net annualized costs of $72 million. 

These costs are primarily attributable to 

provisions pertaining to the information 

collection requirements of the Medicare 

Prescription payment plan. This 

provision implements requirements 

created by the IRA and is expected to 

increase costs in the first year by over 

$264. million, dropping to $36.7 million 

annually in subsequent years. The 

proposed rule would also result in 

significant outlays from the Medicare 

Trust Fund. There are anticipated 

savings to the Trust Fund, notably 

coming from proposed adjustments in 

MLR calculations and audits, which 

may result in transfers of $1010 and 

$320 million over a 10-year period. 

However, the rule also includes 

transfers from the Medicare Trust Fund 

and other entities to cover AOMs. 

Coverage of AOMs are anticipated to 

result in annualized monetized Federal 

transfers amounting to $2,502 million 

from the Medicare Trust Fund, $ $1,084 

million in Federal Medicaid transfers, 

and $374 million in State Medicaid 

transfers. 

VIII. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the ‘‘DATES’’ section 

of this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

Chiquita Brooks-LaSure, 

Administrator of the Centers for 

Medicare & Medicaid Services, 

approved this document on November 

8, 2024. 

List of Subjects 

42 CFR Part 417 

Administrative practice and 

procedure, Grant programs-health, 

Health care, Health Insurance, Health 

maintenance organizations (HMO), Loan 

programs-health Medicare, and 

Reporting and recordkeeping 

requirements. 

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. 

42 CFR Part 460 

Aged, Citizenship and naturalization, 

Civil rights, Health, Health care, Health 

records, Individuals with disabilities, 

Medicaid, Medicare, Religious 

discrimination, Reporting and 

recordkeeping requirements, Sex 

discrimination. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR Chapter IV as set forth below: 

PART 417—HEALTH MAINTENANCE 

ORGANIZATIONS, COMPETITIVE 

MEDICAL PLANS, AND HEALTH CARE 

PREPAYMENT PLANS 

■ 1. The authority for part 417 

continues to read as follows: 

Authority: 42 U.S.C. 1302 and 1395hh, and 

300e, 300e–5, and 300e–9, and 31 U.S.C. 

9701. 

■ 2. Section 417.454 is amended by 

revising paragraph (e) and adding 

paragraph (f) to read as follows: 

§ 417.454 Charges to Medicare enrollees. 

* * * * * 

(e) Services for which cost sharing 

may not exceed cost sharing under 

original Medicare. For each year 

beginning on or after January 1, 2026, 

in-network cost sharing established by 

an HMO or CMP for the basic benefits 

listed in this paragraph may not exceed 

the cost sharing required under original 

Medicare. When an HMO or CMP uses 

coinsurance, the coinsurance must not 

exceed the coinsurance charged in 

original Medicare. When an HMO or 

CMP uses copayments, the copayment 

must not exceed the actuarially 

equivalent value calculated for that 


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benefit using the Medicare Advantage 

rules at § 422.100(j)(1)(ii) of this chapter 

and Medicare FFS data projections as 

defined in § 422.100(f)(4)(i). The 

benefits listed in this paragraph are as 

follows: 

(1) Chemotherapy administration 

services to include chemotherapy/ 

radiation drugs and radiation therapy 

integral to the treatment regimen. 

(2) Renal dialysis services as defined 

at section 1881(b)(14)(B) of the Act. 

(3) Skilled nursing care defined as 

services provided during a covered stay 

in a skilled nursing facility during the 

period for which cost sharing would 

apply under Original Medicare. 

(4) A COVID–19 vaccine and its 

administration described in section 

1861(s)(10)(A) of the Act. 

(5) Behavioral health service 

categories including all of the following: 

(i) Intensive outpatient services. 

(ii) Mental health specialty services. 

(iii) Opioid treatment program 

services. 

(iv) Outpatient substance use disorder 

services. 

(v) Partial hospitalization. 

(vi) Psychiatric services. 

(6) Inpatient hospital acute and 

psychiatric services cost sharing must 

not exceed 100 percent of estimated 

Medicare FFS cost sharing, including 

the projected Part A deductible and 

related Part B costs, for the following 

length-of-stay scenarios for a period for 

which cost sharing would apply under 

original Medicare: 

(i) For acute services as follows: 

(A) 3 days. 

(B) 6 days. 

(C) 10 days. 

(D) 60 days. 

(ii) For psychiatric services as follows: 

(A) 8 days 

(B) 15 days. 

(C) 60 days. 

(7) Home health services (as defined 

in section 1861(m) of the Act). 

(8) The following specific service 

categories of durable medical equipment 

(DME): 

(i) Equipment. 

(ii) Prosthetics. 

(iii) Medical supplies. 

(iv) Diabetes monitoring supplies. 

(v) Diabetic shoes or inserts. 

(9) Other drugs covered under Part B 

of original Medicare (that is, Part B 

drugs not included in paragraph (e)(1) of 

this section). 

(f) Cost sharing for other Medicare 

Part A and B benefits. For Medicare Part 

A and Part B services furnished innetwork for which a cost sharing limit 

is not established by other regulation or 

statute, the HMO or CMP must not 

establish a cost sharing amount that 

exceeds 50 percent coinsurance or an 

actuarially equivalent copayment value 

(calculated by CMS following the 

requirements in § 422.100(f)(7) of this 

chapter or, if CMS does not calculate a 

copayment limit, based on the average 

Medicare FFS allowable amount for the 

plan service area or the estimated total 

HMO or CMP plan financial liability for 

the service category or for a reasonable 

group of benefits in the PBP for that 

contract year). 

■ 3. Section 417.486 is amended by 

adding paragraph (a)(3) to read as 

follows: 

§ 417.486 Disclosure of information and 

confidentiality. 

(a) * * * 

(3) Risk adjustment data as specified 

in section 422.310 of this chapter for the 

purposes of determining an individual’s 

health status. In applying this provision, 

references to MA organizations in 

§ 422.310 shall be read to mean HMOs 

and CMPs. 

* * * * * 

PART 422—MEDICARE ADVANTAGE 

PROGRAM 

■ 4. The authority for part 422 

continues to read as follows: 

Authority: 42 U.S.C. 1302, 1306, 1395w–21 

through 1395w–28, and 1395hh. 

■ 5. Section 422.2 is amended by— 

■ a. Adding in alphabetical order 

definitions for ‘‘Automated system’’, 

‘‘Community-based organizations’’, and 

‘‘Direct furnishing entity’’; 

■ b. Revising the definition of 

‘‘Hierarchical condition categories 

(HCC)’’ and paragraph (1) of the 

definition of ‘‘Highly integrated dual 

eligible special needs plan’’; 

■ c. Adding in alphabetical order a 

definition for ‘‘In-home or at-home 

supplemental benefit provider’’; and 

■ d. Revising the definition of ‘‘Service 

area’’. 

The additions and revisions read as 

follows: 

§ 422.2 Definitions. 

* * * * * 

Automated system means any system, 

software, or process that uses 

computation as whole or part of a 

system to determine outcomes, make or 

aid decisions, inform policy 

implementation, collect data or 

observations, or otherwise interact with 

individuals or communities or both. 

Automated systems include, but are not 

limited to, systems derived from 

machine learning, statistics, or other 

data processing or artificial intelligence 

techniques, and exclude passive 

computing infrastructure. ‘Passive 

computing infrastructure’ is any 

intermediary technology that does not 

influence or determine the outcome of 

decision, make or aid in decisions, 

inform policy implementation, or 

collect data or observations, including 

web hosting, domain registration, 

networking, caching, data storage, or 

cybersecurity. As used in this part, 

automated systems that are considered 

in scope are only those that have the 

potential to meaningfully impact 

individuals’ or communities’ rights, 

opportunities, or access. 

* * * * * 

Community-based organizations 

(CBOs) mean public or private not-forprofit entities that provide specific 

services to the community or targeted 

populations in the community, to 

address the health and social needs of 

those populations. 

* * * * * 

Direct furnishing entity means any 

individual or entity that delivers or 

furnishes covered benefits to the 

enrollee. This includes Medicare Part A 

and B covered benefits, as well as 

supplemental benefits. 

* * * * * 

Hierarchical condition categories 

(HCC) mean diagnosis groupings that 

predict average healthcare spending. 

HCCs consist of International 

Classification of Diseases, Clinical 

Modification (ICD–CM) diagnosis codes 

and represent the disease component of 

the enrollee risk score that are applied 

to MA payments. 

Highly integrated dual eligible special 

needs plan * * * 

(1) The capitated contract is between 

the State Medicaid agency and one of 

the following: 

(i) The MA organization. 

(ii) The MA organization’s parent 

organization, or another entity that is 

owned and controlled by its parent 

organization. 

(iii) A local nonprofit public benefit 

corporation of which the MA 

organization, MA organization’s parent 

organization, or another entity that is 

owned and controlled by its parent 

organization is a founding member 

where the local nonprofit public benefit 

corporation is responsible for the 

delivery of physical, behavioral, and 

dental health services. 

* * * * * 

In-home or at-home supplemental 

benefit provider means any direct 

furnishing entity in which the direct 

furnishing entity or an employee of the 

direct furnishing entity is given an 

enrollee’s physical address in order to 

provide supplemental benefits or 

special supplemental benefits for the 


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chronically ill (SSBCI) items or services 

to that enrollee. An in-home or at-home 

supplemental benefit provider may 

include direct furnishing entities who 

offer both in-office as well as in-home 

or at-home supplemental benefits. 

* * * * * 

Service area means a geographic area 

that for local MA plans is one or more 

counties, as defined in § 422.116 of this 

chapter, and for MA regional plans is a 

region approved by CMS within which 

an MA-eligible individual may enroll in 

a particular MA plan offered by an MA 

organization. Facilities in which 

individuals are incarcerated are not 

included in the service area of an MA 

plan. Each MA plan must be available 

to all MA-eligible individuals within the 

plan’s service area. In deciding whether 

to approve an MA plan’s proposed 

service area, CMS considers the 

following criteria: 

* * * * * 

■ 6. Section 422.100 is amended by: 

■ a. Removing the phrase ‘‘services, 

partial hospitalization, and’’ and adding 

in its place the phrase ‘‘services, 

occupational therapy, and’’ in paragraph 

(f)(6)(iii)(A); 

■ b. Removing the phrase ‘‘under 

paragraph (f)(6)(iv) of this section’’ and 

adding in its place the phrase ‘‘under 

paragraphs (f)(6)(iv) and (j)(1)(i)(H) of 

this section’’ in paragraph (f)(6)(iv)(A); 

■ c. Revising paragraphs (f)(6)(iv)(B) and 

(f)(6)(iv)(D) introductory text; 

■ d. Removing the phrase ‘‘January 1, 

2023, in-network’’ and adding in its 

place the phrase ‘‘January 1, 2023, 

unless otherwise specified in this 

section, in-network’’ in paragraph 

(j)(1)(i) introductory text; 

■ e. Revising paragraph (j)(1)(i)(C); 

■ f. Adding paragraphs (j)(1)(i)(G) and 

(H); and 

■ g. Revising paragraph (o)(2). 

The revisions and additions read as 

follows: 

§ 422.100 General requirements. 

* * * * * 

(f) * * * 

(6) * * * 

(iv) * * * 

(B) Cost sharing limits for inpatient 

hospital acute service categories are 

calculated for the following length-ofstay scenarios for a period for which 

cost sharing would apply under original 

Medicare: 

(1) 3 days. 

(2) 6 days. 

(3) 10 days. 

(4) 60 days. 

* * * * * 

(D) Provided that the total cost 

sharing for the inpatient benefit does 

not exceed overall cost sharing for 

inpatient benefits in original Medicare 

on a per member per month actuarially 

equivalent basis, MA plan cost sharing 

applicable to inpatient hospital acute 

service categories is permitted up to the 

following limits (based on original 

Medicare cost sharing for a new benefit 

period): 

* * * * * 

(j) * * * 

(1) * * * 

(i) * * * 

(C) Skilled nursing care, defined as 

services provided during a covered stay 

in a skilled nursing facility during the 

period for which cost sharing would 

apply under original Medicare, when 

the MA plan establishes the mandatory 

MOOP type; when the MA plan 

establishes the lower MOOP type, the 

cost sharing must not be greater than 

$20 per day for the first 20 days of a 

SNF stay; when the MA plan establishes 

the intermediate MOOP type, the cost 

sharing must not be greater than $10 per 

day for the first 20 days of a SNF stay. 

For all MOOP types, the per-day cost 

sharing for days 21 through 100 must 

not be greater than one-eighth of the 

projected (or actual) Part A deductible 

amount for the year. Total cost sharing 

for the overall SNF benefit must not be 

greater than the per member per month 

actuarially equivalent cost sharing for 

the SNF benefit in original Medicare. 

* * * * * 

(G) Behavioral health service 

categories for contract year 2026 and 

subsequent contract years including all 

of the following: 

(1) Intensive outpatient services. 

(2) Mental health specialty services. 

(3) Opioid treatment program 

services. 

(4) Outpatient substance use disorder 

services. 

(5) Partial hospitalization. 

(6) Psychiatric services. 

(H) Inpatient hospital psychiatric 

services cost sharing must not exceed 

100 percent of estimated Medicare FFS 

cost sharing, including the projected 

Part A deductible and related Part B 

costs, for the following length-of-stay 

scenarios for a period for which cost 

sharing would apply under original 

Medicare for contract year 2026 and 

subsequent years: 

(1) 8 days. 

(2) 15 days. 

(3) 60 days. 

* * * * * 

(o) * * * 

(2) Complies with the limits described 

in paragraph (j)(1) of this section with 

the exception that references to the 

MOOP amounts refer to the total 

catastrophic limits under § 422.101(d)(3) 

for local PPOs and MA regional plans 

and, for regional PPO dual eligible 

special needs plans, excluding the last 

sentence of paragraph (j)(1)(i)(C) and the 

last sentence of paragraph (j)(1)(i)(E) of 

this section. 

■ 7. Section 422.101 is amended by 

revising paragraphs (b)(6) and (f)(1)(i) 

through (iv) and adding paragraphs 

(f)(1)(v) through (x) to read as follows: 

§ 422.101 Requirements relating to basic 

benefits. 

* * * * * 

(b) * * * 

(6) MA organizations may create 

publicly available internal coverage 

criteria that are based on current 

evidence in widely used treatment 

guidelines or clinical literature when 

coverage criteria are not fully 

established in applicable Medicare 

statutes, regulations, NCDs or LCDs. 

Current, widely used treatment 

guidelines are those developed by 

organizations representing clinical 

medical specialties and refers to 

guidelines for the treatment of specific 

diseases or conditions. Acceptable 

clinical literature includes large, 

randomized controlled trials or 

prospective cohort studies with clear 

results, published in a peer-reviewed 

journal, and specifically designed to 

answer the relevant clinical question, or 

large systematic reviews or metaanalyses summarizing the literature of 

the specific clinical question. 

(i) Coverage criteria not fully 

established. Coverage criteria are not 

fully established if any of the following 

occur: 

(A) Additional, unspecified criteria 

are needed to interpret or supplement 

the plain language of applicable 

Medicare coverage and benefit criteria 

in order to determine medical necessity 

consistently. 

(B) NCDs or applicable LCDs include 

flexibility that explicitly allows for 

discretionary coverage in circumstances 

beyond the specific indications that are 

listed in an NCD or LCD. 

(C) There is an absence of any 

applicable Medicare statutes, 

regulations, NCDs or LCDs setting forth 

coverage criteria. 

(ii) Publicly available. For internal 

coverage criteria, the MA organization 

must provide in a publicly available 

way all of the following: 

(A) Each internal coverage criterion in 

use and a summary of evidence that was 

considered during the development of 

each internal coverage criterion used to 

make medical necessity determinations. 

Any internal coverage criterion used by 

the MA organization must be clearly 


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identified and marked as internal 

coverage criteria in the coverage policies 

of the MA plan. 

(B) A list of the sources of such 

evidence that are connected by footnote 

to the applicable coverage criterion. 

(C) An explanation of the rationale 

that supports the adoption of each 

coverage criterion used to make a 

medical necessity determination. When 

coverage criteria are not fully 

established as described in paragraph 

(b)(6)(i)(A) of this section, the MA 

organization must identify the plain 

language of applicable Medicare 

coverage and benefit criteria that are 

being supplemented or interpreted. 

(D) By January 1, 2026, MA 

organizations must publicly display on 

the MA organization’s website a list of 

all items and services for which there 

are benefits available under Part A or 

Part B where the MA organization uses 

internal coverage criteria when making 

medical necessity decisions. The list of 

items and services on the website must 

include the information in paragraphs 

(b)(6)(ii)(A) through (C) of this section 

(explicitly or by connecting directly to 

that information through a hyperlink) 

and include the vendor’s name when 

using a third-party vendor’s criteria. 

Additionally, the web page that lists the 

items and services that contain internal 

coverage criteria must meet the 

following requirements: 

(1) Displayed in a prominent manner 

and clearly identified in the footer of the 

website. 

(2) Easily available to the public, 

without barriers, including but not 

limited to ensuring the information is 

available: 

(i) Free of charge. 

(ii) Without having to establish a user 

account or password. 

(iii) Without having to submit 

personal identifying information. 

(iv) In a machine-readable format with 

the data contained within that file being 

digitally searchable and downloadable. 

(v) Include a txt file in the root 

directory of the website domain that 

includes a direct link to the machinereadable file to establish and maintain 

automated access. 

(iii) Internal coverage criteria defined. 

Internal coverage criteria are any 

policies, measures, tools, or guidelines, 

whether developed by an MA 

organization or a third party, that are 

not expressly stated in applicable 

Medicare statutes, regulations, NCDs, 

LCDs, or CMS manuals and are adopted 

or relied upon by an MA organization 

for purposes of making a medical 

necessity determination at 

§ 422.101(c)(1). This includes any 

coverage policies that restrict access to 

or payment for medically necessary Part 

A or Part B items or services based on 

the duration or frequency, setting or 

level of care, or clinical effectiveness. 

(iv) Prohibited. Use of an internal 

coverage criterion is prohibited when 

either of the following occur: 

(A) The criterion does not have any 

clinical benefit. 

(B) The criterion is used to 

automatically deny coverage of basic 

benefits without the MA organization 

making an individual medical necessity 

determination as required at 

§ 422.101(c)(1)(i). 

* * * * * 

(f) * * * 

(1) * * * 

(i) Within 90 days (before or after) of 

the effective date of enrollment for all 

new enrollees, conduct a 

comprehensive initial health risk 

assessment (HRA). 

(ii) Conduct a comprehensive annual 

HRA. 

(iii) Use a comprehensive risk 

assessment tool that CMS may review 

during oversight activities that meet 

both of the following: 

(A) Assesses the enrollee’s physical, 

psychosocial, and functional needs. 

(B) Includes one or more questions 

from a list of screening instruments 

specified by CMS in subregulatory 

guidance on each of the following 

domains: 

(1) Housing stability. 

(2) Food security. 

(3) Access to transportation. 

(iv) Must do all of the following: 

(A) Make at least three non-automated 

phone call attempts, unless an enrollee 

agrees or declines to participate in the 

HRA before three attempts are made, on 

different days at different times of day 

to reach the enrollee to schedule the 

comprehensive initial or annual HRA. 

(B) If the enrollee has not responded, 

send a follow-up letter to conduct the 

initial or annual HRA. 

(C) For any enrollees who are unable 

to be reached or decline to participate 

in the HRA, document the attempts to 

contact the enrollee and, if applicable, 

the enrollee’s choice not to participate. 

(v) For D–SNPs that are applicable 

integrated plans (as defined in 

§ 422.561), conduct a comprehensive 

HRA that meets all requirements at 

paragraphs (f)(1)(i) through (iv) of this 

section as well as any applicable 

Medicaid requirements, including those 

at § 438.208, such that enrollees 

complete a single integrated assessment 

for Medicare and Medicaid. 

(vi) Ensure that the results from the 

comprehensive initial and annual HRA 

conducted for each enrollee are 

addressed in the enrollee’s 

individualized care plan as required 

under paragraph (f)(1)(vii) of this 

section. 

(vii) Within 30 days of conducting a 

comprehensive initial HRA or 30 days 

after the effective date of enrollment, 

whichever is later, develop a 

comprehensive individualized plan of 

care that meets all of the following: 

(A) Is person-centered and based on 

the enrollee’s preferences, including for 

delivery of services and benefits, and 

their needs identified in the HRA. 

(B) Is developed through an 

interdisciplinary care team with the 

active participation of the enrollee (or 

the enrollee’s representative, as 

applicable), as feasible. 

(C) Identifies person-centered goals 

and objectives (as prioritized by the 

enrollee), including measurable 

outcomes as well as specific services 

and benefits to be provided. 

(D) Is updated as warranted by 

changes in the health status or care 

transitions of enrollees. 

(viii) For any enrollees who are 

unable to be reached or decline to 

participate in the development or 

updates to the comprehensive 

individualized plan of care, document 

the attempts to contact the enrollee or 

the enrollee’s refusal to participate. 

(ix) In the management of care, use an 

interdisciplinary team that includes a 

team of providers with demonstrated 

expertise and training, and, as 

applicable, training in a defined role 

appropriate to their licensure in treating 

individuals similar to the targeted 

population of the plan. 

(x) Provide, on at least an annual 

basis, beginning within the first 12 

months of enrollment, as feasible and 

with the enrollee’s consent, for face-toface encounters for the delivery of 

health care or care management or care 

coordination services and be between 

each enrollee and a member of the 

enrollee’s interdisciplinary team or the 

plan’s case management and 

coordination staff, or contracted plan 

healthcare providers. A face-for-face 

encounter must be either in person or 

through a visual, real-time, interactive 

telehealth encounter. 

* * * * * 

■ 8. Section § 422.102 is amended by— 

■ a. Revising paragraphs (a)(6)(i) and 

(f)(1)(i)(A); 

■ b. Adding paragraphs (f)(1)(i)(C) and 

(f)(1)(iii); 

■ c. Revising paragraph (f)(4)(iii); and 

■ d. Adding paragraph (g). 

The revisions and additions read as 

follows: 


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§ 422.102 Supplemental benefits. 

(a) * * * 

(6) * * * 

(i) Reductions in cost sharing through 

the use of manual reimbursement or 

through a debit card for cost sharing 

paid for covered benefits. 

Reimbursements must be limited to the 

specific plan year. 

* * * * * 

(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) Examples of items or services that 

may not be offered as SSBCI include all 

of the following: 

(A) 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). 

(B) Hospital indemnity insurance. 

(C) Funeral planning and expenses. 

(D) Life insurance. 

(E) Alcohol. 

(F) Tobacco. 

(G) Cannabis products. 

(H) Broad membership programs 

inclusive of multiple unrelated services 

and discounts. 

* * * * * 

(4) * * * 

(iii) Have objective criteria for SSBCI. 

Specifically, the plan must: 

(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. 

(C) For each SSBCI, the MA plan must 

list all the written policies and objective 

criteria on which the policies are based 

as noted in paragraph (f)(4)(i) 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 

§§ 422.100(c)(2) and 422.102(a) through 

(f) and appropriate access to all covered 

items and services, in accordance with 

§ 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. 

(iv) Ensure debit cards are limited to 

the specific plan year. 

■ 9. Section 422.107 is amended by 

revising paragraph (f)(1) to read as 

follows: 

§ 422.107 Requirements for dual eligible 

special needs plans. 

* * * * * 

(f) * * * 

(1) The enrollee advisory committee 

must include at least a reasonably 

representative sample of the population 

enrolled in the dual eligible special 

needs plan or plans, or other 

individuals representing those 

enrollees, and solicit input on, among 

other topics, ways to improve access to 

covered services, coordination of 

services, updates to the model of care 

described in § 422.101(f), and health 

equity for underserved populations. 

* * * * * 

■ 10. Section 422.111 is amended by 

revising paragraphs (b)(3)(i) and (b)(6) 

and adding paragraph (m) to read as 

follows: 

§ 422.111 Disclosure requirements. 

* * * * * 

(b) * * * 

(3) * * * 

(i) The number, mix, and distribution 

(addresses) of providers and direct 

furnishing entities from whom enrollees 

may reasonably be expected to obtain 

services, including all of the following: 

(A) All direct furnishing entities, as 

defined in § 422.2, from whom enrollees 

may reasonably be expected to obtain 

services. 

(B) Each provider’s cultural and 

linguistic capabilities, including 

languages (including American Sign 

Language) offered by the provider or a 

skilled medical interpreter at the 

provider’s office. 

(C) Easily identifiable notations, 

filters, or other distinguishing features 

to indicate providers and direct 

furnishing entities that are communitybased organizations (CBOs) (as defined 

in § 422.2). 

(D) Easily identifiable notations, 

filters, or other distinguishing features 

to indicate in-home or at-home 

supplemental benefit providers (as 

defined in § 422.2). 

(E) Any out-of-network coverage; any 

point-of-service option, including the 

supplemental premium for that option. 

(F) How the MA organization meets 

the requirements of §§ 422.112 and 

422.114 for access to services offered 

under the plan. 

* * * * * 

(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-thecounter items. 

(ii) If providing supplemental benefits 

through a debit card, specifying which 

benefits may be accessed using the debit 

card. 

* * * * * 

(m) Increasing consumer 

transparency. For plan years beginning 

on or after January 1, 2026, MA 

organizations must do all of the 

following: 

(1) Make the information described in 

paragraph (b)(3)(i) of this section 

available to CMS/HHS for publication 

online in accordance with guidance 

from CMS/HHS. 

(2) Submit, or otherwise make 

available, the information described in 

paragraph (b)(3)(i) of this section to 

CMS/HHS in a format and manner and 

at times determined by CMS/HHS. 

(3) Update the information subject to 

this paragraph (m) within 30 days of the 

date an MA organization becomes aware 

of a change. 

(4) Attest, in a format and manner and 

at times determined by CMS/HHS, that 


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all information submitted or otherwise 

made available to CMS/HHS under this 

paragraph (m) is accurate and consistent 

with data submitted to comply with 

CMS’s MA network adequacy 

requirements at § 422.116(a)(1)(i). 

■ 11. Section 422.112 is amended by 

revising paragraph (a)(8) to read as 

follows: 

§ 422.112 Access to services. 

(a) * * * 

(8) Ensuring equitable access to 

Medicare Advantage (MA) services. 

Ensure that services are provided as 

follows: 

(i) In a culturally competent manner 

by including all of the following: 

(A) People with limited English 

proficiency or reading skills. 

(B) People of ethnic, cultural, racial, 

or religious minorities. 

(C) People with disabilities. 

(D) People who identify as lesbian, 

gay, bisexual, or other diverse sexual 

orientations. 

(E) People who identify as 

transgender, nonbinary, and other 

diverse gender identities, or people who 

were born intersex. 

(F) People living in rural areas and 

other areas with high levels of 

deprivation. 

(G) People otherwise adversely 

affected by persistent poverty or 

inequality. 

(ii) Equitably irrespective of delivery 

method or origin, whether from human 

or automated systems. Artificial 

intelligence or automated systems, if 

utilized, must be used in a manner that 

preserves equitable access to MA 

services. 

* * * * * 

■ 12. Section 422.116 is amended by— 

■ a. Redesignating paragraphs (a)(1) 

through (4) as paragraphs (a)(2) through 

(5); 

■ b. Adding a new paragraph (a)(1) and 

■ c. Revising paragraph (f)(1)(i)(A). 

The addition and revision read as 

follows: 

§ 422.116 Network adequacy. 

(a) * * * 

(1) County, for purposes of this 

section, is defined as the primary 

political and administrative division of 

most States and includes functionally 

equivalent divisions called ‘‘county 

equivalents’’ as recognized by the 

United States Census Bureau (for 

economic census purposes). 

* * * * * 

(f) * * * 

(1) * * * 

(i) * * * 

(A) Certain providers or facilities are 

not available for the MA plan to meet 

the network adequacy criteria as shown 

in the Provider Supply file for the year 

for a given county and specialty type 

based on substantial and credible 

evidence, in the form and manner 

requested by CMS, regarding the 

following valid rationales: 

(1) Provider is no longer practicing 

(for example, deceased, retired). 

(2) Provider does not provide services 

at the office or facility address listed in 

the Provider Supply file 

(§ 422.116(a)(4)(ii)). 

(3) Provider does not provide services 

for the specialty type listed in the 

Provider Supply file (§ 422.116(a)(4)(ii)). 

(4) Provider has opted out of Medicare 

(in compliance with § 422.204(b)(4)). 

(5) Provider is a sanctioned provider 

on the List of Excluded Individuals and 

Entities (in compliance with § 422.204); 

or provider is on the CMS preclusion 

list (in compliance with § 422.222). 

(6) Provider is at capacity and is not 

accepting new patients; and 

* * * * * 

■ 13. Section § 422.137 is amended by 

revising paragraphs (d)(6)(iii)(A) 

through (H) and adding paragraph 

(d)(7)(v) to read as follows: 

§ 422.137 Medicare Advantage Utilization 

Management Committee. 

* * * * * 

(d) * * * 

(6) * * * 

(iii) * * * 

(A) The percentage of standard prior 

authorization requests that were 

approved, reported by each covered 

item and service. 

(B) The percentage of standard prior 

authorization requests that were denied, 

reported by each covered item and 

service. 

(C) The percentage of standard prior 

authorization requests that were 

approved after appeal, reported by each 

covered item and service. 

(D) The percentage of prior 

authorization requests for which the 

timeframe for review was extended, and 

the request was approved, reported by 

each covered item and service. 

(E) The percentage of expedited prior 

authorization requests that were 

approved, reported by each covered 

item and service. 

(F) The percentage of expedited prior 

authorization requests that were denied, 

reported by each covered item and 

service. 

(G) The average and median time that 

elapsed between the submission of a 

request and a determination by the MA 

plan, for standard prior authorizations, 

reported by each covered item and 

service. 

(H) The average and median time that 

elapsed between the submission of a 

request and a decision by the MA plan 

for expedited prior authorizations, 

reported by each covered item and 

service. 

(7) * * * 

(v) Include an executive summary of 

the results of the analysis. The executive 

summary must provide additional 

context for the results of the analysis. 

The executive summary must provide 

clarifying information for the report, 

including an overview of the 

information produced by the analysis. 

Accompanying language must not be 

misleading or misrepresent the findings 

that result from the analysis. 

■ 14. Section 422.138 is amended by 

revising paragraph (c) to read as follows: 

§ 422.138 Prior authorization. 

* * * * * 

(c) Effect of prior authorization, preservice, or concurrent approval. If the 

MA organization approved the 

furnishing of a covered item or service 

through a prior authorization preservice determination of coverage or 

payment, or a concurrent determination 

made during the enrollee’s receipt of 

inpatient or outpatient services, it may 

not deny coverage later on the basis of 

lack of medical necessity and may not 

reopen such a decision for any reason 

except for good cause (as provided at 

§§ 405.986 and 422.616 of this chapter) 

or if there is reliable evidence of fraud 

or similar fault per the reopening 

provisions at § 422.616. The definitions 

of the terms ‘‘reliable evidence’’ and 

‘‘similar fault’’ in § 405.902 of this 

chapter apply to this provision. 

■ 15. Section 422.162 is amended by 

revising paragraphs (b)(3)(iv)(A)(2) and 

(b)(3)(iv)(B)(2) to read as follows: 

§ 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 

§ 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. 


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(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 

§ 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. 

* * * * * 

■ 16. Section 422.166 is amended by: 

■ a. Revising paragraph (f)(3)(iv) 

introductory text; 

■ b. Adding paragraphs (f)(3)(iv)(C), 

(f)(3)(v)(A), and reserved paragraph 

(f)(3)(v)(B); 

■ c. Revising paragraphs (f)(3)(vi) and 

(f)(3)(viii)(B); 

■ d. Adding paragraph (f)(3)(viii)(C); 

and 

■ e. Revising paragraphs (g)(1)(i) and 

(ii). 

The revisions and additions read as 

follows: 

§ 422.166 Calculation of Star Ratings. 

* * * * * 

(f) * * * 

(3) * * * 

(iv) For a measure to be included in 

the calculation of a contract’s HEI score, 

the measure must meet all of the 

following criteria: 

* * * * * 

(C) Beginning with the 2027 Star 

Ratings, for contracts that are 

Institutional Special Needs Plan (I–SNP) 

only contracts in the ratings year, the 

measure must be required to be reported 

for I–SNP-only contracts. 

(v) * * * 

(A) Starting with the 2029 Star 

Ratings if a contract’s HEDIS measure 

score across all enrollees for a HEDIS 

measure included in the HEI calculated 

from the patient-level data submitted by 

the contract does not match the 

summary-level score submitted by the 

contract to NCQA for either of the 

measurement years used to construct 

the HEI, the contract will receive –1 

points for the HEDIS measure in the 

calculation of the HEI. If a contract does 

not submit HEDIS patient-level data for 

a measure for which it submitted 

contract-level data for either of the 

measurement years used to construct 

the HEI, the contract will receive –1 

points for the HEDIS measure in the 

calculation of the HEI. 

(B) [Reserved] 

(vi) Starting with the 2027 Star 

Ratings, to have the HEI calculated, 

contracts that are I–SNP-only contracts 

in the ratings year must have at least 

500 enrollees in the most recent 

measurement year used in the HEI and 

have at least half of the measures 

included in the HEI meet the criteria 

specified under paragraph (f)(3)(iv) of 

this section for the subset of measures 

that I–SNP-only contracts are required 

to report. To have the HEI calculated, all 

other contracts must have at least 500 

enrollees in the most recent 

measurement year used in the HEI and 

have at least half of the measures 

included in the HEI meet the criteria 

specified under paragraph (f)(3)(iv) of 

this section. 

* * * * * 

(viii) * * * 

(B) Starting with the 2027 Star 

Ratings, for the second year following a 

consolidation when calculating the HEI 

score for the surviving contract, the 

patient-level data used in calculating 

the HEI score is combined across the 

consumed and surviving contracts in 

the consolidation and used in 

calculating the HEI score. The 

enrollment used in assessing whether 

the surviving contract meets an 

enrollment threshold under paragraph 

(f)(3)(vii) of this section will be the 

combined enrollment from the 

consumed and surviving contracts from 

the most recent year of data used to 

calculate the HEI. 

(C) Starting with the 2029 Star 

Ratings, in states where, consistent with 

§ 422.107(e), one or more MA contracts 

that only include one or more dual 

eligible special needs plans (D–SNPs) 

with a service area limited to that state 

are required to be established and 

maintained, the original MA contract(s) 

from which the D–SNP plan benefit 

package or packages were moved 

(hereafter referred to as the ‘‘legacy MA 

contract(s)’’) into the MA contract 

established under § 422.107(e) will have 

the HEI reward calculated as follows 

every year after the D–SNP-only 

contract is required to be created until 

the Star Ratings year in which 

additional SRFs beyond receipt of LIS, 

dual-eligibility, and disability are added 

to the HEI: 

(1) If the legacy MA contract, based on 

its own enrollment, meets an enrollment 

threshold under paragraph (f)(3)(vii) of 

this section, the methodology for 

calculating the HEI reward in paragraph 

(f)(3)(viii) of this section is followed. 

(2) If the legacy MA contract, based on 

its own enrollment, does not meet an 

enrollment threshold as defined in 

paragraph (f)(3)(vii) of this section, and 

either one of the legacy MA contract or 

the MA contract established under 

§ 422.107(e) cannot have the HEI 

reliably calculated as described in 

paragraphs (f)(3)(iv) and (vi) of this 

section, then the legacy MA contract 

does not qualify for an HEI reward. 

(3) If the legacy MA contract, based on 

its own enrollment, does not meet an 

enrollment threshold as defined in 

paragraph (f)(3)(vii) of this section, and 

the legacy MA contract’s performance 

on the HEI based on its own enrollment 

is less than— 

(i) The minimum index score defined 

at paragraph (f)(3)(vii) of this section; or 

(ii) The performance on the HEI of the 

MA contract established under 

§ 422.107(e) 

Then, the legacy MA contract does 

not qualify for an HEI reward. 

(4)(i) If the legacy MA contract, based 

on its own enrollment, does not meet an 

enrollment threshold as defined in 

paragraph (f)(3)(vii) of this section, and 

both the legacy MA contract and the MA 

contract established under § 422.107(e) 

can have the HEI score reliably 

calculated following paragraphs 

(f)(3)(iv) and (vi) of this section, then the 

enrollment combined across the legacy 

MA contract and the MA contract 

established under § 422.107(e) for the 

most recent measurement year used in 

calculating the HEI is used in assessing 

the enrollment threshold in paragraph 

(f)(3)(vii) of this section. 

(ii) If an enrollment threshold is met 

using the combined enrollment 

described in paragraph 

(f)(3)(viii)(C)(4)(i) of this section, the 

legacy MA contract’s rating-specific HEI 

score meets the minimum index score of 

greater than zero defined at paragraph 

(f)(3)(vii) of this section, and the legacy 

MA contract’s rating-specific HEI score 

is greater than or equal to the ratingspecific HEI score of the MA contract 

established under § 422.107(e), then the 

HEI reward for the legacy MA contract 

is calculated following paragraph 

(f)(3)(viii) of this section based on the 

enrollment threshold using the 

combined enrollment from the legacy 

MA contract and the MA contract 

established under § 422.107(e), and 

using the HEI score for the MA contract 

established under § 422.107(e). 

(5) When multiple legacy MA 

contracts move their D–SNP plan 

benefit package(s) to the same MA 

contract established under § 422.107(e) 

and any of the legacy MA contracts do 

not meet an enrollment threshold as 

defined in paragraph (f)(3)(vii) of this 


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section, and both the legacy MA 

contracts and the MA contract 

established under § 422.107(e) can have 

the HEI score reliably calculated 

following paragraphs (f)(3)(iv) and (vi) 

of this section, then the combined 

enrollment from the legacy MA 

contracts and the MA contract 

established under § 422.107(e) for the 

most recent measurement year used in 

calculating the HEI is used in assessing 

the enrollment threshold in paragraph 

(f)(3)(vii) of this section for any of the 

legacy MA contracts that do not meet an 

enrollment threshold on their own. If an 

enrollment threshold is met using the 

combined enrollment in this paragraph, 

the steps in paragraph 

(f)(3)(viii)(C)(4)(ii) of this section are 

followed separately for each of the 

legacy MA contracts. If a legacy MA 

contract meets the enrollment 

thresholds on its own or if it cannot 

have the HEI score reliably calculated 

following paragraphs (f)(3)(iv) and (vi) 

of this section, the legacy MA contract 

would not be included in the 

calculation of the combined enrollment. 

* * * * * 

(g) * * * 

(1) * * * 

(i) If the highest rating rounded to the 

half star before the addition of the HEI 

reward, if applicable, for each contracttype is 4 stars or more without the use 

of the improvement measure(s) and with 

all applicable adjustments (CAI and the 

reward factor), a comparison of the 

highest rating with and without the 

improvement measure(s) is done. The 

higher rating is used for the rating. 

(ii) If the highest rating rounded to the 

half star before the addition of the HEI 

reward, if applicable, is less than 4 stars 

without the use of the improvement 

measure(s) and with all applicable 

adjustments (CAI and the reward factor), 

the rating will be calculated with the 

improvement measure(s). 

* * * * * 

■ 17. Section 422.562 is amended by 

revising paragraph (c)(2) to read as 

follows: 

§ 422.562 General provisions. 

* * * * * 

(c) * * * 

(2) Based on an MA organization’s 

determination on a request for payment, 

if an enrollee has no further liability to 

pay for services that were furnished by 

an MA organization, a determination 

regarding these services is not subject to 

appeal. 

* * * * * 

■ 18. Section 422.566 is amended by 

revising paragraph (b)(3) to read as 

follows: 

§ 422.566 Organization determinations. 

* * * * * 

(b) * * * 

(3) The MA organization’s refusal, 

pre- or post-service or in connection 

with a decision made concurrently with 

an enrollee’s receipt of services, to 

provide or pay for services, in whole or 

in part, including the type or level of 

services, that the enrollee believes 

should be furnished or arranged for by 

the MA organization. 

* * * * * 

■ 19. Section 422.568 is amended by 

revising paragraphs (b)(1) introductory 

text, (d) introductory text, and (f) to read 

as follows: 

§ 422.568 Standard timeframes and notice 

requirements for organization 

determinations. 

* * * * * 

(b) * * * 

(1) Requests for service or item. 

Except as provided in paragraph (b)(2) 

of this section, when a party has made 

a request for an item or service, the MA 

organization must notify the enrollee 

(and the physician or provider involved, 

as appropriate) of its determination as 

expeditiously as the enrollee’s health 

condition requires but no later than 

either of the following: 

* * * * * 

(d) Written notice for MA organization 

denials. The MA organization must give 

the enrollee and the physician or 

provider involved, as appropriate, a 

written notice if— 

* * * * * 

(f) Effect of failure to provide timely 

notice. If the MA organization fails to 

provide the enrollee and the physician 

or provider involved, as appropriate, 

with timely notice of an organization 

determination as specified in this 

section, this failure itself constitutes an 

adverse organization determination and 

may be appealed. 

* * * * * 

■ 20. Section 422.572 is amended by 

revising paragraph (f) to read as follows: 

§ 422.572 Timeframes and notice 

requirements for expedited organization 

determinations. 

* * * * * 

(f) Effect of failure to provide a timely 

notice. If the MA organization fails to 

provide the enrollee and the physician 

or prescriber involved, as appropriate, 

with timely notice of an expedited 

organization determination as specified 

in this section, this failure itself 

constitutes an adverse organization 

determination and may be appealed. 

■ 21. Section 422.616 is amended by 

revising paragraph (a) and adding 

paragraph (e) to read as follows: 

§ 422.616 Reopening and revising 

determinations and decisions. 

(a) Subject to paragraph (e) of this 

section and the rules at § 422.138(c) of 

this part, an organization or 

reconsidered determination made by an 

MA organization, a reconsidered 

determination made by the independent 

entity described in § 422.592, or the 

decision of an ALJ or attorney 

adjudicator or the Council that is 

otherwise final and binding may be 

reopened and revised by the entity that 

made the determination or decision, 

under the rules in part 405 of this 

chapter. 

* * * * * 

(e) Limitation on reopening a 

determination related to an approved 

inpatient hospital admission: If the MA 

organization approved an inpatient 

hospital admission under the rules at 

§ 412.3(d)(1) and (3), any additional 

clinical information obtained after the 

initial organization determination 

cannot be used as new and material 

evidence to establish good cause for 

reopening the determination. 

■ 22. Section 422.631 is amended by 

revising paragraphs (a) and (d)(1)(i) and 

(ii) to read as follows: 

§ 422.631 Integrated organization 

determinations. 

(a) General rule. An applicable 

integrated plan must adopt and 

implement a process for enrollees to 

request that the plan make an integrated 

organization determination. The process 

for requesting that the applicable 

integrated plan make an integrated 

organization determination must be the 

same for all covered benefits. 

Timeframes and notice requirements for 

integrated organization determinations 

for Part B drugs are governed by the 

provisions for Part B drugs in 

§§ 422.568(b)(3), 422.570(d)(2), and 

422.572(a)(2). 

* * * * * 

(d) * * * 

(1) * * * 

(i) The applicable integrated plan 

must send an enrollee a written notice 

(and notify the physician or provider 

involved, as appropriate) of any adverse 

decision on an integrated organization 

determination (including a 

determination to authorize a service or 

item in an amount, duration, or scope 

that is less than the amount previously 

requested or authorized for an ongoing 

course of treatment) within the 

timeframes set forth in this section. 

(ii) For an integrated organization 

determination not reached within the 

timeframes specified in this section 

(which constitutes a denial and is thus 

an adverse decision), the applicable 


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integrated plan must send a notice to 

the enrollee (and notify the physician or 

provider involved, as appropriate) on 

the date that the timeframes expire. 

Such notice must describe all applicable 

Medicare and Medicaid appeal rights. 

* * * * * 

■ 23. Section 422.2260 is amended by 

revising the definitions of 

‘‘Advertisement (Ad)’’ and ‘‘Marketing’’ 

to read as follows: 

§ 422.2260 Definitions. 

* * * * * 

Advertisement (Ad) means a read, 

written, visual, oral, watched, or heard 

bid for, or call to attention. 

* * * * * 

Marketing means communications 

materials and activities that are 

intended to draw a beneficiary’s 

attention to a MA plan or plans, 

influence a beneficiary’s decisionmaking process when making a MA 

plan selection, or influence a 

beneficiary’s decision to stay enrolled in 

a plan (that is, retention-based 

marketing), except those required 

materials specified in § 422.2267(e) of 

this chapter, which will maintain the 

material designation as provided by 

CMS. In evaluating the intent of an 

activity or material, CMS considers 

objective information including, but not 

limited to, the audience of the activity 

or material, other information 

communicated by the activity or 

material, timing, and other context of 

the activity or material and is not 

limited to the MA organization’s stated 

intent. 

* * * * * 

■ 24. Section 422.2263 is amended by 

adding paragraph (b)(11) to read as 

follows: 

§ 422.2263 General marketing 

requirements. 

* * * * * 

(b) * * * 

(11) Market 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. 

* * * * * 

■ 25. Section 422.2267 is amended: 

■ a. In paragraph (e)(30)(vi) by removing 

the word ‘‘and’’; 

■ b. In paragraph (e)(30)(vii) by 

removing the phrase ‘‘of this section.’’ 

and adding in its place the phrase ‘‘of 

this section; and’’; and 

■ c. By adding paragraph (e)(30)(viii). 

The addition reads as follows: 

§ 422.2267 Required materials and 

content. 

* * * * * 

(e) * * * 

(30) * * * 

(viii) For dual eligible special needs 

plans that are applicable integrated 

plans, as defined in § 422.561, must be 

an integrated member ID card that 

serves as the ID card for both the 

Medicare and Medicaid plans in which 

the enrollee is enrolled, beginning no 

later than contract year 2027. 

* * * * * 

■ 26. Section 422.2274 is amended by 

revising paragraph (c)(12) to read as 

follows: 

§ 422.2274 Agent, broker, and other thirdparty requirements. 

* * * * * 

(c) * * * 

(12) Ensure that, prior to an 

enrollment, CMS’ required questions 

and topics regarding beneficiary needs 

in a health plan choice are fully 

discussed. Topics to be discussed 

include all the following: 

(i) Primary care providers and 

specialists (that is, whether or not the 

beneficiary’s current providers are in 

the plan’s network). 

(ii) Pharmacies (that is, whether or not 

the beneficiary’s current pharmacy is in 

the plan’s network). 

(iii) Prescription drug coverage and 

costs (including whether or not the 

beneficiary’s current prescriptions are 

covered). 

(iv) Low-income subsidy eligibility 

(that is, at a minimum, explaining the 

eligibility requirements as defined at 

§ 423.773, and the effect on drug costs 

if eligible, and identifying resources 

where they can get more information on 

applying). 

(v) Resources for state programs, 

including Medicare Savings Programs 

(vi) For beneficiaries who are 

enrolling into a MA plan when first 

eligible for Medicare, or those who are 

dropping a Medigap plan to enroll into 

an MA plan for the first time. 

(A) The agent must explain all of the 

following: 

(1) That there is a 12-month period 

under Federal law in which they are 

permitted to disenroll from the MA plan 

and switch back to Traditional Medicare 

and purchase a Medigap plan with 

guaranteed issue rights. 

(2) If the beneficiary enrolls into 

Traditional Medicare and decides to 

purchase a Medigap plan outside of the 

12-month window, that they are not 

guaranteed the right under Federal law 

to purchase a Medigap plan in the 

future, and if they do, the insurance 

company selling the Medigap plan may 

not cover all preexisting health 

conditions and may charge more based 

on past or present health problems. 

(B) The agent may do either of the 

following: 

(1) Provide additional state-based 

guaranteed issue rights information. 

(2) Supplement state-based 

guaranteed issue rights information with 

the information provided under 

422.2274(c)(12)(vi)(A) of this section, 

when it offers additional protections or 

flexibility. 

(vii) Costs of health care services. 

(viii) Premiums. 

(ix) Benefits. 

(x) Specific health care needs. 

(xi) Conclude by pausing to ask if the 

beneficiary has any questions about the 

topics discussed in paragraph (c)(12) of 

this section or others, including those 

related to enrollment. 

* * * * * 

■ 27. Section 422.2401 is amended by 

adding in alphabetical order definitions 

for ‘‘MLR audit remittance’’ and ‘‘MLR 

audit remittance process’’ to read as 

follows: 

§ 422.2401 Definitions. 

MLR audit remittance means the 

amount CMS calculates and an MA 

organization pays for an MA contract 

that has failed to meet the 85 percent 

minimum MLR requirement as the 

result of an MLR audit examination. 

MLR audit remittance process means 

the process by which CMS calculates 

the MLR audit remittance for a contract 

that is determined to have failed to meet 

the 85 percent minimum MLR 

requirement as the result of an MLR 

audit examination and notify the MA 

organization about the remittance. The 

process includes all of the following: 

(1) Collecting the MLR audit 

remittance indicated in the final audit 

report issued by CMS. 

(2) Receiving responses from MA 

organizations requesting an appeal of 

the MLR audit remittance. 

(3) Taking actions to adjudicate an 

appeal (if requested). 

(4) Receiving MLR remittances from 

MA organizations. 

* * * * * 

■ 28. Section 422.2420 is amended by— 

■ a. Revising paragraph (b)(2)(xi); 

■ b. Adding paragraph (b)(4)(i)(D); 

■ c. Revising paragraph (c)(2)(iv)(B); 

■ d. Redesignating paragraphs (d)(2)(i) 

through (iii) as paragraphs (d)(2)(ii) 

through (iv); and 

■ e. Adding new paragraph (d)(2)(i). 

The additions and revisions read as 

follows: 


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§ 422.2420 Calculation of medical loss 

ratio. 

* * * * * 

(b) * * * 

(2) * * * 

(xi) The amount of incentive and 

bonus payments made, or expected to be 

made, to providers that are tied to 

clearly defined, objectively measurable, 

and well-documented clinical or quality 

improvement standards that apply to 

providers. 

(3) * * * 

(4) * * * 

(i) * * * 

(D) Unsettled balances from the 

Medicare Prescription Payment Plan 

* * * * * 

(c) * * * 

(2) * * * 

(iv) * * * 

(B) Such payment may be deducted 

up to the limit of either 3 percent of 

total revenue under this part or the 

highest premium tax rate in the State for 

which the MA organization is licensed, 

multiplied by the MA organization’s 

earned premium for the contract. 

* * * * * 

(d) * * * 

(2) * * * 

(i) The report required in § 422.2460 

must include a detailed description of 

the methods used to allocate expenses, 

including incurred claims, expenditures 

on quality improving activities, 

licensing and regulatory fees, and State 

and Federal taxes and assessments. A 

detailed description of each expense 

element must be provided, including 

how each specific expense meets the 

criteria for the type of expense in which 

it is categorized, as well as the method 

by which it was aggregated. 

* * * * * 

■ 29. Section 422.2430 is amended by 

redesignating paragraphs (a) and (b) as 

paragraphs (b) and (c) and adding a new 

paragraph (a) to read as follows: 

§ 422.2430 Activities that improve health 

care quality. 

(a) General requirements. The report 

required in § 422.2460 must include 

expenditures directly related to 

activities that improve health care 

quality, as such activities are described 

in this section. 

* * * * * 

■ 30. Section 422.2450 is added to read 

as follows: 

§ 422.2450 MLR audit process. 

(a) Notice of audit. CMS provides at 

least 15 calendar days advance notice of 

its intent to conduct an audit of an MA 

organization. 

(b) Conferences. All audits include an 

entrance conference during which the 

scope of the audit is presented and an 

exit conference during which the initial 

audit findings are discussed. 

(c) Audit documentation. All 

requested audit documentation must be 

provided by the MA organization to 

CMS within 30 calendar days of the 

audit entrance conference. CMS may 

extend, at CMS’s discretion, the time for 

an MA organization to provide the 

documentation requested. 

(d) Preliminary audit findings. CMS 

shares its preliminary audit findings 

with the MA organization, which then 

has 30 calendar days to respond to such 

findings. CMS may extend, for good 

cause, the time for an MA organization 

to submit such a response. 

(e) Final audit findings. If the MA 

organization does not dispute the 

preliminary findings within the 30-day 

timeframe per paragraph (d) of this 

section, then the audit report becomes 

final. Alternatively, if the MA 

organization disputes the preliminary 

findings, CMS reviews and considers 

such response before finalizing the audit 

findings. 

(f) Corrective actions. CMS sends a 

copy of the final audit report to the MA 

organization as well as issues corrective 

actions that the MA organization must 

undertake as a result of the audit 

findings. 

(g) Order to pay remittances. If CMS 

determines as the result of an audit that 

an MA organization has failed to pay 

remittances it is obligated to pay under 

§ 422.2480, it may order the MA 

organization to pay those remittances 

consistent with § 422.2452. 

■ 31. Section 422.2452 is added to read 

as follows: 

§ 422.2452 MLR audit remittance and 

payment process. 

(a) Notice of MLR audit remittance. 

After the calculation of the MLR audit 

remittance, CMS sends the MA 

organization the final audit report with 

the MLR audit remittance amount. The 

final audit report contains the following 

information: 

(1) A MLR audit remittance for the 

contract that has failed to meet the 85 

percent MLR minimum requirement 

based on audit findings, which may be 

one of the following: 

(ii) An amount due from the MA 

organization. 

(iii) $0 if nothing is due from the MA 

organization. 

(2) Relevant banking and financial 

mailing instructions for MA 

organizations that owe a MLR audit 

remittance. 

(3) Relevant CMS contact information. 

(4) A description of the steps for 

requesting an appeal of the MLR audit 

remittance calculation, in accordance 

with the requirements specified in 

§ 422.2454. 

(b) Request for an appeal. A MA 

organization that disagrees with the 

MLR audit remittance has 15 calendar 

days from the date of issuance of the 

final audit report, as described in 

paragraph (a) of this section, to request 

an appeal of the MLR audit remittance 

under the process described in 

§ 422.2454. 

(1) If an MA organization agrees with 

the MLR audit remittance, no response 

is required. 

(2) If an MA organization disagrees 

with the MLR audit remittance, it must 

request an appeal within 15 calendar 

days from the date of issuance of the 

final audit report. CMS will not 

consider any requests for appeal after 

this 15-day period. 

(c) Actions if a MA organization does 

not request an appeal. (1) The MA 

organization is required to remit 

payment to CMS within 120 calendar 

days from the date of issuance of the 

final audit report. 

(2) If the MA organization fails to 

remit payment within that 120-calendarday period, CMS refers the debt owed to 

CMS to the Department of the Treasury 

for collection. 

(d) Actions following a request for 

appeal. If an MA organization responds 

to the final audit report disagreeing with 

the MLR audit remittance and 

requesting appeal, CMS conducts a 

review process under the process 

described at § 422.2454. 

■ 32. Section 422.2454 is added to read 

as follows: 

§ 422.2454 MLR audit remittance appeals 

process. 

(a) Appeals process. If an MA 

organization does not agree with the 

MLR audit remittance described in 

§ 422.2452(a), it may appeal under the 

following three-level appeal process: 

(1) Reconsideration. An MA 

organization may request 

reconsideration of the MLR audit 

remittance described in § 422.2452(a) 

according to the following process: 

(i) Manner and timing of request. A 

written request for reconsideration must 

be filed within 15 days from the date of 

issuance of the final audit report to the 

MA organization. 

(ii) Content of request. The written 

request for reconsideration must do all 

of the following: 

(A) Specify the calculation with 

which the MA organization disagrees 

and the reasons for its disagreement. 

(B) Include evidence supporting the 

assertion that CMS’s calculation of the 

MLR audit remittance is incorrect. 


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(C) Not include new data or data that 

was submitted to CMS after the final 

audit report was issued. 

(iii) Conduct of reconsideration. In 

conducting the reconsideration, the 

CMS reconsideration official reviews 

the calculations that were used to 

determine the MLR audit remittance 

and any additional evidence timely 

submitted by the MA organization. 

(iv) Reconsideration decision. The 

CMS reconsideration official informs 

the MA organization of its decision on 

the reconsideration in writing. 

(v) Effect of reconsideration decision. 

The decision of the CMS 

reconsideration official is final and 

binding unless a timely request for an 

informal hearing is filed in accordance 

with paragraph (a)(2) of this section. 

(2) Informal hearing. An MA 

organization dissatisfied with CMS’s 

reconsideration decision made under 

paragraph (a)(1) of this section is 

entitled to an informal hearing as 

provided for under paragraphs (a)(2)(i) 

through (iv) of this section. 

(i) Manner and timing of request. A 

request for an informal hearing must be 

made in writing and filed with the CMS 

hearing officer within 15 calendar days 

from the date of issuance of the 

reconsideration decision. 

(ii) Content of request. The request for 

an informal hearing must include a copy 

of the reconsideration decision and 

must specify the findings or issues in 

the decision with which the MA 

organization disagrees and the reasons 

for its disagreement. 

(iii) Informal hearing procedures. The 

informal hearing is conducted in 

accordance with the following: 

(A) The CMS Hearing Officer provides 

written notice of the time and place of 

the informal hearing at least 30 calendar 

days before the scheduled date. 

(B) The CMS reconsideration official 

provides, within 10 calendar days of the 

hearing officer receiving an informal 

hearing request, a copy of the record 

that was before the reconsideration 

official. 

(C) The hearing officer review is 

conducted by a CMS hearing officer 

who neither receives testimony nor 

accepts any new evidence. The CMS 

hearing officer is limited to the review 

of the record that was before CMS 

reconsideration official had when 

making the reconsideration decision. 

(iv) Decision of the CMS hearing 

officer. The CMS hearing officer decides 

whether to uphold or overturn the 

reconsideration official’s decision and 

sends a written decision to the MA 

organization explaining the basis for the 

decision. 

(v) Effect of hearing officer’s decision. 

The hearing officer’s decision is final 

and binding, unless the decision is 

reversed or modified by the CMS 

Administrator in accordance with 

paragraph (a)(3) of this section. 

(3) Review by the Administrator. The 

Administrator’s review is conducted in 

the following manner: 

(i) Manner and timing of request. An 

MA organization that has received a 

hearing officer’s decision may request 

review by the Administrator within 15 

calendar days of the date of issuance of 

the hearing officer’s decision under 

paragraph (a)(2)(iv) of this section. The 

MA organization may submit written 

arguments to the Administrator for 

review. 

(ii) Discretionary review. (A) After 

receiving a request for review, the 

Administrator has the discretion to elect 

to review the hearing officer’s 

determination in accordance with 

paragraph (a)(3)(iii) of this section or to 

decline to review the hearing officer’s 

decision within 30 calendar days of 

receiving the request for review. 

(B) If the Administrator declines to 

review the hearing officer’s decision, the 

hearing officer’s decision is final and 

binding. 

(iii) Electing to review. If the 

Administrator elects to review the 

hearing officer’s decision, the 

Administrator reviews the hearing 

officer’s decision, as well as any 

information included in the record of 

the hearing officer’s decision and any 

written argument submitted by the MA 

organization, and determine whether to 

uphold, reverse, or modify the hearing 

officer’s decision. 

(iv) Effect of Administrator’s decision. 

The Administrator’s decision is final 

and binding. 

(b) Matters subject to appeal and 

burden of proof. (1) The MA 

organization’s appeal is limited to 

CMS’s calculation of the MLR audit 

remittance. 

(2) The MA organization bears the 

burden of proof for providing evidence 

demonstrating that CMS’s audit 

examination results for the MLR audit 

remittance require further review. The 

MA organization may not challenge the 

underlying methodology for the MLR 

audit remittance calculation. 

(c) Stay of financial transaction until 

appeals are exhausted. If an MA 

organization requests review of the MLR 

audit remittance, the financial 

transaction associated with the payment 

of the MLR audit remittance is stayed 

until all appeals are exhausted. Once all 

levels of appeal are exhausted or the 

MA organization fails to request further 

review within the applicable 15- 

calendar-day timeframe, CMS 

communicates with the MA 

organization to complete the financial 

transaction associated with the payment 

of the MLR audit remittance. 

(d) Continued compliance with other 

law required. Nothing in this section 

limits a MA organization’s 

responsibility to comply with any other 

statute or regulation. 

■ 33. Section 422.2460 is amended by 

revising paragraph (a) to read as follows: 

§ 422.2460 Reporting requirements. 

(a) Except as provided in paragraph 

(b) of this section, for each contract year, 

each MA organization must submit to 

CMS, in a timeframe and manner 

specified by CMS, a report that includes 

the data needed by the MA organization 

to calculate and verify the medical loss 

ratio (MLR) and remittance amount, if 

any, for each contract under this part, 

including the amount of incurred claims 

for original Medicare covered benefits, 

supplemental benefits, provider 

payment arrangements, and prescription 

drugs; total revenue; expenditures on 

quality improving activities; non-claims 

costs; taxes; licensing and regulatory 

fees; and any remittance owed to CMS 

under § 422.2410. 

* * * * * 

■ 34. Section 422.2480 is amended by 

revising paragraph (d) introductory text 

to read as follows: 

§ 422.2480 MLR review and noncompliance. 

* * * * * 

(d) Data submitted under § 422.2460, 

calculations, or any other MLR 

submission required by this subpart 

which have not been reported in a 

timely and accurate manner or have 

been found to be materially incorrect or 

fraudulent— 

* * * * * 

■ 35. Section 422.2490 is amended by 

adding paragraphs (b)(6) and (7) to read 

as follows: 

§ 422.2490 Release of Part C MLR data. 

* * * * * 

(b) * * * 

(6) DIR information reported within 

the MLR data as part of incurred claims. 

(7) Provider payment arrangement 

data that is not reported on a 

deidentified basis and provider payment 

arrangement data that is not reported on 

an aggregate total basis. 

* * * * * 

PART 423—VOLUNTARY MEDICARE 

PRESCRIPTION DRUG BENEFIT 

■ 36. The authority for part 423 

continues to read as follows: 


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Authority: 42 U.S.C. 1302, 1306, 1395w– 

101 through 1395w–152, and 1395hh. 

■ 37. Section 423.100 is amended by 

adding in alphabetical order definitions 

for ‘‘ACIP-recommended adult vaccine,’’ 

‘‘Covered insulin product,’’ ‘‘Covered 

insulin product applicable cost-sharing 

amount,’’ and ‘‘Effective date of the 

ACIP recommendation’’ to read as 

follows: 

§ 423.100 Definitions. 

ACIP-recommended adult vaccine 

means a covered Part D drug, as defined 

at § 423.100, that is a vaccine licensed 

by the U.S. Food and Drug 

Administration (FDA) under section 351 

of the Public Health Service Act for use 

by adult populations and administered 

in accordance with recommendations of 

the Advisory Committee on 

Immunization Practices (ACIP) of the 

Centers for Disease Control and 

Prevention (CDC) as adopted by the CDC 

Director. 

* * * * * 

Covered insulin product means, for 

purposes of § 423.120(h), an insulin 

product, including a product that is a 

combination of more than one type of 

insulin or a product that is a 

combination of both insulin and a noninsulin drug or biological product, 

that— 

(1) Is a covered Part D drug covered 

under a PDP or MA–PD plan— 

(i) Is licensed under section 351 of the 

Public Health Service Act; and 

(ii) Is marketed under the license 

described in paragraph (1)(i) of this 

definition. 

(2) Is not a compounded drug product 

that contains insulin (as described in 

§ 423.120(d)). 

Covered insulin product applicable 

cost-sharing amount means, with 

respect to a covered insulin product, as 

defined in this section, covered under a 

PDP or an MA–PD plan prior to an 

enrollee reaching the annual out-ofpocket threshold during plan year 2026 

and each subsequent plan year, the 

lesser of the following: 

(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 subchapter XI. 

(3) An amount equal to 25 percent of 

the negotiated price (as defined in 

§ 423.100) of the covered insulin 

product under the PDP or MA–PD plan. 

* * * * * 

Effective date of the ACIP 

recommendation means the date 

specified on the CDC website noting the 

date the CDC Director adopted the ACIP 

recommendation. 

* * * * * 

■ 38. Section 423.120 is amended by 

adding paragraphs (g) and (h) to read as 

follows: 

§ 423.120 Access to covered Part D drugs 

* * * * * 

(g) Coverage of ACIP-recommended 

adult vaccines. With respect to an ACIPrecommended adult vaccine, a Part D 

sponsor must— 

(1) Not apply any deductible nor 

charge any cost-sharing; and 

(2) Once a new or revised 

recommendation is posted on the CDC 

website, provide coverage consistent 

with paragraph (g)(1) of this section for 

dates of service on or after the effective 

date of the ACIP recommendation, as 

defined at § 423.100. 

(3) Apply the requirements in 

paragraphs (g)(1) and (2) of this section 

to ACIP-recommended adult vaccines 

obtained from either an in-network or 

out-of-network pharmacy or provider in 

accordance with § 423.124(a) and (c). 

(h) Appropriate cost-sharing for 

covered insulin products. With respect 

to a covered insulin product, as defined 

at § 423.100, covered under a PDP or an 

MA–PD plan prior to an enrollee 

reaching the annual out-of-pocket 

threshold, a Part D sponsor must do all 

of the following: 

(1) Not apply a deductible. 

(2) Ensure any enrollee cost sharing 

for each prescription fill up to a onemonth supply does not exceed the 

covered insulin product applicable costsharing amount defined at § 423.100. 

(3) Ensure any enrollee cost sharing 

for each prescription fill greater than a 

1-month supply does not exceed the 

cumulative covered insulin product 

applicable cost-sharing amount (as 

defined in § 423.100) that would apply 

if the same days’ supply was dispensed 

in the fewest number of 1-month supply 

increments necessary. 

(4) Apply the requirements in 

paragraphs (h)(1) through (3) of this 

section to covered insulin products 

obtained from either an in-network or 

out-of-network pharmacy or provider. 

■ 39. Section 423.137 is added to 

subpart C to read as follows: 

§ 423.137 Medicare Prescription Payment 

Plan. 

(a) General. For plan years beginning 

on or after January 1, 2026, or, in the 

case of a plan operating on a noncalendar year basis, for the portion of 

the plan year starting on January 1, 

2026, each PDP sponsor offering a 

prescription drug plan and each MA 

organization offering an MA–PD plan 

must provide to any enrollee of such 

plan, including an enrollee who is a 

subsidy eligible individual (as defined 

at § 423.4), the option to elect with 

respect to a plan year to pay $0 cost 

sharing at the point of sale and pay cost 

sharing under the plan in monthly 

amounts that are capped in accordance 

with this section. 

(b) Definitions. For the purposes of 

this section, the following definitions 

apply: 

(1) OOP costs for the Medicare 

Prescription Payment Plan means the 

out-of-pocket cost sharing amount the 

Part D enrollee is directly responsible 

for paying. 

(i) For the subsequent month 

calculation of the Part D cost sharing 

incurred by the Part D enrollee, it 

includes those Part D cost sharing 

amounts that the enrollee is responsible 

for paying after taking into account 

amounts paid by third-party payers. 

(ii) It does not include the covered 

plan pay amount or other costs defined 

under section 1860D–2(b)(4)(C) of the 

Act. 

(2) Remaining OOP costs owed by the 

participant means the sum of out-ofpocket costs for the Medicare 

Prescription Payment Plan that have not 

yet billed to the program participant. 

For example, if a Medicare Prescription 

Payment Plan participant incurs $2,000 

in January 2025 and is billed $166.67, 

the remaining OOP costs for the 

Medicare Prescription Payment Plan are 

$2,000¥$166.67 = $1,833.33. 

(c) Calculation of the maximum 

monthly cap on cost-sharing payments. 

For each month in the plan year for 

which an enrollee in a PDP or an MA– 

PD plan has made an election to 

participate in the Medicare Prescription 

Payment Plan, the PDP sponsor or MA 

organization must determine a 

maximum monthly cap (as defined in 

paragraph (c)(1) of this section) for such 

enrollee. 

(1) Enrollee monthly payments. For 

each month an enrollee is participating 

in the Medicare Prescription Payment 

Plan, the PDP sponsor or MA 

organization shall bill such enrollee an 

amount (not to exceed the maximum 

monthly cap) for the out-of-pocket costs 

of such enrollee in such month. 

(i) First month maximum monthly cap 

calculation. For the first month for 

which the enrollee has made an election 

to participate in the Medicare 

Prescription Payment Plan, the 

maximum monthly cap is an amount 

determined by calculating the annual 

out-of-pocket threshold specified in 

section 1860D–2(b)(4)(B) of the Act 

minus the incurred costs of the enrollee 

as described in section 1860D–2(b)(4)(C) 

of the Act; divided by the number of 

months remaining in the plan year. 


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(A) When the out-of-pocket costs 

incurred in the first month of program 

participation are less than the maximum 

monthly cap defined in paragraph 

(c)(1)(i) of this section, the PDP sponsor 

or MA organization must bill the 

participant the lesser of the participant’s 

actual out-of-pocket costs or the first 

month’s maximum monthly cap. 

(B) When an enrollee opts into the 

Medicare Prescription Payment Plan 

prior to the start of the plan year, the 

calculation described in (c)(1)(i) applies 

to their first month of active coverage 

within the plan year. 

(ii) Calculation of maximum monthly 

cap in subsequent months. For 

subsequent months in the plan year, the 

maximum monthly cap is an amount 

determined by calculating the sum of 

any remaining out-of-pocket costs owed 

by the enrollee from a previous month 

that have not yet been billed to the 

enrollee and any additional out-ofpocket costs incurred by the enrollee; 

divided by the number of months 

remaining in the plan year. 

(2) Eligible out-of-pocket costs. The 

calculations described in paragraphs 

(c)(1)(i) and (ii) of this section apply 

only to covered Part D drugs, as defined 

at § 423.100. 

(3) Months remaining in the plan 

year. For the calculations described in 

paragraphs (c)(1)(i) and (ii) of this 

section, the number of months 

remaining in the plan year includes the 

month for which the cap is being 

calculated. 

(4) Impact on true out-of-pocket cost 

accumulation. Participation in the 

Medicare Prescription Payment Plan 

must have no impact on true out-ofpocket cost accumulation. Costs defined 

under section 1860D–2(b)(4)(C) of the 

Act incurred under the Medicare 

Prescription Payment Plan must still be 

treated as incurred based on the date 

each Part D claim is adjudicated. 

(5) Prescriptions for an extended day 

supply. For participants who fill 

prescriptions for an extended day 

supply, their OOP costs for the 

Medicare Prescription Payment Plan for 

those prescriptions must be attributed to 

the month the prescription was filled 

and not be pro-rated over the months 

covered by the prescription. 

(6) Mid-year plan switching. When an 

individual opts into the Medicare 

Prescription Payment Plan after 

switching plans midyear, the new Part 

D sponsor must calculate the 

individual’s monthly cap for the first 

month of participation under the new 

plan using the formula for the 

calculation of the maximum monthly 

cap in the first month. 

(d) Eligibility and election. An 

individual is eligible for the Medicare 

Prescription Payment Plan if they are 

enrolled in a Part D plan and have not 

been precluded from participation due 

to failure to pay, as described in 

paragraphs (f)(2)(ii) and (f)(5) of this 

section. LIS-eligible Part D enrollees are 

eligible to participate in the program. 

(1) Election. A Part D sponsor must 

allow any Part D enrollee, including 

those who are LIS-eligible, to opt into 

the program prior to the beginning of 

the plan year or at any point during the 

plan year. A Part D enrollee must also 

be allowed to opt into the program in 

advance of a new plan enrollment 

effective date, including during any of 

the following: 

(i) The annual election period for the 

subsequent plan year. 

(ii) The Part D initial enrollment 

period. 

(iii) Part D special election periods. 

(2) Format of election requests. A Part 

D sponsor must allow any Part D 

enrollee or a Part D enrollee’s 

authorized legal representative acting on 

behalf of the enrollee to opt into the 

program using a paper or electronic 

election request form or through a 

telephone call. Part D sponsors must 

process any election request regardless 

of format. 

(i) Paper election requests. Paper 

election requests are considered 

received on the date and time: 

(A) The Part D sponsor initially 

stamps a document received by regular 

mail (that is, U.S. Postal Service); or 

(B) A delivery service that has the 

ability to track when a shipment is 

delivered (for example, U.S. Postal 

Service, UPS, FedEx, or DHL) delivers 

the document. 

(ii) Telephonic election requests. 

Telephonic election requests are 

considered received on the date and 

time that either of the following occurs: 

(A) The verbal request is made by 

telephone with a customer service 

representative. 

(B) A message is left on the Part D 

sponsor’s voicemail system if the Part D 

sponsor utilizes a voicemail system to 

accept requests or supporting statements 

after normal business hours. 

(iii) Electronic election requests. An 

electronic election request is considered 

received on the date and time a request 

is received through the Part D sponsor’s 

website. This is true regardless of when 

a Part D sponsor ultimately retrieves or 

downloads the request. 

(3) Completion of election request. For 

an election request to be considered 

complete, the Part D sponsor must 

receive all of the following: 

(i) The name of the Part D enrollee. 

(ii) The Medicare ID number of the 

Part D enrollee. 

(iii) The Part D enrollee’s or their 

authorized legal representative’s 

agreement to the Part D sponsor’s terms 

and conditions for the program 

(signature or, in the case of telephonic 

requests, verbal attestation). 

(4) Processing an election request—(i) 

Prior to plan year. Part D sponsors must 

process election requests received prior 

to the plan year within the following 

timeframes: 

(A) Within 10 calendar days of 

receipt, process a complete election 

request as specified in § 423.137(d)(3). 

(B) Within 10 calendar days of receipt 

of an incomplete election request, 

contact the Part D enrollee to request the 

necessary information to process the 

request as specified in § 423.137(d)(3). 

(C) If information necessary to 

consider the request complete, as 

required at § 423.137(d)(3), is not 

received within 21 calendar days of the 

request for information, the Part D 

sponsor may deny the request. 

(ii) During a plan year. Part D 

sponsors must process election requests 

received during a plan year within the 

following timeframes: 

(A) Within 24 hours of receipt, 

process a complete election request, as 

specified in § 423.137(d)(3). 

(B) Within 24 hours of receipt of an 

incomplete election request, contact the 

Part D enrollee to request the necessary 

information to process the request, as 

required in § 423.137(d)(3). 

(C) If information necessary to 

consider the request complete, as 

required at § 423.137(d)(3), is not 

received within 21 calendar days of the 

request for information, the Part D 

sponsor may deny the request. 

(D) In the event a Part D sponsor fails 

to process the request within 24 hours 

due to no fault of the Part D enrollee, 

the Part D sponsor must— 

(1) Process a retroactive election 

effective on the date on which the 

enrollee should have been admitted into 

the program; and 

(2) Reimburse the enrollee for any 

cost-sharing paid on or after that date 

within 45 calendar days and include 

those amounts, as appropriate, in the 

program calculations. 

(5) Inclusion of all covered Part D 

drugs once in the program. Once a 

participant has opted into the program, 

cost sharing for all covered Part D drugs 

must be included in the program. 

(6) Retroactive election. (i) A Part D 

sponsor must have in place a process to 

effectuate a retroactive election into the 

Medicare Prescription Payment Plan if 

both of the following conditions are 

met: 


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(A) The Part D enrollee believes that 

any delay in filling the prescription(s) 

due to the 24-hour timeframe required 

to process their request to opt in may 

seriously jeopardize their life, health, or 

ability to regain maximum function. 

(B) The Part D enrollee requests 

retroactive election within 72 hours of 

the date and time the claim(s) were 

adjudicated. 

(ii) The Part D sponsor must process 

the reimbursement for all cost sharing 

paid by the enrollee for the prescription 

and any covered Part D prescription 

filled between the date of adjudication 

of the claim and the date that the 

enrollee’s election is effectuated within 

45 calendar days of the election date. 

(iii) If the Part D sponsor determines 

that an enrollee failed to request 

retroactive election within the required 

timeframe, it must promptly notify the 

individual of its determination and 

provide instructions on how the 

individual may file a grievance, as 

required under § 423.137(h)(2). 

(7) Retroactive LIS eligibility. A Part D 

sponsor must develop standardized 

procedures for determining and 

processing reimbursements for excess 

Medicare Prescription Payment Plan 

payments made by program participants 

who become LIS eligible and that meet 

requirements specified at §§ 423.800(c) 

and (e) and 423.466(a). 

(8) Mid-year plan switching. When a 

Part D enrollee switches Part D plans, 

whether offered by the same or a 

different Part D sponsor, during the plan 

year or is reassigned by CMS, the Part 

D sponsor of the new Part D plan is not 

permitted to automatically sign up the 

individual for the Medicare Prescription 

Payment Plan under the new plan but 

must allow the individual to opt into 

the program. Part D plan has the 

definition established at § 423.4. 

(i) The Part D sponsor of the prior Part 

D plan must offer the participant the 

option to repay the full outstanding 

amount in a lump sum. If the individual 

chooses to continue paying monthly, the 

Part D sponsor must continue to bill the 

participant monthly based on the 

participant’s accrued OOP costs for the 

Medicare Prescription Payment Plan 

while in the program under that 

sponsor’s Part D plan. The Part D 

sponsor cannot require full immediate 

repayment. 

(ii) Part D enrollees may only be 

precluded from opting into the program 

under a new Part D plan if both of the 

following conditions are met: 

(A) Both the former and new plans are 

offered by the same Part D sponsor. 

(B) The enrollee was involuntarily 

terminated from the program under the 

former plan, as described in paragraph 

(f)(2)(ii) of this section, for failure to pay 

and still owes an overdue balance. 

(9) Automatic renewal. A Part D 

sponsor is required to automatically 

renew a Part D enrollee’s participation 

in the Medicare Prescription Payment 

Plan for subsequent plan years. The Part 

D sponsor must notify the enrollee of 

the renewal and remind enrollees that 

they may opt out of the program at any 

time, in accordance with paragraph 

(f)(2)(i) of this section. 

(10) Election communications—(i) 

Election request form. A Part D sponsor 

must make available throughout the 

plan year and during the Part D plan 

enrollment periods described at 

paragraph (d)(4)(i)(A) of this section an 

election request form in the formats 

specified in paragraph (d)(2) of this 

section. 

(A) Timing. A Part D sponsor must 

send a paper election request form 

within the same timeframe as the 

membership ID card mailing specified at 

§ 423.2267(e)(32)(i). The election form 

may be sent in the membership ID card 

mailing itself or in a separate mailing. 

(B) Contents. The election request 

form must include or provide all of the 

following: 

(1) Fields for all of the following Part 

D enrollee information: 

(i) First and last name. 

(ii) Medicare Number. 

(iii) Birth date. 

(iv) Phone number. 

(v) Permanent residence street 

address, and mailing address, if 

different from permanent residence 

street address. 

(vi) Signature field, allowing the 

enrollee to attest that they understand 

that form is a request to participate in 

the Medicare Prescription Payment Plan 

and the Part D sponsor will contact 

them if more information is needed to 

complete the request; (their signature 

indicates they have read and understood 

the Part D sponsor’s terms and 

conditions; and the Part D sponsor will 

inform the individual when their 

participation in the program is active, 

and, until the individual receives that 

notification, they are not a participant in 

the program. 

(2) Instructions for how to submit the 

form to the Part D sponsor. 

(3) Instructions for how the Part D 

enrollee can contact the Part D sponsor 

for questions or assistance. 

(C) Additional information. 

Additional educational information 

about the Medicare Prescription 

Payment Plan must accompany the 

election request form when provided in 

hard copy or on the web. The additional 

information requirement may be 

fulfilled by including with the election 

request form the CMS-developed fact 

sheet about the program. If the Part D 

sponsor develops and uses alternative 

informational materials in lieu of the 

CMS-developed fact sheet to satisfy this 

requirement, they must ensure that 

these alternative materials accurately 

convey program information and are 

compliant with existing Part D 

requirements specified at subpart V of 

this part. 

(D) Terms and conditions. A Part D 

sponsor may include their program 

terms and conditions on the election 

request form or may include them on a 

separate attachment. 

(ii) Notice of election approval. Upon 

accepting an election request, the Part D 

sponsor must send a notice of election 

approval. 

(A) Timing. (1) For requests received 

prior to the plan year, the notice of 

election approval must be sent within 

10 calendar days of receipt of the 

election request. 

(2) For requests received during the 

plan year, the notice of election 

approval must be sent within 24 hours 

of receipt of the election request. 

(3) The initial notice must be 

delivered via telephone, to be followed 

by a written notice delivered to the 

participant within three calendar days 

of delivering the initial telephone 

notice. 

(B) Contents. The notice of election 

approval must include all of the 

following: 

(1) The effective date of the 

individual’s participation. 

(2) A description of how payments for 

covered Part D drugs under the program 

will work. 

(3) An overview of how the monthly 

bill is calculated. 

(4) Information about procedures for 

involuntary termination due to failure to 

pay and how to submit an inquiry or file 

a grievance. 

(5) A statement that leaving the 

program will not affect the individual’s 

Part D plan enrollment. 

(6) A description of how individuals 

may still owe a program balance if they 

leave the program, and they can choose 

to pay their balance all at once or be 

billed monthly. 

(7) An overview of other Medicare 

programs that can help lower costs and 

how to learn more about these 

programs. These programs include all of 

the following: 

(i) Extra Help. 

(ii) The Medicare Savings Program. 

(iii) The State Pharmaceutical 

Assistance Program. 

(iv) A manufacturer’s Pharmaceutical 

Assistance Program. 

(C) Additional information. 

Additional educational information 


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about the Medicare Prescription 

Payment Plan must accompany the 

notice of election approval. The 

additional information requirement may 

be fulfilled by including with the notice 

the CMS-developed fact sheet about the 

program. If the Part D sponsor develops 

and uses alternative informational 

materials in lieu of the CMS-developed 

fact sheet to satisfy this requirement, 

they must ensure that these alternative 

materials accurately convey program 

information and are compliant with 

existing Part D requirements specified at 

subpart V of this part. 

(iii) Notification of denial. Upon 

denial of an election request, the Part D 

sponsor must send a notice of denial. 

(A) Timing. (1) For requests received 

prior to the plan year, the notice of 

denial must be sent within 10 calendar 

days of receipt of the election request. 

(2) For requests received during the 

plan year, the notice of denial must be 

sent within 24 hours of receipt of the 

election request. 

(3) For incomplete election requests, 

within 10 calendar days of the 

expiration of the timeframe for 

submission of additional information. 

(B) Contents. The notice of denial 

must explain the reason for denial and 

a description of the grievance process 

available to the individual. 

(iv) Renewal notice. A Part D sponsor 

must send a notice alerting program 

participants that their participation in 

the program will automatically renew 

for the subsequent plan year. 

(A) Timing. The notice must be sent 

no later than the end of the annual 

coordinated election period, as 

described at § 422.62(a)(2). 

(B) Contents. The notice must include 

all of the following: 

(1) Notification to the participant that 

their participation will automatically 

renew for the upcoming year. 

(2) Reminder that the participant may 

opt out of the program at any time, 

including for the upcoming plan year. 

(3) The Part D sponsor’s program 

terms and conditions for the upcoming 

plan year. 

(e) Part D enrollee targeted outreach. 

A Part D sponsor must undertake 

targeted outreach to enrollees who are 

likely to benefit from making an election 

into the Medicare Prescription Payment 

Plan. 

(1) Identification criteria. An enrollee 

deemed to be ‘‘likely to benefit’’ from 

the Medicare Prescription Payment Plan 

is identified by the Part D sponsor based 

on the following criteria. 

(i) For 2026 and subsequent years, the 

targeted outreach criteria are as follows: 

(A) A Part D enrollee is likely to 

benefit from participating in the 

program if the enrollee incurs $600 or 

more in out-of-pocket costs for a single 

covered Part D drug. 

(B) A Part D enrollee is likely to 

benefit from participating in the 

program if the enrollee incurred $2,000 

in out-of-pocket costs for covered Part D 

drugs in the first nine months of the 

year prior to the upcoming plan year. 

(ii) A Part D sponsor may develop 

supplemental strategies for 

identification of additional Part D 

enrollees likely to benefit. If 

supplemental strategies are 

implemented, then the Part D sponsor 

must apply any additional identification 

criteria to every enrollee of each plan 

equally. 

(2) Point of sale notification. (i) A Part 

D sponsor must have a mechanism to 

notify a pharmacy when a Part D 

enrollee incurs out-of-pocket costs with 

respect to covered Part D drugs that 

make it likely the enrollee may benefit 

from participating in the program using 

the identification criteria set forth in 

paragraphs (e)(1)(i)(A) and (e)(1)(ii) of 

this section. 

(ii) A Part D sponsor must ensure that 

a pharmacy, after receiving such a 

notification from the Part D sponsor, 

informs the Part D enrollee that it is 

likely that the Part D enrollee may 

benefit from the Medicare Prescription 

Payment Plan. 

(3) Part D sponsor notification. A Part 

D sponsor must directly outreach to 

enrollees identified as likely to benefit 

from the program during either of the 

following timeframes: 

(i) Prior to the plan year. Prior to the 

plan year, a Part D sponsor must notify 

current enrollees that they are likely to 

benefit from the program during the 

fourth quarter of the year, and no later 

than the end of the annual coordinated 

election period, as described at 

§ 422.62(a)(2), using the identification 

criteria set forth in paragraphs 

(e)(1)(i)(B) and (e)(1)(ii) of this section. 

(ii) On an ongoing basis during the 

plan year. Part D sponsors must put in 

place reasonable guidelines for ongoing 

identification and notification of 

enrollees that are likely to benefit from 

the program on an ongoing basis during 

the plan year. 

(4) Targeted outreach notification 

requirements. When an enrollee is 

identified as likely to benefit from the 

program, using the identification criteria 

set forth in paragraphs (e)(1)(i) and (ii) 

of this section or based on Part D 

sponsor-developed guidelines set forth 

at paragraph (e)(3)(ii) of this section, the 

Part D sponsor must provide to the 

enrollee the standardized Medicare 

Prescription Payment Plan Likely to 

Benefit Notice consistent with the 

requirements at § 423.2267(b). 

(i) When the enrollee is identified as 

likely to benefit directly by the Part D 

sponsor, either prior to or during the 

plan year, the notification may be done 

via mail or electronically (based on the 

Part D enrollee’s preferred and 

authorized communication methods). 

(A) The outreach must include a 

program election request form and 

additional information about the 

Medicare Prescription Payment Plan. 

The additional information requirement 

may be fulfilled by including with the 

notice the CMS-developed fact sheet 

about the program. If the Part D sponsor 

develops and uses alternative 

informational materials in lieu of the 

CMS-developed fact sheet to satisfy this 

requirement, they must ensure that 

these alternative materials accurately 

convey program information and are 

compliant with existing Part D 

requirements specified at 42 CFR part 

423 subpart V. 

(B) During the plan year, the initial 

notice may be provided via telephone, 

so long as the written ‘‘Medicare 

Prescription Payment Plan Likely to 

Benefit Notice,’’ election request form, 

and additional information are sent 

within three calendar days of the 

telephone notification. 

(ii) When the enrollee is identified as 

likely to benefit during the plan year at 

the pharmacy point of sale, the notice 

must be provided as described in 

paragraph (i)(2) of this section. 

(5) Targeted outreach exclusions. A 

Part D sponsor does not have to notify 

enrollees that they are likely to benefit 

from the program under any of the 

following circumstances: 

(i) For the current year during the 

final month of the plan year (December). 

(ii) When the enrollee is currently 

participating in the program, 

including— 

(A) For the current year; and 

(B) For the upcoming year. 

(iii) When the enrollee is precluded 

from opting into the program. 

(iv) When the PDP is non-renewing its 

contract or individual plan benefit 

package. This exclusion only applies to 

the requirements at paragraph (e)(3)(i) of 

this section related to prior to plan year 

targeted outreach. 

(f) Termination of election, 

reinstatement, and preclusion—(1) 

General rule. Except as provided in 

paragraph (f)(2) of this section, a Part D 

sponsor may not do any of the 

following: 

(i) Terminate an individual from the 

Medicare Prescription Payment Plan. 


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(ii) Orally or in writing, or by any 

action or inaction, request or encourage 

an individual to disenroll. 

(2) Basis for termination—(i) 

Voluntary terminations. A Part D 

sponsor must have a process to allow 

participants who have opted into the 

Medicare Prescription Payment Plan to 

opt out during the plan year. 

(A) When a participant opts out of the 

Medicare Prescription Payment Plan, a 

Part D sponsor must— 

(1) Process the termination with an 

effective date within 24 hours of receipt 

of the request for termination. 

(2) Provide the individual with a 

notice of termination after the 

individual notifies the Part D sponsor 

that they intend to opt out under the 

Part D sponsor’s established process. 

(i) Timing. The Part D sponsor must 

send the notice of termination within 

ten calendar days of receipt of the 

request for termination. 

(ii) Contents. The notice of voluntary 

termination must include all of the 

following. The date on which the 

individual’s participation in the 

program ends. An explanation of why 

the individual is receiving the notice. A 

statement clarifying that the notice only 

applies to participation in the Medicare 

Prescription Payment Plan. A statement 

clarifying that the individual will 

continue to be billed monthly or can 

choose to pay the amount owed all at 

once, and that the individual will not 

pay interest or fees on the amount owed. 

A statement clarifying that the 

individual can join the Medicare 

Prescription Payment Plan again and 

instructions for how to do so. An 

overview of other Medicare programs 

that can help lower costs and how to 

learn more about these programs, 

including Extra Help, the Medicare 

Savings Program, the State 

Pharmaceutical Assistance Program, and 

a manufacturer’s Pharmaceutical 

Assistance Program. 

(3) Offer the participant the option to 

repay the full outstanding amount in a 

lump sum. A Part D sponsor is 

prohibited from requiring full 

immediate repayment from a participant 

who has been terminated from the 

Medicare Prescription Payment Plan. 

(4) If the participant opts not to repay 

the full outstanding amount in a lump 

sum, continue to bill amounts owed 

under the program in monthly amounts 

not to exceed the maximum monthly 

cap according to the statutory formula 

for the duration of the plan year after an 

individual has been terminated. 

(5) Maintain appropriate records of 

the termination once the termination is 

processed. 

(ii) Involuntary termination. If a 

participant fails to pay their monthly 

billed amount under the program, a Part 

D sponsor is required to terminate that 

individual’s Medicare Prescription 

Payment Plan participation. 

(A) A participant will be considered 

to have failed to pay their monthly 

billed amount only after the conclusion 

of the required grace period as specified 

at paragraph (f)(4) of this section. 

(B) When a Part D sponsor 

involuntarily terminates a participant, 

the sponsor must do all of the following: 

(1) Provide the individual with a 

notice of termination consistent with 

the requirements of paragraphs (f)(C) 

and (f)(D) of this section. 

(2) Offer the participant the option to 

repay the full outstanding amount in a 

lump sum. A Part D sponsor is 

prohibited from requiring full 

immediate repayment from a participant 

who has been terminated from the 

Medicare Prescription Payment Plan. 

(3) If the participant opts not to repay 

the full outstanding amount in a lump 

sum, continue to bill amounts owed 

under the program in monthly amounts 

not to exceed the maximum monthly 

cap according to the statutory formula 

for the duration of the plan year after an 

individual has been terminated. 

(C) Notice of failure to pay. If a Part 

D sponsor involuntarily terminates a 

participant under paragraph (f)(2)(ii) of 

this section, the Part D sponsor must 

send the individual an initial notice 

explaining that the individual has failed 

to pay the billed amount. 

(1) Timing. The notice of failure to 

pay must be sent within 15 calendar 

days of the payment due date. 

(2) Contents. The notice of failure to 

pay must include all of the following: 

(i) Pertinent dates, including the date 

the missed monthly payment was due, 

the amount the individual must pay to 

remain in the program, and the date by 

when payment must be received, which 

is the date of the end of the grace 

period. 

(ii) A statement clarifying that the 

notice only applies to participation in 

the Medicare Prescription Payment 

Plan. 

(iii) Instructions for how to submit 

payment. 

(iv) Information about procedures for 

involuntary termination due to failure to 

pay, including the date on which the 

participant would be removed if 

payment is not received, and how to 

submit an inquiry or file a grievance. 

(v) A statement describing how 

individuals should pay their Part D plan 

premium first if they cannot afford both 

their premium and their program 

balance. 

(vi) An overview of other Medicare 

programs that can help lower costs and 

how to learn more about these 

programs, including Extra Help, the 

Medicare Savings Program, the State 

Pharmaceutical Assistance Program, and 

a manufacturer’s Pharmaceutical 

Assistance Program. 

(D) Involuntary termination notice. If 

the individual has failed to pay the 

amount due by the end of the grace 

period described at paragraph (f)(4) of 

this section, the Part D sponsor must 

send the individual a termination notice 

explaining that the individual has been 

terminated from the Medicare 

Prescription Payment Plan. 

(1) Timing. The involuntary 

termination notice must be sent within 

3 business days following the last day 

of the end of the grace period. 

(2) Contents. The involuntary 

termination notice must include all of 

the following: 

(i) Pertinent dates, including the date 

the individual was originally notified of 

the missed monthly payment and the 

due date for that payment, as well as the 

date on which the individual’s 

participation in the program ends, 

which should be the same date as the 

notice. 

(ii) A statement clarifying that the 

notice only applies to participation in 

the Medicare Prescription Payment 

Plan, and that the individual’s Part D 

drug coverage will not be impacted. 

(iii) Instructions for how to submit 

payment and the amount owed. 

(iv) Instructions for how to submit an 

inquiry or file a grievance. 

(v) A statement clarifying that the 

individual can join the Medicare 

Prescription Payment Plan again if they 

pay the amount owed. 

(vi) An overview of other Medicare 

programs that can help lower costs and 

how to learn more about these 

programs, including Extra Help, the 

Medicare Savings Program, the State 

Pharmaceutical Assistance Program, and 

a manufacturer’s Pharmaceutical 

Assistance Program. 

(E) If either notice is returned to the 

Part D sponsor as undeliverable, the Part 

D sponsor must immediately implement 

its existing procedure for researching a 

potential change of address. 

(3) Required grace period and 

reinstatement. When a program 

participant fails to pay a program bill, 

the Part D sponsor must provide 

individuals with a grace period of at 

least 2 months upon notifying the 

individual of the initial missed 

payment. 

(i) The grace period must begin on the 

first day of the month following the date 


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on which the initial notice described in 

paragraph (f)(3) of this section is sent. 

(ii) A participant must be allowed to 

pay the overdue balance in full during 

the grace period to remain in the 

program. 

(iii) If a participant fails to pay their 

monthly billed amount under the 

program with fewer than 2 full calendar 

months remaining in the calendar year, 

the grace period must carry over into the 

next calendar year. 

(A) If the program participant is 

within their grace period from the prior 

year, the Part D sponsor must allow the 

participant to opt into the program for 

the next year. 

(B) If that participant fails to pay the 

amount due from the prior year during 

the required grace period, the Part D 

sponsor may terminate the individual’s 

participation in the program in the new 

year following the procedures outlined 

in paragraph (f)(2)(ii). 

(iv) If an individual who has been 

terminated from the Medicare 

Prescription Payment Plan demonstrates 

good cause for failure to pay the 

program billed amount within the grace 

period and pays all overdue amounts 

billed, a Part D sponsor must reinstate 

that individual into the Medicare 

Prescription Payment Plan. 

(A) A Part D sponsor is expected to 

reinstate an individual into the program 

within a reasonable timeframe after the 

individual has repaid their past due 

Medicare Prescription Payment Plan 

balance in full. 

(B) To demonstrate good cause, the 

individual must establish by a credible 

statement that failure to pay the 

monthly amount billed within the grace 

period was due to circumstances for 

which the individual had no control, or 

which the individual could not 

reasonably have been expected to 

foresee. 

(v) If an individual who has been 

terminated from the Medicare 

Prescription Payment Plan pays all 

overdue amounts billed in full, a Part D 

sponsor may also reinstate that 

individual, at the sponsor’s discretion 

and within a reasonable timeframe, even 

if the individual does not demonstrate 

good cause. 

(4) Preclusion of election in a 

subsequent plan year. If an individual 

fails to pay the amount billed for a 

month as required under the Medicare 

Prescription Payment Plan, a Part D 

sponsor may preclude that individual 

from opting into the Medicare 

Prescription Payment Plan in a 

subsequent year. 

(i) A Part D sponsor may only 

preclude an individual from opting into 

the Medicare Prescription Payment Plan 

in a subsequent year if the individual 

owes an overdue balance to that Part D 

sponsor. 

(ii) If an individual enrolls in a Part 

D plan offered by a different Part D 

sponsor than the Part D sponsor to 

which the individual owes an overdue 

balance, that individual cannot be 

precluded from opting into the 

Medicare Prescription Payment Plan in 

a subsequent year by that different Part 

D sponsor. 

(iii) If a Part D enrollee remains in a 

plan offered by the same Part D sponsor 

and continues to owe an overdue 

balance, preclusion may extend beyond 

the immediately subsequent plan year. 

(A) If an individual pays off the 

outstanding balance under the Medicare 

Prescription Payment Plan during a 

subsequent year, the Part D sponsor 

must promptly permit them to opt into 

the Medicare Prescription Payment Plan 

after the balance is paid. 

(B) [Reserved] 

(iv) A Part D sponsor that offers more 

than one Part D plan may have different 

preclusion policies for its different 

plans. However, the Part D sponsor 

must apply its preclusion policy 

consistently among all enrollees of the 

same Part D plan. 

(5) Prohibition on Part D enrollment 

penalties. A Part D plan sponsor is 

prohibited from doing any of the 

following: 

(i) Disenrolling a Part D enrollee from 

a Part D plan for failure to pay any 

amount billed under the Medicare 

Prescription Payment Plan. 

(ii) Declining future enrollment into a 

Part D plan based on an individual’s 

failure to pay a monthly amount billed 

under the Medicare Prescription 

Payment Plan. 

(6) Disenrollment. (i) If a participant 

in the Medicare Prescription Payment 

Plan is disenrolled voluntarily or 

involuntarily from their Part D plan 

under the provisions in § 423.44(b), the 

participant is also terminated from the 

Medicare Prescription Payment Plan in 

that plan. 

(ii) If the participant enrolls in a 

different plan, they may opt into the 

Medicare Prescription Payment Plan 

under their new plan. 

(7) Billing for amounts owed. Nothing 

in this section prohibits a Part D 

sponsor from billing an individual for 

an outstanding Medicare Prescription 

Payment Plan amount owed. 

(g) Participant billing rights—(1) 

General rule. For each billing period 

after an individual has opted into the 

program and incurred out-of-pocket 

costs, a Part D sponsor must calculate a 

monthly amount that takes into account 

the out-of-pocket costs in that month 

that were incurred on or after the date 

on which the individual opted into the 

program. 

(i) A Part D sponsor must not bill a 

participant who is in the program but 

has not yet incurred any out-of-pocket 

costs during the plan year. 

(ii) While past due balances from 

prior monthly bills may also be 

included in a billing statement, which 

could result in the total amount on the 

billing statement exceeding the 

maximum monthly cap, the amount 

billed for the month for which the 

maximum monthly cap is being 

calculated cannot be higher than the cap 

for that month. 

(iii) A Part D sponsor must not charge 

late fees, interest payments, or other 

fees, such as for different payment 

mechanisms. 

(A) A Part D sponsor must ensure 

that— 

(1) Any third party it contracts with 

complies with such requirements. 

(2) Participants do not incur any 

charges or fees as a result of overbilling 

or overpayment errors made by the Part 

D sponsor. 

(iv) A Part D sponsor must send a bill 

for the Medicare Prescription Payment 

Plan that is separate from the bill for 

collection of premiums, if applicable. 

(2) Billing period. Each billing period 

will be a calendar month. 

(i) The billing period begins on either 

of the following: 

(A) The effective date of a Part D 

enrollee’s participation in the Medicare 

Prescription Payment Plan (for the first 

month a participant elects into the 

program during the plan year). 

(B) The first day of the month (for 

each subsequent month or for the first 

month of a participant who elects into 

the program prior to the start of the plan 

year). 

(ii) The billing period ends on the last 

date of that month. 

(3) Billing statement. Billing 

statements must include all of the 

following information: 

(i) A statement that the bill is for the 

Medicare Prescription Payment Plan; 

(ii) A brief description of the program; 

and 

(iii) A reference to where additional 

information about the program can be 

found. 

(iv) The effective date of program 

participation. 

(v) The last payment received, 

showing the date, amount of the last 

payment, and the means of payment 

made by the participant. 

(vi) Any balance carried over from the 

prior month, including any missed 

payments. 

(vii) Itemized out-of-pocket costs by 

prescription for the month being billed. 


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(viii) The amount due from the 

participant for the month being billed 

(that is, the amount based on the 

application of the monthly cap 

calculation). 

(ix) The remaining total out-of-pocket 

cost sharing balance. 

(x) Information on the next steps if the 

participant fails to pay by the stated due 

date. 

(xi) Information on how to voluntarily 

opt out of the program and balances due 

if participation is terminated. 

(xii) Information on the dispute 

processes available if the individual 

disputes their bill. 

(xiii) LIS program information, 

including: 

(A) General information about how to 

enroll in the LIS program (as an 

additional or alternative avenue for 

addressing prescription drug costs). 

(B) A statement that LIS enrollment, 

for those who qualify, is likely to be 

more advantageous than participation in 

the Medicare Prescription Payment 

Plan. 

(xiv) Plan contact information for 

participant questions about the billing 

statement. 

(4) Treatment of unsettled balances. 

Any unsettled balances with respect to 

amounts owed under the program will 

be treated as plan losses. 

(i) The Secretary is not liable for any 

such balances outside of those assumed 

as losses estimated in a Part D sponsor’s 

plan bid. 

(ii) If a Part D sponsor is compensated 

by or on behalf of the participant for an 

unsettled balance or sells an unsettled 

balance as a debt, that Part D sponsor 

cannot treat the amount as a loss and 

cannot include it in its bid. 

(5) Prioritization of premium 

payments. If a Part D enrollee has opted 

into the program and makes payments 

directly to the Part D sponsor, and it is 

unclear whether a payment should go 

towards the participant’s outstanding 

Part D plan premium or Medicare 

Prescription Payment Plan balance, then 

the payment must be applied to the Part 

D premium. 

(6) Financial reconciliation. A Part D 

sponsor must have a financial 

reconciliation process in place to correct 

inaccuracies in billing or payments or 

both. 

(i) Participant payment. (A) A 

participant may pay more than the 

maximum monthly cap, up to the 

annual out-of-pocket threshold. 

(B) The participant cannot pay more 

than their total OOP costs for the 

Medicare Prescription Payment Plan. 

(C) If a participant does pay more than 

their total OOP costs for the Medicare 

Prescription Payment Plan, then the Part 

D sponsor must reimburse the 

participant the amount that is paid 

above the balance owed. 

(ii) Reimbursements for excess 

participant payments. A Part D sponsor 

must develop standardized procedures 

for determining and processing 

reimbursements for excess Medicare 

Prescription Payment Plan payments 

made by program participants. 

(iii) Claims adjustments resulting in 

increased amounts owed. When Part D 

claims adjustments result in increased 

amounts owed by the participant, and 

these amounts have not yet been billed 

to the participant, they must be 

included in the revised remaining OOP 

costs owed by the participant (as 

defined at § 423.137(b)(1)) and, thus, in 

the subsequent month maximum cap for 

the next billing period. 

(h) Participant disputes—(1) Coverage 

determination and appeals procedures. 

A Part D sponsor must apply the Part D 

coverage determination and appeals 

procedures specified at § 423.566(a) to 

any disputes made by program 

participants concerning the cost sharing 

amount of a covered Part D drug. 

(2) Grievance procedures. A Part D 

sponsor must apply the Part D grievance 

procedure specified at § 423.562 to any 

dispute made by a program participant 

related to any aspect of the Medicare 

Prescription Payment Plan. 

(i) Pharmacy point of sale notification 

process. (1) When a Part D sponsor is 

notifying a pharmacy that a Part D 

enrollee has incurred out-of-pocket 

costs with respect to covered Part D 

drugs that make it likely the enrollee 

may benefit from participating in the 

program, as required at paragraph (e)(2) 

of this section, the Part D sponsor must 

use standard codes for notifying the 

pharmacy that an enrollee has been 

identified as likely to benefit, as 

outlined by the National Council for 

Prescription Drug Programs. 

(2) Point of sale notification 

requirements. A Part D sponsor must 

ensure that the Medicare Prescription 

Payment Plan Likely to Benefit Notice is 

provided to enrollees identified as likely 

to benefit (or the person acting on their 

behalf) through the pharmacy point of 

sale notification process. 

(i) In pharmacy settings in which 

there is direct contact with enrollees (for 

example, community pharmacies where 

enrollees present in person to pick up 

prescriptions), the Part D sponsor must 

ensure that a hard copy of the 

‘‘Medicare Prescription Payment Plan 

Likely to Benefit Notice’’ is provided to 

enrollees identified as likely to benefit 

(or the person acting on their behalf) at 

the time the prescription is picked up. 

(ii) For non-retail pharmacy settings 

without in-person encounters (such as 

mail order pharmacies), a Part D 

sponsor must require the pharmacy to 

notify the Part D enrollee via a 

telephone call or their preferred contact 

method. 

(iii) If the pharmacy is in contact with 

a Part D enrollee identified as likely to 

benefit and the enrollee declines to 

complete the prescription filling 

process, the Part D sponsor must ensure 

that the pharmacy provides the 

‘‘Medicare Prescription Payment Plan 

Likely to Benefit Notice’’ to the Part D 

enrollee. 

(3) A Part D sponsor must ensure that 

any contract between the Part D sponsor 

and a pharmacy (or between a first tier, 

downstream, or related entity and a 

pharmacy on the Part D sponsor’s 

behalf) for participation in one or more 

of the Part D sponsor’s networks 

includes a provision requiring 

pharmacies to provide this notification 

to Part D enrollees. 

(j) Pharmacy claims processing—(1) 

Electronic claims processing 

methodology. Part D sponsors must use, 

and must ensure pharmacies use, a bank 

identification number (BIN) or processor 

control number (PCN) electronic claims 

processing methodology for applicable 

Medicare Prescription Payment Plan 

transactions. 

(i) Part D sponsors must utilize, and 

ensure pharmacies utilize, an additional 

BIN/PCN that is unique to the Medicare 

Prescription Payment Plan to facilitate 

electronic processing of supplemental 

COB transactions for program 

participants. 

(ii) A Part D sponsor must provide the 

unique Medicare Prescription Payment 

Plan BIN/PCN and any other pertinent 

billing information to the pharmacy on 

paid claim responses when the enrollee 

is also a Medicare Prescription Payment 

Plan participant. 

(iii) A Part D sponsor must assign a 

program-specific PCN that starts with 

‘‘MPPP’’ and report the new BIN/PCN to 

CMS. 

(iv) The transaction processed 

through the Medicare Prescription 

Payment Plan BIN/PCN will be 

submitted after processing any 

applicable other payer transactions in 

order to capture the final patient 

responsibility amount after all other 

payers have paid. 

(2) Supplemental coverage that 

increases final patient pay amount. 

When a Part D enrollee has 

supplemental coverage that modifies 

their final out-of-pocket responsibility 

for covered Part D drugs: 

(i) When the final patient pay amount 

returned to the pharmacy by a 


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supplemental payer for a covered Part D 

drug is higher than the original Part D 

patient pay amount, the Part D sponsor 

may only include in the Medicare 

Prescription Payment Plan the 

participant’s original Part D cost 

sharing, as determined by their planspecific benefit structure. 

(3) Prescription drug event reporting. 

A Part D sponsor must ensure that the 

claims processing methodology 

described in paragraph (j)(1) of this 

section has no impact on prescription 

drug event (PDE) cost/payment field 

reporting, meaning PDE records must 

reflect participant and plan liability 

amounts as if the Medicare Prescription 

Payment Plan did not apply. 

(4) Real-time benefit tools. A Part D 

sponsor must ensure that participation 

in the Medicare Prescription Payment 

Plan or the associated claims processing 

methodology described in paragraph 

(j)(1) of this section or both has no 

impact on the cost-sharing information 

displayed in real-time benefit tools. 

(5) Inclusion of retroactive claims. A 

Part D sponsor is not required to 

retroactively include under this program 

claims submitted to the Part D sponsor 

by a Medicare Prescription Payment 

Plan participant (whether the request is 

made via paper form, telephonically, or 

electronically) except as provided in 

423.137(d)(6). 

(6) Re-adjudication of prescription 

drug claims for new program 

participants. (i) When a Part D enrollee 

receives the ‘‘Medicare Prescription 

Payment Plan Likely to Benefit Notice’’ 

from the pharmacy, they may choose to 

take time to consider opting into the 

program and leave the pharmacy 

without the prescription that triggered 

the notification. 

(ii) When the Part D enrollee returns 

to the pharmacy after their election into 

the Medicare Prescription Payment Plan 

has been effectuated, the plan sponsor 

must require the pharmacy to reverse 

and reprocess the high-cost claim that 

triggered the likely to benefit 

notification. 

(A) Should a Part D enrollee have 

other unpaid claims at the same 

pharmacy for covered Part D drugs from 

prior dates of service, in addition to the 

prescription that may have triggered the 

likely to benefit notification, they may 

also request that those claims be 

readjudicated. 

(iii) When the Part D claim date of 

service is the same as the date of 

program effectuation), the Part D 

sponsor is not required to ensure the 

pharmacy reverse and resubmit the Part 

D claim, provided that they otherwise 

obtain the necessary Medicare 

Prescription Payment Plan BIN/PCN for 

the program-specific transaction. 

(7) Obtaining and providing OOP 

costs for the Medicare Prescription 

Payment Plan. Part D sponsors must 

ensure that pharmacies— 

(i) Can easily access a Part D 

enrollee’s OOP costs for the Medicare 

Prescription Payment Plan at the point 

of sale; and 

(ii) Are prepared to provide OOP costs 

for the Medicare Prescription Payment 

Plan to a participant at the point of sale. 

(k) Pharmacy payment obligations. (1) 

A Part D sponsor must ensure that 

enrollee participation in the Medicare 

Prescription Payment Plan does not 

affect the amount paid to pharmacies or 

the timing of such payments, consistent 

with § 423.520. A Part D sponsor must 

not do either of the following: 

(i) Impose any fees or costs related to 

program implementation on 

pharmacies. 

(ii) Hold pharmacies responsible for 

any unsettled balances of a participant 

or for collecting unpaid balances from 

the participant on the Part D sponsor’s 

behalf. 

(l) [Reserved]. 

(m) General Part D sponsor outreach 

and education requirements—(1) 

Mailing. A Part D sponsor must provide 

a Medicare Prescription Payment Plan 

election request form, described at 

paragraph (d)(10)(i) of this section, and 

additional educational information on 

the program in a hard copy mailing. 

(i) The mailing must be sent by the 

later of— 

(A) Within 10 calendar days from 

receipt of CMS confirmation of 

enrollment in the Part D plan; or 

(B) The last day of the month prior to 

the plan effective date. 

(ii) The election request form and 

supplemental information may be 

sent— 

(A) With the membership ID card 

mailing described at § 423.2267(e)(32); 

or 

(B) In its own envelope. 

(iii) The mailing may be sent only to 

a Part D enrollee who is receiving a new 

membership ID card or to all Part D 

enrollees. 

(iv) The additional information 

requirement may be fulfilled by 

including in the mailing the CMSdeveloped fact sheet about the program. 

If the Part D sponsor develops and uses 

alternative informational materials in 

lieu of the CMS-developed fact sheet to 

satisfy this requirement, they must 

ensure that these alternative materials 

accurately convey program information 

and are compliant with existing Part D 

requirements specified at 42 CFR part 

423 subpart V. 

(2) Websites. In addition to meeting 

requirements described at 

§§ 423.128(d)(2) and 423.2265(b), a Part 

D sponsor is required to include all of 

the following on its website: 

(i) An election request mechanism, as 

described at § 423.137(d)(2). 

(ii) An overview of the Medicare 

Prescription Payment Plan. 

(iii) Examples of the program 

calculation and explanations. 

(iv) A description of Part D enrollees 

who may be likely to benefit from the 

program. 

(v) The financial implications of 

participation. 

(vi) The implications of not paying 

monthly bills. 

(vii) Instructions for how to opt into 

and out of the program, including 

timing requirements around election 

effectuation. 

(viii) A description of the standards 

for retroactive election in cases where 

an enrollee believes that a delay in 

filling a prescription may seriously 

jeopardize their life, health, or ability to 

regain maximum function. 

(ix) A description of the dispute and 

grievance procedure, as required under 

§ 423.137(h). 

(x) Contact information Part D 

enrollees can use to obtain further 

information 

(xi) General information about the LIS 

program, including an overview of how 

LIS enrollment, for those who qualify, is 

likely to be more advantageous than 

program participation. 

■ 40. Section 423.153 is amended 

revising paragraph (d)(2)(iii)(A) to read 

as follows: 

§ 423.153 Drug utilization management, 

quality assurance, medication therapy 

management (MTM) programs, drug 

management programs, and access to 

Medicare Parts A and B claims data 

extracts. 

* * * * * 

(d) * * * 

(2) * * * 

(iii) * * * 

(A) Alzheimer’s disease and 

dementia. 

* * * * * 

■ 41. Section 423.182 is amended by 

revising paragraphs (b)(3)(ii)(A)(2) and 

(b)(3)(ii)(B)(2) to read as follows: 

§ 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 


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a measure score for a consumed or 

surviving contract is missing due to a 

data integrity issue as described in 

§ 423.184(g)(1)(i), CMS assigns a score of 

zero for the missing measure score in 

the calculation of the enrollmentweighted 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 CAHPS, if a 

measure score for a consumed or 

surviving contract is missing due to a 

data integrity issue as described in 

§ 423.184(g)(1)(i), CMS assigns a score of 

zero for the missing measure score in 

the calculation of the enrollmentweighted 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. 

* * * * * 

■ 42. Section 423.186 is amended by: 

■ a. Revising paragraph (f)(3)(iv) 

introductory text; 

■ b. Adding paragraphs (f)(3)(iv)(C), 

(f)(3)(v)(A), and reserved paragraph 

(f)(3)(v)(B); 

■ c. Revising paragraph (f)(3)(vi) and 

(f)(3)(viii)(B); 

■ d. Adding paragraph (f)(3)(viii)(C); 

and 

■ e. Revising paragraphs (g)(1)(i) and 

(ii). 

The revisions and additions read as 

follows: 

§ 423.186 Calculation of Star Ratings. 

* * * * * 

(f) * * * 

(3) * * * 

(iv) For a measure to be included in 

the calculation of a contract’s HEI score, 

the measure must meet all of the 

following criteria: 

* * * * * 

(C) Beginning with the 2027 Star 

Ratings, for contracts that are 

Institutional Special Needs Plan (I–SNP) 

only contracts in the ratings year, the 

measure must be required to be reported 

for I–SNP-only contracts. 

(v) * * * 

(A) Starting with the 2029 Star 

Ratings if a contract’s HEDIS measure 

score across all enrollees for a HEDIS 

measure included in the HEI calculated 

from the patient-level data submitted by 

the contract does not match the 

summary-level score submitted by the 

contract to NCQA for either of the 

measurement years used to construct 

the HEI, the contract will receive ¥1 

points for the HEDIS measure in the 

calculation of the HEI. If a contract does 

not submit HEDIS patient-level data for 

a measure for which it submitted 

contract-level data for either of the 

measurement years used to construct 

the HEI, the contract will receive ¥1 

points for the HEDIS measure in the 

calculation of the HEI. 

(B) [Reserved] 

(vi) Starting with the 2027 Star 

Ratings, to have the HEI calculated, 

contracts that are ISNP-only contracts in 

the ratings year must have at least 500 

enrollees in the most recent 

measurement year used in the HEI and 

have at least half of the measures 

included in the HEI meet the criteria 

specified under paragraph (f)(3)(iv) of 

this section for the subset of measures 

that I–SNP-only contracts are required 

to report. To have the HEI calculated, all 

other contracts must have at least 500 

enrollees in the most recent 

measurement year used in the HEI and 

have at least half of the measures 

included in the HEI meet the criteria 

specified under paragraph (f)(3)(iv) of 

this section. 

* * * * * 

(viii) * * * 

(B) Starting with the 2027 Star 

Ratings, for the second year following a 

consolidation when calculating the HEI 

score for the surviving contract, the 

patient-level data used in calculating 

the HEI score is combined across the 

consumed and surviving contracts in 

the consolidation and used in 

calculating the HEI score. The 

enrollment used in assessing whether 

the surviving contract meets an 

enrollment threshold under paragraph 

(f)(3)(vii) of this section will be the 

combined enrollment from the 

consumed and surviving contracts from 

the most recent year of data used to 

calculate the HEI. 

(C) Starting with the 2029 Star 

Ratings, in states where, consistent with 

§ 422.107(e), one or more MA contracts 

that only include one or more dual 

eligible special needs plans (D–SNPs) 

with a service area limited to that state 

are required to be established and 

maintained, the original MA contract(s) 

from which the D–SNP plan benefit 

package or packages were moved 

(hereafter referred to as the ‘‘legacy MA 

contract(s)’’) into the MA contract 

established under § 422.107(e) will have 

the HEI reward calculated as follows 

every year after the D–SNP-only 

contract is required to be created until 

the Star Ratings year in which 

additional SRFs beyond receipt of LIS, 

dual-eligibility, and disability are added 

to the HEI: 

(1) If the legacy MA contract, based on 

its own enrollment, meets an enrollment 

threshold under paragraph (f)(3)(vii) of 

this section, the methodology for 

calculating the HEI reward in paragraph 

(f)(3)(viii) of this section is followed. 

(2) If the legacy MA contract, based on 

its own enrollment, does not meet an 

enrollment threshold as defined in 

paragraph (f)(3)(vii) of this section, and 

either one of the legacy MA contract or 

the MA contract established under 

§ 422.107(e) cannot have the HEI 

reliably calculated as described in 

paragraphs (f)(3)(iv) and (vi) of this 

section, then the legacy MA contract 

does not qualify for an HEI reward. 

(3) If the legacy MA contract, based on 

its own enrollment, does not meet an 

enrollment threshold as defined in 

paragraph (f)(3)(vii) of this section, and 

the legacy MA contract’s performance 

on the HEI based on its own enrollment 

is less than— 

(i) The minimum index score defined 

at paragraph (f)(3)(vii) of this section; or 

(ii) The performance on the HEI of the 

MA contract established under 

§ 422.107(e) Then, the legacy MA 

contract does not qualify for an HEI 

reward. 

(4)(i) If the legacy MA contract, based 

on its own enrollment, does not meet an 

enrollment threshold as defined in 

paragraph (f)(3)(vii) of this section, and 

both the legacy MA contract and the MA 

contract established under § 422.107(e) 

can have the HEI score reliably 

calculated following paragraphs 

(f)(3)(iv) and (vi) of this section, then the 

enrollment combined across the legacy 

MA contract and the MA contract 

established under § 422.107(e) for the 

most recent measurement year used in 

calculating the HEI is used in assessing 

the enrollment threshold in paragraph 

(f)(3)(vii) of this section. 

(ii) If an enrollment threshold is met 

using the combined enrollment 

described in paragraph (4)(i) of this 

paragraph, the legacy MA contract’s 

rating-specific HEI score meets the 

minimum index score of greater than 

zero defined at paragraph (f)(3)(vii) of 

this section, and the legacy MA 

contract’s rating-specific HEI score is 

greater than or equal to the ratingspecific HEI score of the MA contract 

established under § 422.107(e), then the 

HEI reward for the legacy MA contract 

is calculated following paragraph 


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(f)(3)(viii) of this section based on the 

enrollment threshold using the 

combined enrollment from the legacy 

MA contract and the MA contract 

established under § 422.107(e), and 

using the HEI score for the MA contract 

established under § 422.107(e). 

(5) When multiple legacy MA 

contracts move their D–SNP plan 

benefit package(s) to the same MA 

contract established under § 422.107(e) 

and any of the legacy MA contracts do 

not meet an enrollment threshold as 

defined in paragraph (f)(3)(vii) of this 

section, and both the legacy MA 

contracts and the MA contract 

established under § 422.107(e) can have 

the HEI score reliably calculated 

following paragraphs (f)(3)(iv) and (vi) 

of this section, then the combined 

enrollment from the legacy MA 

contracts and the MA contract 

established under § 422.107(e) for the 

most recent measurement year used in 

calculating the HEI is used in assessing 

the enrollment threshold in paragraph 

(f)(3)(vii) of this section for any of the 

legacy MA contracts that do not meet an 

enrollment threshold on their own. If an 

enrollment threshold is met using the 

combined enrollment in this paragraph, 

the steps in paragraph 

(f)(3)(viii)(C)(4)(ii) of this section are 

followed separately for each of the 

legacy MA contracts. If a legacy MA 

contract meets the enrollment 

thresholds on its own or if it cannot 

have the HEI score reliably calculated 

following paragraphs (f)(3)(iv) and (vi), 

the legacy MA contract would not be 

included in the calculation of the 

combined enrollment. 

* * * * * 

(g) * * * 

(1) * * * 

(i) If the highest rating rounded to the 

half star before the addition of the HEI 

reward, if applicable, for each contracttype is 4 stars or more without the use 

of the improvement measure(s) and with 

all applicable adjustments (CAI and the 

reward factor), a comparison of the 

highest rating with and without the 

improvement measure(s) is done. The 

higher rating is used for the rating. 

(ii) If the highest rating rounded to the 

half star before the addition of the HEI 

reward, if applicable, is less than 4 stars 

without the use of the improvement 

measure(s) and with all applicable 

adjustments (CAI and the reward factor), 

the rating will be calculated with the 

improvement measure(s). 

* * * * * 

■ 43. Section 423.325 is added to read 

as follows: 

§ 423.325 PDE submission timeliness 

requirements. 

(a) General PDE submission timeliness 

requirements. Unless paragraph (b) of 

this section applies, a Part D sponsor 

must submit PDE records to CMS as 

follows: 

(1) Initial PDE records within 30 

calendar days from the date the Part D 

sponsor (or its contracted first tier, 

downstream, or related entity) receives 

the claim. 

(2) Adjustment or deletion PDE 

records within 90 calendar days of the 

Part D sponsor (or its contracted first 

tier, downstream, or related entity) 

discovering or receiving notification of 

an issue that requires a change to the 

previously submitted PDE record. 

(3) Revised PDE records to resolve 

CMS rejected records within 90 

calendar days of the rejection. 

(b) Selected Drugs PDE submission 

timeliness requirement. A Part D 

sponsor must submit initial PDE records 

for selected drugs (as described at 

section 1192(c) of the Act) within 7 

calendar days from the date the Part D 

sponsor (or its contracted first tier, 

downstream, or related entity) receives 

the claim. 

■ 44. Section 423.505 is amended by 

adding paragraphs (i)(7) and (8) and (q) 

to read as follows. 

§ 423.505 Contract provisions. 

* * * * * 

(i) * * * 

(7) Any contract between the sponsor 

and a pharmacy, or between a first tier, 

downstream, or related entity and a 

pharmacy on the sponsor’s behalf, for 

participation in one or more of the Part 

D sponsor’s networks must include a 

provision requiring the sponsor or the 

first tier, downstream, or related entity 

to provide the pharmacy a list of the 

Part D PBPs that the pharmacy 

participates in pursuant to the contract. 

(i) For every Part D PBP that the 

pharmacy participates in pursuant to 

the contract, the list must include all of 

the following: 

(A) The Part D contract number 

assigned by CMS. 

(B) The plan ID assigned by CMS for 

the PBP. 

(C) The marketing name of the PBP. 

(ii) The contract must require the 

sponsor or the first tier, downstream, or 

related entity to provide this list to the 

pharmacy by October 1 of the year prior 

to the plan year and at the pharmacy’s 

request thereafter. 

(iii) The sponsor or the first tier, 

downstream, or related entity can meet 

its obligations under this paragraph by 

either of the following: 

(A) Providing a hard copy of the list 

to the pharmacy. 

(B) Providing the list electronically 

by— 

(1) Sending an electronic file to the 

pharmacy; or 

(2) Providing the pharmacy 

instructions on how to access the list 

electronically. 

(8) Any contract between the sponsor 

and a pharmacy, or between a first tier, 

downstream, or related entity and a 

pharmacy on the sponsor’s behalf, for 

participation in one or more of the Part 

D sponsor’s networks that allows the 

sponsor or the first tier, downstream, or 

related entity to terminate the contract 

or the pharmacy’s participation in a 

particular network without cause must 

allow the pharmacy to terminate the 

contract or its participation in a 

particular network without cause after 

providing the same notice that the 

contract requires the Part D sponsor or 

the first tier, downstream, or related 

entity to provide for a termination 

without cause. 

* * * * * 

(q) Enrollment in the Medicare 

Transaction Facilitator Data Module for 

the Medicare Drug Price Negotiation 

Program. For contract year 2026 and all 

subsequent years, any contract between 

the sponsor and a pharmacy, or between 

a first tier, downstream, or related entity 

and a pharmacy on the sponsor’s behalf, 

for participation in one or more of the 

Part D sponsor’s networks must include 

a provision requiring the pharmacy to 

be enrolled in the Medicare Transaction 

Facilitator Data Module (MTF DM) (or 

any successor to the MTF DM) in a form 

and manner determined by CMS. Such 

provision must also require the 

pharmacy to maintain and certify up-todate, complete, and accurate enrollment 

information with the MTF DM, pursuant 

to applicable terms and conditions of 

participation with the MTF DM, 

including but not limited to contact, 

third-party support entity or entities, 

and banking information, in a form and 

manner determined by CMS. 

■ 45. Section 423.2265 is amended by 

adding paragraph (b)(16) to read as 

follows: 

§ 423.2265 Websites. 

* * * * * 

(b) * * * 

(16) Information about the Medicare 

Prescription Payment Plan as described 

in § 423.137(m)(2). 

* * * * * 

■ 46. Section 423.2260 is amended by 

revising the definitions of 

‘‘Advertisement’’ and ‘‘Marketing’’ to 

read as follows: 

§ 423.2260 Definitions. 

* * * * * 


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Advertisement (Ad) means a read, 

written, visual, oral, watched, or heard 

bid for, or call to attention. 

* * * * * 

Marketing means communications 

materials and activities that are 

intended to draw a beneficiary’s 

attention to a Part D plan or plans, 

influence a beneficiary’s decisionmaking process when making a Part D 

plan selection, or influence a 

beneficiary’s decision to stay enrolled in 

a Part D plan (that is, retention-based 

marketing), except those required 

materials specified in § 423.2267(e) of 

this chapter, which will maintain the 

material designation as provided by 

CMS. In evaluating the intent of an 

activity or material, CMS will consider 

objective information including, but not 

limited to, the audience of the activity 

or material, other information 

communicated by the activity or 

material, timing, and other context of 

the activity or material and is not 

limited to the Part D sponsor’s stated 

intent. 

* * * * * 

■ 47. Section 423.2267 is amended by— 

■ a. Removing the word ‘‘and’’ at the 

end of paragraph (e)(32)(vi); 

■ b. Removing the period and adding in 

its place ‘‘; and’’ at the end of paragraph 

(e)(32)(vii); 

■ c. Adding paragraphs (e)(32)(viii); 

■ d. Revising paragraphs (e)(33)(i) 

introductory text and (e)(33)(ii) 

introductory text; and 

■ e. Adding paragraphs (e)(45) through 

(51). 

The revisions and additions read as 

follows: 

§ 423.2267 Required materials and 

content. 

* * * * * 

(e) * * * 

(32) * * * 

(viii) For dual eligible special needs 

plans that are applicable integrated 

plans, as defined in § 422.561, must be 

an integrated member ID card that 

serves as the ID card for both the 

Medicare and Medicaid plans in which 

the enrollee is enrolled, beginning no 

later than contract year 2027. 

* * * * * 

(33) * * * 

(i) Prior to contract year 2026 

marketing on September 30, 2025, the 

notice for Part D sponsors is referred to 

as the Multi-language insert (MLI). This 

is a standardized communications 

material which states, ‘‘We have free 

interpreter services to answer any 

questions you may have about our 

health or drug plan. To get an 

interpreter, just call us at [1–xxx–xxx– 

xxxx]. Someone who speaks [language] 

can help you. This is a free service.’’ in 

the following languages: Spanish, 

Chinese, Tagalog, French, Vietnamese, 

German, Korean, Russian, Arabic, 

Italian, Portuguese, French Creole, 

Polish, Hindi, and Japanese. 

* * * * * 

(ii) For CY 2026 marketing and 

communications beginning September 

30, 2025, the required notice for Part D 

sponsors is referred to as the Notice of 

availability of language assistance 

services and auxiliary aids and services 

(Notice of Availability). This is a model 

communications material through 

which Part D sponsors must provide a 

notice of availability of language 

assistance services and auxiliary aids 

and services that, at a minimum, states 

that the Part D sponsors provide 

language assistance services and 

appropriate auxiliary aids and services 

free of charge. 

* * * * * 

(45) Election request form. This is a 

model communications material that 

Part D sponsors must provide to allow 

enrollees to request to opt into the 

Medicare Prescription Payment Plan, as 

required under § 423.137(d)(10)(i). 

(46) Notice of election approval. This 

is a model communications material 

that Part D sponsors must provide upon 

accepting a Medicare Prescription 

Payment Plan election request, as 

required under § 423.137(d)(10)(ii). 

(47) Medicare Prescription Payment 

Plan Likely to Benefit Notice. This is a 

standardized communications material 

that Part D sponsors must provide to 

enrollees identified as being likely to 

benefit from opting into the Medicare 

Prescription Payment Plan, as required 

under § 423.137(e)(4). 

(48) Notice of failure to pay. This is 

a model communications material that 

Part D sponsors must provide to 

Medicare Prescription Payment Plan 

participants who fail to pay a program 

bill, as required under § 423.137(f)(2)(C). 

(49) Involuntary termination notice. 

This is a model communications 

material that Part D sponsors must 

provide to Medicare Prescription 

Payment Plan participants who are 

being involuntarily terminated from the 

program due to failure to pay, as 

required under § 423.137(f)(2)(D). 

(50) Voluntary termination notice. 

This is a model communications 

material that Part D sponsors must 

provide to Medicare Prescription 

Payment Plan participants who request 

to voluntarily leave the program, as 

required under § 423.137(f)(2)(i)(A)(2). 

(51) Renewal notice. This is a model 

communications material that Part D 

sponsors must send to Medicare 

Prescription Payment Plan participants 

alerting them that their participation in 

the program will automatically renew 

for the subsequent plan year, as required 

under § 423.137(d)(10)(iv). 

■ 48. Section 423.2274 is amended by 

revising paragraph (c)(12) to read as 

follows: 

§ 423.2274 Agent, broker, and other thirdparty requirements. 

* * * * * 

(c) * * * 

(12) Ensure that, prior to an 

enrollment CMS’ required questions and 

topics regarding beneficiary needs in a 

health plan choice are fully discussed. 

Topics to be discussed include all the 

following: 

(i) Pharmacies (that is, whether or not 

the beneficiary’s current pharmacy is in 

the plan’s network). 

(ii) Prescription drug coverage and 

costs (including whether or not the 

beneficiary’s current prescriptions are 

covered). 

(iii) Low-income subsidy eligibility 

(that is, at a minimum, explaining the 

eligibility requirements as defined at 

§ 423.773 and the effect on drug costs if 

eligible, and identifying resources 

where they can get for more information 

on applying). 

(iv) Resources for state programs, 

including Medicare Savings Programs 

(v) Premiums 

(vi) Other services or incentives 

(vii) Conclude by pausing to ask if the 

beneficiary has any questions about the 

topics discussed in paragraph (c)(12) of 

this section or others, including those 

related to enrollment. 

* * * * * 

■ 49. Section 423.2401 is amended by 

adding in alphabetical order definitions 

for ‘‘MLR audit remittance’’ and ‘‘MLR 

audit remittance process’’ to read as 

follows: 

§ 423.2401 Definitions. 

MLR audit remittance means the 

amount CMS calculates and a Part D 

sponsor pays for a Part D contract that 

has failed to meet the 85 percent 

minimum MLR requirement as the 

result of an MLR audit examination. 

MLR audit remittance process means 

the process by which CMS calculates 

the MLR audit remittance for a contract 

that is determined to have failed to meet 

the 85 percent minimum MLR 

requirement as the result of an MLR 

audit examination and notify the Part D 

sponsor about the remittance. The 

process includes all of the following: 

(1) Collecting the MLR audit 

remittance indicated in the final audit 

report issued by CMS. 


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(2) Receiving responses from Part D 

sponsors requesting an appeal of the 

MLR audit remittance. 

(3) Taking actions to adjudicate an 

appeal (if requested). 

(4) Receiving MLR remittances from 

Part D sponsors. 

* * * * * 

■ 50. Section 423.2420 is amended by— 

■ a. Adding paragraph (b)(4)(i)(D); 

■ b. Redesignating paragraphs (d)(2)(i) 

through (iii) as paragraphs (d)(2)(ii) 

through (d)(2)(iv); and 

■ c. Adding new paragraph (d)(2)(i). 

The additions read as follows: 

§ 423.2420 Calculation of medical loss 

ratio. 

* * * * * 

(b) * * * 

(4) * * * 

(i) * * * 

(D) Unsettled balances from the 

Medicare Prescription Payment Plan. 

* * * * * 

(d) * * * 

(2) * * * 

(i) The report required in § 423.2460 

must include a detailed description of 

the methods used to allocate expenses, 

including incurred claims, expenditures 

on quality improving activities, 

licensing and regulatory fees, and State 

and Federal taxes and assessments. A 

detailed description of each expense 

element must be provided, including 

how each specific expense meets the 

criteria for the type of expense in which 

it is categorized, as well as the method 

by which it was aggregated. 

* * * * * 

■ 51. Section 423.2430 is amended by 

redesignating paragraphs (a) and (b) as 

paragraphs (b) and (c) and adding a new 

paragraph (a) to read as follows: 

§ 423.2430 Activities that improve health 

care quality. 

(a) General requirements. The report 

required in § 423.2460 must include 

expenditures directly related to 

activities that improve health care 

quality, as such activities are described 

in this section. 

* * * * * 

■ 52. Section 423.2450 is added to read 

as follows: 

§ 423.2450 MLR audit process. 

(a) Notice of audit. CMS provides at 

least 15 days advance notice of its intent 

to conduct an audit of a Part D sponsor. 

(b) Conferences. All audits include an 

entrance conference during which the 

scope of the audit is presented and an 

exit conference during which the initial 

audit findings are discussed. 

(c) Audit documentation. All 

requested audit documentation must be 

provided by the Part D sponsor to CMS 

within 30 calendar days of the audit 

entrance conference. CMS may extend, 

at CMS’s discretion, the time for a Part 

D sponsor to provide the documentation 

requested. 

(d) Preliminary audit findings. CMS 

shares its preliminary audit findings 

with the Part D sponsor, which then has 

30 calendar days to respond to such 

findings. CMS may extend, for good 

cause, the time for a Part D sponsor to 

submit such a response. 

(e) Final audit findings. If the Part D 

sponsor does not dispute the 

preliminary findings within the 30-day 

timeframe per paragraph (d) of this 

section, then the audit report becomes 

final. Alternatively, if the Part D sponsor 

disputes the preliminary findings, CMS 

reviews and considers such response 

before finalizing the audit findings. 

(f) Corrective actions. CMS sends a 

copy of the final audit report to the Part 

D sponsor as well as issues corrective 

actions that the Part D sponsor must 

undertake as a result of the audit 

findings. 

(g) Order to pay remittances. If CMS 

determines as the result of an audit that 

a Part D sponsor has failed to pay 

remittances it is obligated to pay under 

§ 423.2480, it may order the Part D 

sponsor to pay those remittances 

consistent with § 423.2452. 

■ 53. Section 423.2452 is added to read 

as follows: 

§ 423.2452 MLR audit remittance and 

payment process. 

(a) Notice of MLR audit remittance. 

After the calculation of the MLR audit 

remittance, CMS sends the Part D 

sponsor the final audit report with the 

MLR audit remittance amount. The final 

audit report contains the following 

information: 

(1) A MLR audit remittance for the 

contract that has failed to meet the 85 

percent MLR minimum requirement 

based on audit findings, which may be 

one of the following: 

(ii) An amount due from the Part D 

sponsor. 

(iii) $0 if nothing is due from the Part 

D sponsor. 

(2) Relevant banking and financial 

mailing instructions for Part D sponsors 

that owe a MLR audit remittance. 

(3) Relevant CMS contact information. 

(4) A description of the steps for 

requesting an appeal of the MLR audit 

remittance calculation, in accordance 

with the requirements specified in 

§ 423.2454. 

(b) Request for an appeal. A Part D 

sponsor that disagrees with the MLR 

audit remittance has 15 calendar days 

from the date of issuance of the final 

audit report, as described in paragraph 

(a) of this section, to request an appeal 

of the MLR audit remittance under the 

process described in § 423.2454. 

(1) If a Part D sponsor agrees with the 

MLR audit remittance, no response is 

required. 

(2) If a Part D sponsor disagrees with 

the MLR audit remittance, it must 

request an appeal within 15 calendar 

days from the date of issuance of the 

final audit report. CMS will not 

consider any requests for appeal after 

this 15-day period. 

(c) Actions if a Part D sponsor does 

not request an appeal. (1) The Part D 

sponsor is required to remit payment to 

CMS within 120 calendar days from the 

date of issuance of the final audit report. 

(2) If the Part D sponsor fails to remit 

payment within that 120-calendar-day 

period, CMS refers the debt owed to 

CMS to the Department of the Treasury 

for collection. 

(d) Actions following a request for 

appeal. If a Part D sponsor responds to 

the final audit report disagreeing with 

the MLR audit remittance and 

requesting appeal, CMS conducts a 

review process under the process 

described at § 423.2454. 

■ 54. Section 423.2454 is added to read 

as follows: 

§ 423.2454 MLR audit remittance appeals 

process. 

(a) Appeals process. If a Part D 

sponsor does not agree with the MLR 

audit remittance described in 

§ 423.2452(a), it may appeal under the 

following three-level appeal process: 

(1) Reconsideration. A Part D sponsor 

may request reconsideration of the MLR 

audit remittance described in 

§ 423.2452(a) according to the following 

process: 

(i) Manner and timing of request. A 

written request for reconsideration must 

be filed within 15 days from the date of 

issuance of the final audit report to the 

Part D sponsor. 

(ii) Content of request. The written 

request for reconsideration must do all 

of the following: 

(A) Specify the calculation with 

which the Part D sponsor disagrees and 

the reasons for its disagreement. 

(B) Include evidence supporting the 

assertion that CMS’s calculation of the 

MLR audit remittance is incorrect. 

(C) Not include new data or data that 

was submitted to CMS after the final 

audit report was issued. 

(iii) Conduct of reconsideration. In 

conducting the reconsideration, the 

CMS reconsideration official reviews 

the calculations that were used to 

determine the MLR audit remittance 

and any additional evidence timely 

submitted by the Part D sponsor. 


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(iv) Reconsideration decision. The 

CMS reconsideration official informs 

the Part D sponsor of its decision on the 

reconsideration in writing. 

(v) Effect of reconsideration decision. 

The decision of the CMS 

reconsideration official is final and 

binding unless a timely request for an 

informal hearing is filed in accordance 

with paragraph (a)(2) of this section. 

(2) Informal hearing. A Part D sponsor 

dissatisfied with CMS’s reconsideration 

decision made under paragraph (a)(1) of 

this section is entitled to an informal 

hearing as provided for under 

paragraphs (a)(2)(i) through (a)(2)(iv) of 

this section. 

(i) Manner and timing of request. A 

request for an informal hearing must be 

made in writing and filed with the CMS 

hearing officer within 15 calendar days 

from the date of issuance of the 

reconsideration decision. 

(ii) Content of request. The request for 

an informal hearing must include a copy 

of the reconsideration decision and 

must specify the findings or issues in 

the decision with which the Part D 

sponsor disagrees and the reasons for its 

disagreement. 

(iii) Informal hearing procedures. The 

informal hearing is conducted in 

accordance with the following: 

(A) The CMS Hearing Officer provides 

written notice of the time and place of 

the informal hearing at least 30 calendar 

days before the scheduled date. 

(B) The CMS reconsideration official 

provides, within 10 calendar days of the 

hearing officer receiving an informal 

hearing request, a copy of the record 

that was before the reconsideration 

official. 

(C) The hearing officer review is 

conducted by a CMS hearing officer 

who neither receives testimony nor 

accepts any new evidence. The CMS 

hearing officer is limited to the review 

of the record that was before CMS 

reconsideration official had when 

making the reconsideration decision. 

(iv) Decision of the CMS hearing 

officer. The CMS hearing officer decides 

whether to uphold or overturn the 

reconsideration official’s decision and 

sends a written decision to the Part D 

sponsor explaining the basis for the 

decision. 

(v) Effect of hearing officer’s decision. 

The hearing officer’s decision is final 

and binding, unless the decision is 

reversed or modified by the CMS 

Administrator in accordance with 

paragraph (a)(3) of this section. 

(3) Review by the Administrator. The 

Administrator’s review is conducted in 

the following manner: 

(i) Manner and timing of request. A 

Part D sponsor that has received a 

hearing officer’s decision may request 

review by the Administrator within 15 

calendar days of the date of issuance of 

the hearing officer’s decision under 

paragraph (a)(2)(iv) of this section. The 

Part D sponsor may submit written 

arguments to the Administrator for 

review. 

(ii) Discretionary review. (A) After 

receiving a request for review, the 

Administrator has the discretion to elect 

to review the hearing officer’s 

determination in accordance with 

paragraph (a)(3)(iii) of this section or to 

decline to review the hearing officer’s 

decision within 30 calendar days of 

receiving the request for review. 

(B) If the Administrator declines to 

review the hearing officer’s decision, the 

hearing officer’s decision is final and 

binding. 

(iii) Electing to review. If the 

Administrator elects to review the 

hearing officer’s decision, the 

Administrator reviews the hearing 

officer’s decision, as well as any 

information included in the record of 

the hearing officer’s decision and any 

written argument submitted by the Part 

D sponsor, and determine whether to 

uphold, reverse, or modify the hearing 

officer’s decision. 

(iv) Effect of Administrator’s decision. 

The Administrator’s decision is final 

and binding. 

(b) Matters subject to appeal and 

burden of proof. (1) The Part D 

sponsor’s appeal is limited to CMS’s 

calculation of the MLR audit remittance. 

(2) The Part D sponsor bears the 

burden of proof for providing evidence 

demonstrating that CMS’s audit 

examination results for the MLR audit 

remittance require further review. The 

Part D sponsor may not challenge the 

underlying methodology for the MLR 

audit remittance calculation. 

(c) Stay of financial transaction until 

appeals are exhausted. If a Part D 

sponsor requests review of the MLR 

audit remittance, the financial 

transaction associated with the payment 

of the MLR audit remittance is stayed 

until all appeals are exhausted. Once all 

levels of appeal are exhausted or the 

Part D sponsor fails to request further 

review within the applicable 15- 

calendar-day timeframe, CMS 

communicates with the Part D sponsor 

to complete the financial transaction 

associated with the payment of the MLR 

audit remittance. 

(d) Continued compliance with other 

law required. Nothing in this section 

limits a Part D sponsor’s responsibility 

to comply with any other statute or 

regulation. 

■ 55. Section 423.2480 is amended by 

revising paragraph (d) introductory text 

to read as follows: 

§ 423.2480 MLR review and noncompliance. 

* * * * * 

(d) Data submitted under § 423.2460, 

calculations, or any other MLR 

submission required by this subpart 

which have not been reported in a 

timely and accurate manner or have 

been found to be materially incorrect or 

fraudulent— 

* * * * * 

■ 56. Section 423.2490 is amended by 

adding paragraph (b)(6) to read as 

follows: 

§ 423.2490 Release of Part D MLR data. 

* * * * * 

(b) * * * 

(6) DIR information reported within 

the MLR data as part of incurred claims. 

* * * * * 

■ 57. Section 423.2536 is amended by— 

■ a. Redesignating paragraphs (c) 

through (k) as paragraphs (d) through (l); 

■ b. Adding a new paragraph (c); and 

■ c. Revising newly redesignated 

paragraphs (i)(1) and (4). 

The addition and revisions to read as 

follows: 

§ 423.2536 Waiver of Part D program 

requirements. 

* * * * * 

(c) Medicare Prescription Payment 

Plan. Section 423.137. 

* * * * * 

(i) * * * 

(1) Section 423.2265(b)(4), (5), (11), 

(13), and (16); 

* * * * * 

(4) Section 423.2267(e)(3) through (5), 

(9) through (12), (14) through (17), (25), 

(29), (33), and (45) through (51); and 

* * * * * 

PART 460—PROGRAMS OF ALLINCLUSIVE CARE FOR THE ELDERLY 

(PACE) 

■ 58. The authority for part 460 

continues to read as follows: 

Authority: 42 U.S.C. 1302, 1395, 

1395eee(f), and 1396u–4(f). 

§ 460.70 [Amended] 

■ 59. Section 460.70 is amended in 

paragraph (e)(2) by removing the 

reference ‘‘§ 460.98(c)’’ and adding in its 

place the reference ‘‘§ 460.98(d)’’. 

■ 60. Section 460.112 is amended by 

revising paragraphs (a)(1) and (2), 

adding paragraphs (a)(3) through (8), 

and revising paragraph (b) to read as 

follows 


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§ 460.112 Specific rights to which a 

participant is entitled. 

(a) * * * 

(1) To receive comprehensive health 

care in a safe and clean environment 

and in an accessible manner. 

(2) To be treated with dignity and 

respect, be afforded privacy and 

confidentiality in all aspects of care, and 

be provided humane care. 

(3) Not to be required to perform 

services for the PACE organization. 

(4) To have reasonable access to a 

telephone. 

(5) To be free from harm, including 

physical or mental abuse, neglect, 

corporal punishment, involuntary 

seclusion, excessive medication, and 

any physical or chemical restraint 

imposed for purposes of discipline or 

convenience and not required to treat 

the participant’s medical symptoms. 

(6) To be encouraged and assisted to 

exercise rights as a participant, 

including the Medicare and Medicaid 

appeals processes as well as civil and 

other legal rights. 

(7) To be encouraged and assisted to 

recommend changes in policies and 

services to PACE staff. 

(8) To have all information regarding 

PACE services and treatment options 

explained in a culturally competent 

manner. 

(b) Right to treatment. Each 

participant has the right to appropriate 

and timely treatment for their health 

conditions, including the right to both 

of the following: 

(1) Receive all care and services 

needed to improve or maintain the 

participant’s health condition and attain 

the highest practicable physical, 

emotional, and social well-being. 

(2) Access emergency health care 

services when and where the need 

arises without prior authorization by the 

PACE interdisciplinary team. 

* * * * * 

■ 61. Section 460.180 is amended by 

revising paragraph (b)(3) to read as 

follows: 

§ 460.180 Medicare payment to PACE 

organizations. 

* * * * * 

(b) * * * 

(3) CMS adjusts the monthly 

capitation payment amount derived 

under paragraph (b)(2) of this section 

based on a risk adjustment that reflects 

the individual’s health status. The 

provisions of § 422.310 of this chapter 

apply to PACE organizations and risk 

adjustment data submitted by PACE 

organizations to CMS. In applying 

§ 422.310 to PACE organizations and 

risk adjustment of payments to PACE 

organizations, references to MA 

organizations are read as references to 

PACE organizations. CMS ensures that 

payments take into account the 

comparative frailty of PACE enrollees 

relative to the general Medicare 

population. 

* * * * * 

Xavier Becerra, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2024–27939 Filed 11–26–24; 8:45 am] 

BILLING CODE 4120–01–P 


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