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[Federal Register Volume 89, Number 237 (Tuesday, December 10, 2024)]
[Proposed Rules]
[Pages 99340-99579]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-27939]

[[Page 99339]]

Vol. 89

Tuesday,

No. 237

December 10, 2024

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 417, 422, et al.

Medicare and Medicaid Programs; Contract Year 2026 Policy and Technical 
Changes to the Medicare Advantage Program, Medicare Prescription Drug 
Benefit Program, Medicare Cost Plan Program, and Programs of All-
Inclusive Care for the Elderly; Proposed Rule

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

[[Page 99340]]

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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.

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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.
    [email protected]--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 Sec.  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

[[Page 99341]]

(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 Sec.  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 Sec.  423.137, add several new Part 
D required materials and content at Sec.  423.2267, add Medicare 
Prescription Payment Plan information to the list of required content 
for Part D sponsor websites at Sec.  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 Sec.  
423.2536.
4. Part D Coverage of Anti-Obesity Medications (Sec.  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 anti-obesity 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 long-term 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 Sec.  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 Sec.  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 low-income 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 Sec. Sec.  
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

[[Page 99342]]

under Sec.  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 Sec. Sec.  422.2262 and 423.2262. We are 
also proposing conforming edits to the definition of ``Advertisement 
(Ad)'' in Sec. Sec.  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 All-Inclusive 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 (Sec. Sec.  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 cost-sharing levels in Traditional Medicare.
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    \1\ CMS's behavioral health strategy is available at: https://www.cms.gov/cms-behavioral-health-strategy.
    \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/.
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    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 Sec. Sec.  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 Sec.  422.100(f)(6)(i), (iii), or

[[Page 99343]]

(iv) for MA plans), to the proposed cost-sharing 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 Sec.  
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 person-centered 
coordination of Medicare and Medicaid services; (2) mitigate cost-
shifting incentives between the two programs; and (3) create a seamless 
experience for dually eligible individuals. 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 Sec.  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 Sec.  422.137(d)(6)(iii)(A) through (H) to revise the 
required metrics for the annual health equity analysis of the use of 
prior authorization to require the metrics 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 Sec.  422.137, including a requirement at Sec.  
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, 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, 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

[[Page 99344]]

Sec.  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 Sec.  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.
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    \3\ https://www.federalregister.gov/documents/2023/11/01/2023-24283/safe-secure-and-trustworthy-development-and-use-of-artificial-intelligence.
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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 
at-home 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 at-home 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 at-home 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

BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TP10DE24.000

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[GRAPHIC] [TIFF OMITTED] TP10DE24.001

[[Page 99347]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.002

[[Page 99348]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.003

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[GRAPHIC] [TIFF OMITTED] TP10DE24.004

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 (Sec. Sec.  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 ACIP-recommended 
adult vaccine that becomes available during a plan year, Part D 
sponsors must apply the $0 cost-sharing requirements in section 1860D-
2(b)(8) of the Act to applicable claims with dates of service after 
ACIP's issued recommendation.
---------------------------------------------------------------------------

    \4\ https://www.cms.gov/files/document/irainsulinvaccinesmemo09262022.pdf.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \5\ https://www.cms.gov/files/document/final-cy-2024-part-d-bidding-instructions.pdf.
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    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\
---------------------------------------------------------------------------

    \6\ https://www.cms.gov/files/document/acip-recommended-vaccines-july-2023.pdf.
---------------------------------------------------------------------------

    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.

[[Page 99350]]

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 Sec.  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\
---------------------------------------------------------------------------

    \7\ https://www.cdc.gov/vaccines/schedules/hcp/imz/adult.html.
    \8\ https://www.cdc.gov/vaccines/acip/acip-scdm-faqs.html.
---------------------------------------------------------------------------

    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 ACIP-recommended adult vaccine, when provided 
in accordance with ACIP recommendations.
---------------------------------------------------------------------------

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

    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 Sec.  423.100 a definition of 
``ACIP-recommended adult vaccine'' that means a covered Part D drug, as 
defined at Sec.  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 Sec.  423.120(g)(3) that enrollees who 
submit direct member reimbursement (DMR) requests for ACIP-recommended 
adult vaccines accessed at either out-of-network pharmacies or 
providers (in accordance with Sec.  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 Sec.  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 Sec.  423.124(a) 
and (c)), or at in-network 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.
---------------------------------------------------------------------------

    \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-drug-coverage/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-of-
network (or an in-network) pharmacy (or provider) and where the 
pharmacy (or provider) did not submit the claim to the Part D plan.
---------------------------------------------------------------------------

    The total gross covered drug cost (TGCDC) is usually reported 
differently on PDEs depending on whether the drug was accessed at an 
out-of-network or in-

[[Page 99351]]

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 out-of-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 Sec.  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 ACIP-
recommended 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 Sec.  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 Sec.  
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 Sec.  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.
---------------------------------------------------------------------------

    \11\ https://www.cms.gov/medicare/prescription-drug-coverage/prescriptiondrugcovcontra/downloads/part-d-benefits-manual-chapter-6.pdf
---------------------------------------------------------------------------

    In summary, we propose to codify at Sec.  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 Sec.  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 Sec.  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 Sec.  423.120(g)(3) that these cost-sharing requirements apply for 
ACIP-recommended adult vaccines obtained from either in-network or out-
of-network pharmacies or providers (in accordance with Sec.  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 Sec.  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 
Sec.  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 Sec.  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

[[Page 99352]]

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 cost-sharing. 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 Sec.  423.120(e)(1). As specified in Sec.  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 (Sec. Sec.  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 cost-sharing 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\
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    \12\ https://www.cms.gov/files/document/irainsulinvaccinesmemo09262022.pdf.
    \13\ https://www.cms.gov/files/document/final-cy-2024-part-d-bidding-instructions.pdf.
    \14\ https://www.cms.gov/files/document/final-cy-2025-part-d-redesign-program-instructions.pdf.
---------------------------------------------------------------------------

    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 Sec.  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

[[Page 99353]]

that are FDA-licensed products. Consequently, because a compounded drug 
product, as described in Sec.  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 Sec.  
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 Sec.  
423.124(a) and (c). Accordingly, we specify in our proposed definition 
at Sec.  423.100 that a ``covered insulin product'' is a covered Part D 
drug as defined in Sec.  423.100.
    Additionally, we propose at Sec.  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 Sec.  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 Sec.  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 Sec.  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-of-pocket 
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 Sec.  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 Sec.  
423.100, of the covered insulin product under the PDP or MA-PD plan.
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    \15\ https://www.cms.gov/files/document/fact-sheet-negotiated-prices-initial-price-applicability-year-2026.pdf.
---------------------------------------------------------------------------

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 cost-sharing for 
a month's supply that does not exceed the applicable copayment amount. 
We are proposing to codify these requirements at Sec.  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 Sec.  423.153(b)(4). Under our 
proposal, if the ``covered insulin product applicable cost-sharing 
amount'' is a coinsurance, the coinsurance percentage would be

[[Page 99354]]

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-of-network pharmacies or providers (in 
accordance with Sec.  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 Sec.  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 Sec.  423.124(a) and (c)), 
or at in-network pharmacies or providers, we propose at Sec.  
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.''
---------------------------------------------------------------------------

    \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-drug-coverage/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-of-
network (or an in-network) pharmacy (or provider) and where the 
pharmacy (or provider) did not submit claim to Part D plan.
---------------------------------------------------------------------------

    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 in-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 
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-of-network 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 Sec.  423.120(b). However, regardless of a 
covered insulin product's tier placement or applicable utilization 
management strategy, the statutory cost-sharing limits under this 
proposed rule still apply.
    We propose to codify at Sec.  423.120(h)(1) and (2) that with 
respect to coverage of a covered insulin product, as we propose to 
define such term at Sec.  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 Sec.  
423.100. We also propose to codify at Sec.  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 Sec.  423.120(h)(4) that these cost-sharing requirements 
apply for covered insulin products obtained from either in-network and 
out-of-network pharmacies and providers.

C. Medicare Prescription Payment Plan (Sec. Sec.  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 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.
    CMS undertook consumer focus group testing to select a name for the 
program

[[Page 99355]]

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    CMS released the draft part one guidance in August 2023, which 
covered topics such as how incurred OOP pharmacy costs should be re-
calculated 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 Sec.  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-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;
     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 Sec.  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 Sec.  423.2265 to include Medicare Prescription Payment Plan 
information. Finally, we are proposing to modify Sec.  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

[[Page 99356]]

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 Sec.  423.137.
    In this proposed rule, we propose to codify at Sec.  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 non-calendar year basis to 
comply with the Medicare Prescription Payment Plan requirements set 
forth in this proposed rule and in the proposed new regulation at Sec.  
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 Sec.  423.137 for non-calendar plan years 
beginning in 2026 and subsequent non-calendar plan years.
---------------------------------------------------------------------------

    \18\ Specifically, during any portion of the non-calendar 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.
---------------------------------------------------------------------------

    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 Sec.  
423.137(b) for plan year 2026 and subsequent years with certain 
clarifications. Specifically, at Sec.  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 third-party 
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 Sec.  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 
Sec.  423.137 discussed in this section to the list of Part D 
requirements waived for the LI NET program. In addition, we

[[Page 99357]]

are proposing to revise newly redesignated paragraphs Sec.  
423.2536(i)(1) and (i)(4) to add the materials proposed at Sec. Sec.  
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 
TrOOP-eligible 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.
---------------------------------------------------------------------------

    \19\ Final CY 2025 Part D Redesign Program Instructions: https://www.cms.gov/inflation-reduction-act-and-medicare/part-d-improvements.
---------------------------------------------------------------------------

    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 mid-month 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

[[Page 99358]]

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 Sec.  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 Sec.  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 election-related materials described at proposed Sec.  
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 Sec.  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 Sec.  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 Sec. Sec.  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

[[Page 99359]]

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 
high-cost 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 Sec.  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 sponsor-adjudicated 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 Sec.  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 Sec.  423.137(d)(4). 
Section 423.137(d)(4)(i) includes proposed requirements for processing 
election requests made prior to the plan year, and Sec.  
423.137(d)(4)(ii) includes proposed requirements for processing

[[Page 99360]]

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 Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \20\ Refer to Medicare Prescription Drug Benefit Manual; Chapter 
13--Premium and Cost-Sharing Subsidies for Low-Income Individuals.
---------------------------------------------------------------------------

    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 Sec.  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 Sec.  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

[[Page 99361]]

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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  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 Sec.  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 Sec.  423.137(d)(10)(iv) and to add the election 
request form, notice

[[Page 99362]]

of election approval, and renewal notice as required materials and 
content for Part D sponsors at Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 CMS-developed 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 Sec.  
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

[[Page 99363]]

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 Sec.  423.137(e)(3)(i) related to prior 
to plan year targeted outreach. Non-renewing PDPs must still comply 
with the requirements at Sec.  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

[[Page 99364]]

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 Sec.  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 Sec.  
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

[[Page 99365]]

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 Sec.  
423.137(f)(2)(i) and to add the voluntary termination notice as a 
required material and content for Part D sponsors at Sec.  
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 Sec.  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 Sec.  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

[[Page 99366]]

and subsequent years, we propose to codify these notice requirement 
standards at Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  
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

[[Page 99367]]

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 Sec.  
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 Sec.  
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 Sec.  423.137(f)(6). We note that 
nothing in proposed section Sec.  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

[[Page 99368]]

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 Sec.  
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 Sec.  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 
Sec.  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 Sec.  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 Sec.  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

[[Page 99369]]

procedures to which they are accustomed.
    Consistent with the requirements established in the final part one 
guidance, at Sec.  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 drive-through 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 Sec.  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 long-term 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

[[Page 99370]]

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 Sec.  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/

[[Page 99371]]

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 program-specific 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).

[[Page 99372]]

    Except as proposed in paragraph Sec.  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 program-specific 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 Sec.  
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 long-term 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 
long-term 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 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 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 Plan-
specific 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

[[Page 99373]]

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 Sec.  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 Sec.  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 non-dispensing 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 Sec.  423.137(k).

[[Page 99374]]

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 contract-level 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 Sec. Sec.  
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 Sec.  423.2267(e)(32), or in a separate mailing 
sent out within the same timeframe. Under Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  423.2267(e) to include information about the 
program. These include the Annual Notice of Change (ANOC, described at 
Sec.  423.2267(e)(3)), the Evidence of Coverage (EOC, described at 
Sec.  423.2267(e)(1)), and the Explanation of Benefits (EOB, described 
at Sec.  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 Sec.  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 Sec.  
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 Sec.  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 Sec.  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

[[Page 99375]]

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) (Sec.  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.
---------------------------------------------------------------------------

    \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).
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    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 adiposity-based 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 dysfunction-associated 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\
---------------------------------------------------------------------------

    \22\ Recognition of Obesity as a Disease H-440.842. Accessed 
June 28, 2024 from https://policysearch.ama-assn.org/policyfinder/detail/obesity?uri=%2FAMADoc%2FHOD.xml-0-3858.xml.
    \23\ CDC. Adult Obesity Facts. May 14, 2024. Accessed June 28, 
2024 from https://www.cdc.gov/obesity/php/data-research/adult-obesity-facts.html.
    \24\ Mechanick 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.
    \25\ World Health Organization. Obesity and Overweight. March 1, 
2024. Accessed August 21, 2024 from https://www.who.int/news-room/fact-sheets/detail/obesity-and-overweight.
    \26\ American 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/ama-resolution-obesity.pdf.
    \27\ Mechanick 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.
    \28\ American 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.
---------------------------------------------------------------------------

    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/m\2\ 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

[[Page 99376]]

of Hispanic adults, 41.4 percent of non-Hispanic 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 fee-
for-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\
---------------------------------------------------------------------------

    \30\ CDC. Adult Obesity Facts. May 14, 2024. Available from 
https://www.cdc.gov/obesity/adult-obesity-facts/index.html.
    \31\ Stierman, 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.
    \33\ Chronic Conditions Data Warehouse. Other Chronic or 
Disabling Conditions Trends, 2012-2021. April 2023. Available from: 
https://www2.ccwdata.org/web/guest/medicare-charts/medicare-other-chronic-and-disabling-condtions/#b2bothertrend. See also: https://www2.ccwdata.org/documents/10280/19099072/b2b-other-trend.jpg.
    \34\ Obesity Disparities in Medicare Fee-For-Service 
Beneficiaries Data Snapshot. January 2022. Available from: https://www.cms.gov/files/document/omh-datasnapshot-obesity.pdf.
    \35\ Stierman, 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \36\ https://www.niddk.nih.gov/health-information/health-statistics/oversight-obesity.
    \37\ Mylona 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.
    \38\ https://www.cdc.gov/obesity/php/data-research/adult-obesity-prevalence-maps.html#cdc_data_surveillance_section_4-across-states-and-territories.
---------------------------------------------------------------------------

    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 nutrition-related 
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.
---------------------------------------------------------------------------

    \39\ White-House-National-Strategy-on-Hunger-Nutrition-and-
Health-FINAL.pdf.
---------------------------------------------------------------------------

    Available AOMs in the glucagon-like peptide-1 (GLP-1) and glucose-
dependent 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 FDA-approved 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 CMS-approved 
compendia.
---------------------------------------------------------------------------

    \40\ Table: 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.
    \41\ HPMS 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-memos-wk-4-march-18-22.
    \42\ CMS-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[supreg] 
Information System. See section 10.6 in chapter 6 of the 
Prescription Drug Benefit Manual. Available from https://www.cms.gov/medicare/prescription-drug-coverage/prescriptiondrugcovcontra/downloads/part-d-benefits-manual-chapter-6.pdf.
---------------------------------------------------------------------------

    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

[[Page 99377]]

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 long-term, and not overtly for 
``treatment of obesity.''
---------------------------------------------------------------------------

    \43\ FDA. Draft Guidance for Industry Developing Products for 
Weight Management. February 2007. Available from https://www.fda.gov/media/71252/download.
    \44\ American 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.
---------------------------------------------------------------------------

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 Sec.  
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 drug-induced 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.
---------------------------------------------------------------------------

    \45\ Since 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-program-information/by-topics/prescription-drugs/downloads/rx-releases/state-releases/state-rel-088.pdf.
---------------------------------------------------------------------------

    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 FDA-approved indications 
for most AOMs used for weight loss or chronic weight management specify 
that individuals with overweight must also have weight-related 
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 FDA-approved 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 weight-
related 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

[[Page 99378]]

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 FDA-approved 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 plan-submitted PA criteria for 
clinical appropriateness.
---------------------------------------------------------------------------

    \46\ American 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.
    \47\ Mechanick J.I., Hurley D.L., Gavery W.T. Adiposity-Based 
Chronic Disease As a New Diagnostic Term: The American Association 
of Clinical Endocrinologists and American College of Endocrinology 
Position Statement. Endor Pract. 2017 Mar;23(3):372-378. doi: 
10.4158/EP161688.PS.
---------------------------------------------------------------------------

    As required under Sec.  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 Sec.  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\
---------------------------------------------------------------------------

    \48\ HPMS memorandum. Issuance of the 2010 Call Letter. March 
30, 2009. Available from https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/downloads/2010callletter.pdf. Note, Part D sponsors may limit PA criteria to 
cover only certain FDA-approved indications if they are implementing 
indication-based 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/computer-data-and-systems/hpms/hpms-memos-archive-weekly-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-drug-coverage/prescriptiondrugcovcontra/downloads/part-d-benefits-manual-chapter-6.pdf.
---------------------------------------------------------------------------

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

[[Page 99379]]

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 Sec.  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 
Sec.  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 Sec.  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.
BILLING CODE 4120-01-P

[[Page 99380]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.005

BILLING CODE 4120-01-C

[[Page 99381]]

B. Network Transparency for Pharmacies

    At Sec.  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\
---------------------------------------------------------------------------

    \50\ Federal 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-managers-report, pp. 48-49.
    \51\ Id, at p. 50.
    \52\ Ibid.
---------------------------------------------------------------------------

    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 (Sec.  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 Sec.  423.153(d)(2).
    The regulation at Sec.  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 Sec.  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 Sec.  423.153(d)(2)(i)(A). The 10 core 
chronic diseases are: (1) Alzheimer's disease; (2) Bone disease-
arthritis (including osteoporosis, osteoarthritis, and rheumatoid 
arthritis); (3) Chronic congestive heart failure (CHF); (4) Diabetes; 
(5) Dyslipidemia; (6)

[[Page 99382]]

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 Sec.  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 Sec.  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 CMR 
\53\ under any circumstance. This situation is outside of the policy 
established under Sec.  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 Sec.  
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 Sec.  
423.153(d)(1)(vii)(B).
---------------------------------------------------------------------------

    \53\ May 6, 2024 HPMS memorandum, Contract 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-therapy-management-mtm-program-submission-v050624.pdf.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \54\ https://www.alz.org/media/Documents/alzheimers-facts-and-figures.pdf.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \55\ Maidment 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.
    \56\ Rao 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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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

[[Page 99383]]

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 Sec.  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 Sec.  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 Sec.  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 
non-standard 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 
non-standard 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, Sec.  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 (Sec.  423.505(i)(3)(i));
     A provision requiring prompt payment of clean claims 
(Sec.  423.505(i)(3)(v)); and
     A provision requiring disclosure and updating of any drug 
pricing standards used to determine payment, in accordance with Sec.  
423.505(b)(21)(i) (Sec.  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 Sec.  
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'

[[Page 99384]]

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\
---------------------------------------------------------------------------

    \58\ Federal 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-managers-report, pp. 48-49.
    \59\ Id, at 50, 54.
---------------------------------------------------------------------------

    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 Sec.  423.505(i)(3)(v) that contracts require 
sponsors to promptly pay clean claims and at Sec.  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.
---------------------------------------------------------------------------

    \60\ https://www.cms.gov/files/document/pharmacy-benefit-manager-insurer-letter.pdf.
---------------------------------------------------------------------------

    CMS reminds plans that under section 1860D-4(b)(1)(A) of the Act 
and Sec.  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 Sec.  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 Sec.  423.120.

E. Modifying the Definition of ``Service area'' Sec.  422.2

    In Sec.  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 Sec.  422.116 that includes ``county-
equivalents'' 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 Sec.  422.2 to refer to ``a geographic 
area that for local MA plans is one or more counties, as defined in 
Sec.  422.116(a)(1)''.

F. Administration of Supplemental Benefits Coverage Through Debit Cards 
Sec. Sec.  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 Sec. Sec.  
422.100(c)(2) and 422.102--to regulate how those supplemental benefits, 
such as vision, dental, gym membership, and others must be offered. For 
example, in Medicare Program, Establishment of the Medicare

[[Page 99385]]

Advantage Program Final Rule,\61\ which appeared in the Federal 
Register on January 28, 2005, we established at Sec.  422.102(a)(4) 
that an MA organization could offer as a mandatory supplemental benefit 
a reduction in cost sharing below the actuarial value specified in 
section 1854(e)(4)(B) of the Act (70 FR 4617). Later, in the Medicare 
and Medicaid Programs; Contract Year 2022 Policy and Technical Changes 
to the Medicare Advantage Program, Medicare Prescription Drug Benefit 
Program, Medicaid Program, Medicare Cost Plan Program, and Programs of 
All-Inclusive Care for the Elderly Final Rule \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 Sec.  422.102(a)(5) and (a)(6)(i) and 
(ii) to clarify the different circumstances under which an MA plan may 
reduce cost sharing for covered items and services as a mandatory 
supplemental benefit and the mechanisms by which an MA plan may make 
such reductions in cost sharing available to enrollees. Mandatory 
supplemental benefits are benefits that are included in the plan and 
are generally available to all enrollees with no additional premiums. 
As described in Sec.  422.102(b), optional supplemental benefits are 
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.
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    \61\ https://www.federalregister.gov/documents/2005/12/23/05-24446/medicare-program-establishment-of-the-medicare-advantage-program.
    \62\ https://www.govinfo.gov/content/pkg/FR-2021-01-19/pdf/2021-00538.pdf.
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    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 Sec. Sec.  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 Sec.  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), Sec.  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, fitness-
related 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

[[Page 99386]]

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 non-primarily 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 Sec.  
422.102 to codify existing guidelines for administering supplemental 
benefits, including the use of debit cards to administer plan-covered 
benefits, and add new guardrails to ensure that beneficiaries are fully 
aware of covered supplemental benefits and how to access those 
benefits.
2. The Administration of Supplemental Benefits
    Our regulations at Sec.  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 Sec.  422.102(f)) as an item or service: (1) not covered by 
original Medicare; (2) that is primarily health related; and (3) for 
which the plan must incur a non-zero direct medical cost. The 2022 
Final Rule further clarified at Sec.  422.100(c)(2)(ii)(A) that to be 
considered primarily health related, a supplemental benefit must be to 
diagnose, prevent, or treat an illness or injury; compensate for 
physical impairments; act to ameliorate the functional/psychological 
impact of injuries or health conditions; or reduce avoidable emergency 
and health care utilization. Additionally, we have codified numerous 
requirements that MA organizations must comply with when delivering 
supplemental benefits at Sec.  422.102(a) through (e). More recently, 
we codified standards for SSBCI benefits at Sec.  422.102(f), which 
include the requirements that SSBCI may only be offered to chronically 
ill enrollees as defined by section 1852(a)(3)(D) of the Act, must 
incur a non-zero non-administrative cost, and must have a reasonable 
expectation of improving or maintaining the health or overall function 
of the enrollee. SSBCI may include benefits that are not primarily 
health related per Sec.  422.100(c)(2)(ii)(A) but must have a 
reasonable expectation of improving or maintaining the health or 
overall function of the chronically ill enrollee. Additionally, per 
section 1852(a)(3)(D)(ii)(II) of the Act, CMS has authority to waive 
the uniformity requirements that usually apply for all MA benefits so 
that SSBCI can be offered non-uniformly.
    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 Sec. Sec.  422.100(c)(2) and 
422.102(a) through (f) and appropriate access to suppliers and 
providers in accordance with Sec.  422.112(a) as applicable. Per Sec.  
422.112(a), MA coordinated care plans may specify the networks of 
providers from whom enrollees may obtain services if the MA 
organization ensures that all covered services, including supplemental 
services contracted for by (or on behalf of) the Medicare enrollee, are 
available and accessible under the plan. The MA organization may 
therefore contract with providers or vendors to furnish covered 
services, including supplemental benefits administered via a debit card 
or otherwise. For example, a plan may contract with a particular vendor 
to provide their food and produce benefit. In this scenario, that 
specific vendor is the network provider for furnishing the food and 
produce benefit. We note that section 1854(a)(6)(B)(iii) of the Act, 
commonly known as the ``non-interference clause,'' prohibits CMS from 
requiring any MA organization to contract with a particular provider to 
furnish covered items and services. Therefore, CMS does not specify 
which vendors MA organizations contract with to furnish covered items 
and services. (Note however that Sec.  422.204(b)(3) requires that 
providers that furnish covered Part A and B benefits must meet the 
applicable requirements of Title XVIII of the Act and that certain 
types of institutional providers must have participation agreements 
with Medicare.)
    We also note that all coordinated care plans are required to cover 
benefits, including supplemental benefits, at in-network cost sharing 
when an in-network provider or benefit is unavailable or inadequate to 
meet an enrollee's medical needs in accordance with the standards set 
forth in our rules and regulations.\63\ This is required for all 
benefits, regardless of how they are administered.
---------------------------------------------------------------------------

    \63\ Sec.  422.112 (a)(1)(iii); Chapter 4, section 30.2 of the 
Medicare Managed Care Manual; 88 FR 22200.
---------------------------------------------------------------------------

    If an in-network provider is unavailable or inadequate to 
administer covered plan benefits, whether Parts A and B or supplemental 
benefits, the MA organization should have a plan or process in place to 
ensure that the requirements under Sec.  422.112(a)(1)(iii) are met. 
However, given inconsistencies in how supplemental benefits are 
provided, we believe it is necessary to clarify this requirement in 
regulatory text. Therefore, we propose and seek comment on new Sec.  
422.102(g)(1) that would require MA organizations to have processes for 
delivering all MA organization covered supplemental benefits to 
enrollees that ensure compliance with Sec. Sec.  422.100(c)(2) and 
422.102(a) through (f) and appropriate access to all covered services 
in accordance with Sec.  422.112(a).
3. New Guardrails for Plan Debit Cards
    As described in section III.H.2 of this proposed rule, we are 
proposing to include a clarification in Sec.  422.102(g)(1) requiring 
that MA organizations have processes for delivering all MA organization 
covered supplemental benefits to enrollees that ensure compliance with 
Sec. Sec.  422.100(c)(2) and 422.102(a) through (f) and appropriate 
access to all covered services per Sec.  422.112(a). Thus, 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.

[[Page 99387]]

Under this proposal, plans must have a process in place to maintain 
enrollee access to these benefits. When plans offer debit cards to 
assist with the cost sharing for covered benefits or otherwise 
administer supplemental benefits, the MA organization must ensure that 
the access requirements at Sec.  422.112(a) are met. This means 
regardless of the mode of delivery (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 plan-covered benefits be disclosed in 
the plan's evidence of coverage (EOC). Section 422.111 requires that MA 
organizations disclose all benefits offered under an MA plan, including 
applicable conditions and limitations, and any other conditions 
associated with receipt or use of benefits. These requirements are 
applicable to all benefits, including those administered via debit 
card. 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.
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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).
---------------------------------------------------------------------------

    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 Sec.  422.102(g)(2)(i) the following requirements that MA 
organizations must meet if they choose to administer reductions in cost 
sharing or provide coverage of 100 percent of the cost of a mandatory 
supplemental benefit. We are proposing at Sec.  422.102(g)(2)(i) that 
when administering a mandatory supplemental benefit through plan debit 
cards, an MA organization must provide debit cards that are 
electronically linked to plan covered benefits through a real-time 
identification mechanism to verify eligibility of plan covered benefits 
at the point of sale. This means that a plan issued debit card must be 
electronically linked to the covered benefit through a real-time 
mechanism that ensures the enrollee is only able to receive covered 
items or services that they are eligible to receive at the point of 
sale. The debit card must include some sort of mechanism that ensures 
the enrollee may only use the card to purchase the covered item or 
service. For example, an MA organization could provide a debit card 
linked to covered benefits through the use of item/service codes so 
that the enrollee is only able to pay the cost sharing for those select 
items at the point of sale. In this scenario, the MA organization would 
have to ensure that the enrollee is only able to purchase items or 
services they are specifically eligible to receive. This is necessary 
to ensure that enrollees only receive benefits they are eligible to 
receive and 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 
Sec.  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 Sec.  422.102(g)(2)(ii) to require MA 
organizations that use debit cards to administer a supplemental benefit 
to provide instructions for debit card use and customer service support 
to enrollees to answer questions or help with issues related to the 
administration of the card. For example, if an MA organization provides 
a food and produce benefit that may be accessed via a debit card, the 
plan must provide eligible enrollees with instructions on how to use 
the debit card and provide customer support service to beneficiaries 
who have questions about how to use the debit card. This support 
service must include instructions to beneficiaries on the process to 
access these benefits if not accessible by debit card, in accordance 
with Sec.  422.112(a). 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 Sec.  422.102(g)(2)(iv) that MA organizations must ensure the 
use of a debit card to administer a covered benefit is limited to the 
specific plan year.
    In the January 2021 final rule, we amended Sec.  422.102(a)(6) to 
state that an MA organization may offer reduced cost sharing as a 
mandatory supplemental benefit through the use of reimbursement, 
through a debit card or other means. In order to further support the 
proposed requirements at Sec.  422.102(g)(1), we also propose to revise 
Sec.  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 
Sec.  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 Sec.  
422.102(g)(1)(i). This proposal would

[[Page 99388]]

prohibit plans from using other mechanisms not directly described in 
Sec.  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 Sec.  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 Sec.  422.102(a)(6) and the requirements proposed at 
Sec. Sec.  422.102(g) and 422.111(b)(6) (discussed in section III.H.2 
of this proposed rule). For example, it is not our intent that the 
proposed changes at Sec.  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 Sec.  422.102(g). Therefore, we 
also solicit comment on whether the use of stored value cards meets the 
requirements at Sec.  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 Sec.  422.102(a)(6) and Sec.  422.102(g) as an acceptable 
means of administering reductions in cost sharing and the coverage of 
supplemental benefits.
---------------------------------------------------------------------------

    \66\ https://www.fiscal.treasury.gov/stored-value-card/.
---------------------------------------------------------------------------

    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 Sec.  422.112(a)(1)(iii) specify that coordinated 
care plans must arrange for, and cover any, medically necessary 
(clinically appropriate for non-primarily health related SSBCI) covered 
benefit outside of the plan provider network, but at in-network cost 
sharing, when an in-network provider or benefit is unavailable or 
inadequate to meet an enrollee's medical needs. Additionally, 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 Sec.  422.102(g)(2)(iii) that a plan must 
have an alternative process that allows for reimbursement of eligible 
expenses for plan covered benefits. 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 non-technical obstacles to its use. This alternative reimbursement 
process could also apply if there are failures with the electronic 
processing system used by the provider. This includes situations where 
a permitted transaction is erroneously declined. In other words, in the 
case that the debit card is not operating correctly or as intended, 
there is an issue with the vendor, or any other situation in which the 
use of a debit card is unfeasible for the enrollee, the MA plan must 
allow enrollees to be reimbursed for the purchase of the covered 
benefit based on submitted receipts. This also includes situations in 
which a contracted vendor is not easily accessible due to an enrollee's 
transportation constraints. This 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-of-network access to the benefit where necessary (for example, in 
the event that in-network providers and/or vendors are unavailable or 
inadequate to meet the enrollee's needs). In this scenario, the plan 
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 Sec.  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 Sec.  
422.4(a)(1)(v). Regarding reimbursement, Sec.  422.4(a)(1)(v)(B) 
requires PPOs to provide for ``reimbursement for all covered benefits 
regardless of whether the benefits are provided within the network of 
providers.'' This applies to all supplemental benefits, including those 
administered through a debit card (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

[[Page 99389]]

food and produce benefit. However, in a PPO, enrollees may purchase 
eligible food and produce at another non-contracted grocer (out of 
network provider) and be reimbursed for those covered items. We expect 
MA PPOs to have processes to verify out of network reimbursement is 
only made for plan-covered services and to indicate to enrollees the 
process by which reimbursement can be made. As noted above, that 
process should be mindful of enrollees in rural or remote areas with 
limited access to providers and internet-based communication methods.
    Finally, we remind MA plans that our regulations at Sec.  
422.112(b)(3) provide for coordinated care MA plans to include 
community-based services in their plans for coordination and continuity 
of care for enrollees. In addition, Sec.  422.112(b)(3) specifically 
states that MA coordinated care plans are required to ``coordinate MA 
benefits with community and social services generally available in the 
area served by the MA plan.'' MA plans may contract with community-
based organizations to provide supplemental benefits that are compliant 
with the statutory and regulatory requirements. 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 Sec.  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 Sec.  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 Sec.  422.111(b)(6) to state that MA organizations 
must disclose any mandatory supplemental benefits (including reductions 
in cost sharing) or optional supplemental benefits, the premium for 
optional supplemental benefits, and any applicable conditions and 
limitations associated with receipt or use of supplemental benefits. 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 Sec.  422.102(c)(2) provides that permissible 
supplemental benefits are items and services that are not covered by 
Medicare Part A, Part B or Part D. Per Sec.  422.100(c)(2), plans may 
never offer as a supplemental benefit something that is covered under 
Part B or 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, non-prescription 
birth control pills), cotton swabs, COVID-19 tests (over the counter), 
decongestants, dressing and eating aids, extension grabbers or reaching 
aids, facial cleaners (including acne wash), feminine hygiene products 
(such as douche, lubricants, pads, tampons, wipes), fiber supplements, 
first aid supplies, energy protein bars and power drinks, nutritional 
drinks/shakes, hand sanitizer, hearing aid batteries, hearing 
amplifiers, herbal supplements, hip kits, dietary supplements (such as 
CoQ10, garlic, gingko biloba, melatonin, and saw palmetto,) 
incontinence supplies (such as adult diapers and under pads), insulin 
refrigeration units, and lip soothers/balms (non-medicated), low vision 
aids, magnifying glasses, medicine dispensers, mouth/oral care products 
(such as toothbrush/paste, floss, mouthwash, denture adhesives/
cleaners), naloxone (if furnished under circumstances when it would not 
be covered by Medicare Part B or Part D), night lights, nicotine 
replacement therapy (NRT), pain relief products (such as Epsom salt and 
ice packs), pill bottle openers, pill/tablet boxes, cutters, and 
crushers, pulse oximeters, probiotics, nonprescription reading glasses, 
shoe insoles/inserts/arch supports, skin moisturizers for dry skin, 
skin protectant (such as diaper rash ointment, moleskin, mosquito 
repellent, 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,

[[Page 99390]]

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 non-primarily health related SSBCI 
provided the item has a reasonable expectation of improving or 
maintaining the health or overall function of the enrollee and meets 
the standards at Sec.  422.102(f). For example, research indicates that 
air conditioners may improve the breathing of patients with COPD and 
asthma.\67\ We solicit comment on these listed items and may revise the 
list based on feedback received.
---------------------------------------------------------------------------

    \67\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5291496/.
---------------------------------------------------------------------------

    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 Sec.  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 Sec.  422.100(c)(2) or are not primarily health related per Sec.  
422.100(c)(2)(ii). However, we believe including these lists in this 
preamble discussion will help MA organizations consistently apply the 
requirements at Sec. Sec.  422.100(c)(2) and 422.100(c)(2)(ii) and 
assist MA organizations when planning and preparing their annual bid 
packages.
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    \68\ We 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.
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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 Sec.  422.2263, prohibiting MA organizations from marketing 
the dollar value of a supplemental benefit or the method by which a 
supplemental benefit is administered, such as use of a debit card by 
the enrollee to provide the plan's payment to the provider for the 
covered services. 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) 
(Sec.  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 
Sec.  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 Sec.  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 
Sec.  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

[[Page 99391]]

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 Sec.  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 Sec.  
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 Sec.  
422.100(c)(2)(ii)(A), and the MA organization must incur a non-zero 
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.
---------------------------------------------------------------------------

    \69\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5291496/.
    \70\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2900329/.
---------------------------------------------------------------------------

    We propose to codify a non-exhaustive 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 non-primarily 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 Sec.  
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 
cannabis-based 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

[[Page 99392]]

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 Sec.  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 non-administrative 
cost (Sec.  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 Sec.  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 non-exhaustive 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 
non-exhaustive 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 Sec.  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 (Sec.  422.102(f)(3)), and the requirement that any enrollees 
targeted with an SSBCI service or benefit must meet all the eligibility 
requirements under Sec.  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 (Sec.  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

[[Page 99393]]

offered by the plan (Sec.  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.
---------------------------------------------------------------------------

    \71\ Rebates can also be used to buy down Part B and D premiums 
under Sec.  422.266(b)(2) and (b)(3).
    \72\ https://www.cms.gov/medicare/health-plans/healthplansgeninfo/downloads/supplemental_benefits_chronically_ill_hpms_042419.pdf.
---------------------------------------------------------------------------

    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 life-threatening or 
significantly limits the overall health or function of the enrollee; 
(II) has a high risk of hospitalization or other adverse health 
outcomes; and (III) requires intensive care coordination. Per Sec.  
422.102(f)(1)(i)(B), CMS may publish a non-exhaustive list of 
conditions that are medically complex chronic conditions that are life-
threatening or significantly limit the overall health or function of an 
individual. This list of chronic conditions is the same as the list for 
which MA organizations may offer chronic condition special needs plans 
(C-SNPs), which can be found in the definition of ``severe or disabling 
chronic condition'' within Sec.  422.2.
    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\
---------------------------------------------------------------------------

    \73\ 89 FR 30551.
---------------------------------------------------------------------------

    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 Sec.  422.2267(e)(34) to require plans to 
include clear information about SSBCI eligibility criteria in marketing 
and communications materials that mention SSBCI, including by listing 
the chronic conditions an enrollee must have in order to be eligible 
for the SSBCI. 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 Sec.  422.504(f)(2), CMS may review 
SSBCI eligibility criteria by requesting it from plans. This is 
currently done on a case-by-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\
---------------------------------------------------------------------------

    \74\ https://www.federalregister.gov/d/2024-07105/p-1069.
---------------------------------------------------------------------------

    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 Sec.  
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

[[Page 99394]]

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 three-pronged definition are present in the medical 
community and may be readily accessible to the plan.
---------------------------------------------------------------------------

    \75\ Prior 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 Sec.  422.102(f) as part of 
amendments to adopt new requirements.
    \76\ https://www.federalregister.gov/d/2020-11342/p-59.
---------------------------------------------------------------------------

    We have identified that the current regulation text (Sec.  
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 
Sec.  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 Sec.  422.102(f)(1)(i)(A) and (f)(1)(i)(A)(1) through (3) to 
specify that '' a chronically ill enrollee is an individual enrolled in 
the MA plan who meets all of the following:
     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 Sec.  422.102(f)(1)(i)(A)(1) through (3) to mirror the statutory 
language at section 1852(a)(3)(D)(iii) of the Act as intended in the 
2020 final rule.
    Additionally, we propose that plans must demonstrate that an 
enrollee has met all three of the criteria set forth in Sec.  
422.102(f)(1)(i)(A) through the use 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 Sec.  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 Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \77\ As previously noted, the list of chronic conditions that 
qualify as comorbid and medically complex chronic conditions that 
are life threatening or significantly limit the overall health or 
function of an enrollee for purposes of SSBCI eligibility can be 
found within the definition of ``severe or disabling chronic 
condition'' in CMS's regulations at Sec.  422.2.
---------------------------------------------------------------------------

    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 Sec.  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 Sec.  
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).
---------------------------------------------------------------------------

    \78\ 29 U.S.C. 794; 45 CFR pt. 84.
---------------------------------------------------------------------------

    We believe this proposal would provide greater transparency and

[[Page 99395]]

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 
Sec.  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 Sec.  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 (Sec.  
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 Sec.  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, Sec. Sec.  162.1000 
through 162.1011) for the diagnosis code sets adopted for HIPAA 
transactions. The current HCC definition in Sec.  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 Sec.  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 Sec.  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 Sec.  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 (Sec.  
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 
Sec.  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 Sec.  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 Sec.  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 Sec.  460.180(b)(3) to 
codify existing longstanding practice for the collection and mandatory 
submission of risk adjustment data, as specified in Sec.  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.

[[Page 99396]]

3. Clarifying the Obligation of Cost Plans To Submit Certain Data 
(Sec.  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 Sec.  417.486(a) to add 
a new Sec.  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 Sec.  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 (Sec.  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\
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    \79\ https://www.whitehouse.gov/ostp/ai-bill-of-rights/.
    \80\ https://www.federalregister.gov/documents/2023/11/01/2023-24283/safe-secure-and-trustworthy-development-and-use-of-artificial-intelligence.
    \81\ https://www.federalregister.gov/documents/2024/01/30/2024-01832/medicare-program-request-for-information-on-medicare-advantage-data.
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    15 U.S.C. 9401(3) defines ``artificial intelligence'' or ``AI'' 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.''
    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.
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    \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.
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    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.
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    \83\ Executive 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.
    \84\ Hoffman 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=bbaf6b35fe2b49fd1f4c39fbb91951db5b92a42618d4fd2a6724813f4cf64872.
    \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.
    \86\ Hoffman and Podgurski, ``Artificial Intelligence and 
Discrimination in Health Care, Yale Journal of Health Policy, Law, 
and Ethics,'' Vol. 19 [2020], Iss. 3, Art. 1.
---------------------------------------------------------------------------

    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 no-show 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

[[Page 99397]]

within the AI tool, providers double-booked lower-income patients, 
causing longer wait times for lower-income patients and perpetuating 
the cycle of additional missed appointments for vulnerable 
patients.\87\
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    \87\ Hoffman 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=bbaf6b35fe2b49fd1f4c39fbb91951db5b92a42618d4fd2a6724813f4cf64872.
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    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 decision-making.
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, Sec.  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 Sec.  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 Sec.  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\
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    \88\ https://www.federalregister.gov/d/2023-07115/p-361.
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    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 Sec.  
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 Sec.  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, Sec.  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, Sec.  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 well-established, 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.
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    \89\ https://www.federalregister.gov/d/2023-07115/p-361.
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    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 non-
discriminatory 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 Sec. Sec.  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 Medicare-covered 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

[[Page 99398]]

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 Sec.  422.110(a).
3. Definitions
    For purposes of this policy, we propose to adopt the following 
definition of ``automated system'' in Sec.  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\
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    \90\ https://www.whitehouse.gov/ostp/ai-bill-of-rights/.
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    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 ever-changing, 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 (Sec.  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 Sec.  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 Sec.  417.427, the MA disclosure requirements at Sec.  
422.111 also apply to section 1876 cost plans. The regulatory proposals 
herein apply to all organizations offering network-based plans as 
defined at Sec.  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 
Sec.  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 Sec.  
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.
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    \91\ The 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-care-marketing/models-standard-documents-educational-materials.
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    The current provider directory model contains an array of specific 
required information based on Sec.  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,

[[Page 99399]]

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 Sec.  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 plan-covered 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 Sec.  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 Sec.  
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.
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    \2\ https://www.bloomberg.com/news/features/2023-05-30/papa-eldercare-startup-faces-abuse-claims-by-seniors-caregivers?embedded-checkout=true&leadSource=uverify%20wall.
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    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 Sec.  
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 Sec.  
422.111(b)(3) to explicitly state the requirement to include direct 
furnishing entities. We propose that Sec.  422.111(b)(3)(i)(A) and (B) 
would be revised to specify the following:
     All direct furnishing entities as defined in Sec.  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 
Sec. Sec.  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 Sec.  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

[[Page 99400]]

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 Sec.  
422.111(b)(3)(i)(D). We propose that Sec.  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 Sec.  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 
in-office as well as in-home or at-home supplemental benefits. We 
propose that this definition be added to the regulation at Sec.  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 in-home or at-home services in addition to in-office 
services. Therefore, any enrollees wishing to find in-home or at-home 
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 in-home 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 at-home, 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 in-home 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 
Sec. Sec.  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 at-home, 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 public-facing 
website, and plans must continue to adhere to the current provider 
directory requirements set forth at Sec. Sec.  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 Sec.  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 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.'' 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

[[Page 99401]]

definition based on the comments received.
    We also propose to include new regulation text at Sec.  
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 Sec.  
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 
Sec.  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 Sec.  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 Sec.  
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 Sec.  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.
---------------------------------------------------------------------------

    \92\ McCarthy, 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.
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    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 at-home 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 at-home 
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 at-
home 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 (Sec. Sec.  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 Sec. Sec.  417.416 and 
417.440(b)(1) and section 1852(a)(1) of the Act and Sec. Sec.  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

[[Page 99402]]

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) lower-income bene[filig]ciaries 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\
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    \93\ McGinty, 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-health-coverage-included-changed-gaps-remain.
    \94\ For example, MA plans are not required to provide hospice 
services--a service covered in Traditional Medicare.
    \95\ CMS's behavioral health strategy is available at: https://www.cms.gov/cms-behavioral-health-strategy.
    \96\ Fleet, Alexa. Improving Behavioral Health Care For Older 
Americans: If Not Now, When? June 2022. Retrieved from: https://www.healthaffairs.org/content/forefront/improving-behavioral-health-care-older-americans-if-not-now.
    \97\ American 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.
    \98\ Carter, 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-beneficiaries-from-needed-care.
    \99\ This 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.
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     Between 23 percent and 25 percent of all MA plans charge 
in-network cost-sharing 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 cost-sharing 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 Medicare-eligible 
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\
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    \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/mental-health/issue-brief/one-in-four-older-adults-report-anxiety-or-depression-amid-the-covid-19-pandemic/.
    \101\ McGinty, 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-health-coverage-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-disorder-coverage-in-medicare-advantage-plans/.
    \103\ American 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.
    \104\ Milliman. Potential economic impact of integrated medical-
behavioral healthcare: Updated projections for 2017. February 2018. 
Retrieved from: https://www.milliman.com/en/insight/potential-economic-impact-of-integrated-medical-behavioral-healthcare-updated-projections.
    \105\ CMS. Contract Summary 2024. Data as of July 2024. 
Retrieved from: https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/mcradvpartdenroldata/monthly/contract-summary-2024-07.
    \106\ This 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.
---------------------------------------------------------------------------

     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 Sec. Sec.  
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 
cost-sharing 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.
---------------------------------------------------------------------------

    \107\ This proposal would also apply to out-of-network cost 
sharing standards for D-SNP PPOs per Sec.  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.
---------------------------------------------------------------------------

    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

[[Page 99403]]

2025 behavioral health cost-sharing standards (in current regulations 
at Sec.  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 Sec.  422.100(j)(1) 
and (2) in section III.L.X.e.(4). of this proposed rule. Under this 
proposal, the requirements at Sec.  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 Sec.  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 Sec.  422.100(f)(6)(iii), 
(f)(6)(iv), and (j)(1)(i). First, at Sec.  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 cost-sharing standards in paragraph (f)(6)(iii).
    Second, at Sec.  422.100(f)(6)(iv) we propose to: (1) add a 
reference to Sec.  422.100(j)(1)(i)(H) in paragraph (f)(6)(iv)(A) to 
reflect the proposed cost-sharing 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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec. Sec.  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 Sec. Sec.  417.454 and 422.100(f) and (j): (1) revise 
language at Sec.  417.454(e)(1) to match terminology of chemotherapy 
administration services with language at Sec.  422.100(j)(1)(i)(A), (2) 
remove language at Sec.  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 Sec.  
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 Sec.  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

[[Page 99404]]

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\
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    \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-america-survey-findings/.
    \110\ 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/.
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    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\
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    \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.
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     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
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    \112\ Friedman 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.
    \113\ American 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/mental-health/issue-brief/one-in-four-older-adults-report-anxiety-or-depression-amid-the-covid-19-pandemic/.
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     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
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    \115\ Fleet, Alexa. Improving Behavioral Health Care For Older 
Americans: If Not Now, When? June 2022. Retrieved from: https://www.healthaffairs.org/content/forefront/improving-behavioral-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/reports-and-publications/all-reports-and-publications/a-lack-of-behavioral-health-providers-in-medicare-and-medicaid-impedes-enrollees-access-to-care/.
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    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\
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    \117\ McGinty, 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-health-coverage-included-changed-
gaps-
remain#:~:text=How%20prevalent%20are%20mental%20health,to%2050%20perc
ent%20receive%20treatment.
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     On average, only 3 percent of MA enrollees received 
treatment from a behavioral health provider in 2023.\118\
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    \118\ 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/reports-and-publications/all-reports-and-publications/a-lack-of-behavioral-health-providers-in-medicare-and-medicaid-impedes-enrollees-access-to-care/.
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     MA enrollees paid about $9 more on average for in-network 
mental health services than for comparable physical-health 
services.\119\
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    \119\ Pelech, 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.
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     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 high-value 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\
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    \120\ Fusco 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/.
    \121\ Health 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-part-health-reform.
    \122\ Parish 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.
    \123\ Nelson, Hannah. Cost-Sharing Burden Limits Access to Care 
for Medicare Members. April 2021. Retrieved from: https://healthpayerintelligence.com/news/cost-sharing-burden-limits-access-to-care-for-medicare-members.
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    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.
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    \124\ Office 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/4e2fff45d3f5706d35326b320ed842b3/roadmap-behavioral-health-integration.pdf.
    \125\ CMS. 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-health-strategy.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-disorder-coverage-in-medicare/.
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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

[[Page 99405]]

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:
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    \127\ CMS's behavioral health strategy is available at: https://www.cms.gov/cms-behavioral-health-strategy.
    \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 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-cy-2023-payment-policies-under-the-physician-fee-schedule-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-hospital-outpatient-prospective-payment-and-ambulatory-surgical-center-payment.
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     Counseling and cognitive behavioral therapy--this was done 
by codifying new benefit categories for mental health counselors, 
marriage and family therapists.\130\
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    \130\ The November 2022 final rule is available at: https://www.federalregister.gov/documents/2022/11/18/2022-23873/medicare-and-medicaid-programs-cy-2023-payment-policies-under-the-physician-fee-schedule-and-other.
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     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\
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    \131\ The November 2022 final rule is available at: https://www.federalregister.gov/documents/2022/11/18/2022-23873/medicare-and-medicaid-programs-cy-2023-payment-policies-under-the-physician-fee-schedule-and-other.
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     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\
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    \132\ The November 2023 final rule is available at: https://www.federalregister.gov/documents/2023/11/22/2023-24293/medicare-program-hospital-outpatient-prospective-payment-and-ambulatory-surgical-center-payment.
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    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.
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    \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-and-the-medicare-prescription-drug-benefit-program-for-contract.
    \134\ Centers 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-integration-behavioral-health.
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    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 Sec.  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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    \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-of-pocket-moop-limits-and-service-category-cost-sharing-standards.

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[[Page 99406]]

(1) April 2022 Final Rule
    The April 2022 final rule amended Sec. Sec.  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 cost-sharing 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:
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    \136\ The April 2022 final rule did not change Cost Plan cost-
sharing standards.
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     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 cost-sharing 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 cost-sharing limits CMS sets for the mandatory and lower 
MOOP types. Specifically, the behavioral health service category 
contract year 2026 MA cost-sharing limits at Sec.  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\
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    \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).
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    Per Sec.  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 in-network 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 cost-sharing 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\
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    \138\ Public 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.
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    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

[[Page 99407]]

limits generally or specifically for mental health services. A 
commenter stated that current anti-discriminatory measures (including 
the non-discriminatory 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 Cost-Sharing Standard: Cost Sharing No 
Greater Than Original Medicare (Sec.  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 cost-sharing 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 cost-sharing 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 Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  
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 Sec.  422.100(o)(2) from ``excluding paragraph 
(j)(1)(i)(C)(2)'' to ``excluding the last sentence of paragraph 
(j)(1)(i)(C).''
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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/medicare-program-changes-to-the-medicare-advantage-and-the-medicare-prescription-drug-benefit.
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    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 cost-sharing 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

[[Page 99408]]

copayment limit). Similarly, table 4 reflects this proposal's impact to 
Cost Plan in-network cost-sharing limits.
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    \140\ See 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-and-affordable-care-act-hhs-notice-of-benefit-and-payment-parameters-for-2024.
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    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 Sec.  
422.100(f)(7), including the subregulatory process specified at Sec.  
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.
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    \141\ As 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.
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    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 Sec.  
422.100(f)(7)(i). We would generally describe such changes in the 
annual guidance described in Sec.  422.100(f)(7)(iii).

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    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 Sec.  
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).
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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/hpms-memos-archive-weekly.
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    In conjunction with proposing these behavioral health cost-sharing 
standards, we propose to: (1) revise Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  417.454(f) which references the cost sharing standard 
at Sec.  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 Sec.  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 Sec.  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 Sec.  
417.454(e) to specify that when Cost

[[Page 99411]]

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 Sec.  
422.100(j)(1)(ii) and Medicare FFS data projections as defined in Sec.  
422.100(f)(4)(i). Per Sec.  422.100(j)(1)(ii), CMS calculates copayment 
limits using the rules specified in Sec.  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 
Sec.  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 Sec.  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 Sec.  
422.100(f)(7) and would utilize the most recent Medicare FFS data 
projections available (as defined in Sec.  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 Sec.  
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.

[[Page 99412]]

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[[Page 99413]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.010

(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 cost-sharing 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.

[[Page 99414]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.011

    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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    \143\ Cost 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.

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[[Page 99415]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.012

    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).
[GRAPHIC] [TIFF OMITTED] TP10DE24.013

    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

[[Page 99416]]

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.
[GRAPHIC] [TIFF OMITTED] TP10DE24.014

    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

[[Page 99417]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.015

[[Page 99418]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.016

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

[[Page 99419]]

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 cost-
sharing 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.
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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-medicare-medicaid-hhs-inspector-general.
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    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.
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    \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/reports-and-publications/all-reports-and-publications/a-lack-of-behavioral-health-providers-in-medicare-and-medicaid-impedes-enrollees-access-to-care/.
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    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

[[Page 99420]]

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 Sec.  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 Sec. Sec.  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 (Sec.  422.256), it would provide cost-
sharing 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,

[[Page 99421]]

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.
[GRAPHIC] [TIFF OMITTED] TP10DE24.017

[GRAPHIC] [TIFF OMITTED] TP10DE24.018

    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 Sec. Sec.  417.454 and 
422.100:
     Revise language at Sec.  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.

[[Page 99422]]

     Revise language at Sec.  417.454(e)(1) to match 
terminology of chemotherapy administration services with language at 
Sec.  422.100(j)(1)(i)(A) applying the same cost sharing limit to MA 
plans.
     Add Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  
422.100(f)(6)(iv)(B) and (D) to reflect the proposed cost-sharing 
standard.
     Remove language at Sec.  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 Sec.  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 Sec.  422.100(j)(1)(i)(C) that the Part A 
deductible amount referred to is for the year.
     Remove Sec.  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 cost-sharing standard information.
     Add Sec.  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 Sec.  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 Sec.  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 (Sec.  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\
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    \148\ https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government.
    \149\ https://www.federalregister.gov/d/2022-26956/p-228.
    \150\ https://www.cms.gov/pillar/health-equity.
---------------------------------------------------------------------------

    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
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    \151\ https://www.federalregister.gov/documents/2024/04/23/2024-07105/medicare-program-changes-to-the-medicare-advantage-and-the-medicare-prescription-drug-benefit.
    \152\ https://www.hmpgloballearningnetwork.com/site/frmc/commentary/addressing-health-inequities-prior-authorization; and 
https://www.ncbi.nlm.nih.gov/pmc/articles/ PMC10024078/.
    \153\ https://www.federalregister.gov/d/2023-24118/p-600.
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    Under section 1852 of the Act, MA organizations are generally 
allowed to use utilization management tools, such as prior 
authorization.\154\ Authority for

[[Page 99423]]

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 Sec.  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.
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    \154\ Sections 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 plan-covered services from out-of-network providers (see Sec.  
422.4(a)(1)(v)(D)).
---------------------------------------------------------------------------

    In the April 2024 final rule, CMS added two health equity related 
requirements to Sec.  422.137. First, at Sec.  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 Sec.  
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.
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    \155\ Section 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.
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    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.
---------------------------------------------------------------------------

    \156\ https://www.federalregister.gov/d/2024-07105/p-1232.
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    For these reasons, we propose at Sec.  422.137(d)(6)(iii)(A) 
through (H) to revise the required metrics for the annual health equity 
analysis of the use of prior authorization to require the 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

[[Page 99424]]

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 Sec.  
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 (Sec.  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 Sec.  
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 Sec. Sec.  422.112(a)(10) and Sec.  
422.114 and by meeting the network adequacy standards at Sec.  
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 Sec.  422.116.
1. Defining County
    Network adequacy is assessed at the county level, including county-
equivalents, 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 Sec.  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 county-equivalents. 
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 Sec.  422.116. 
In Sec.  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 Sec.  
422.2 in C-E of this section to incorporate the proposed definition of 
``county'' in Sec.  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 Sec.  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 
Sec. Sec.  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 
Sec.  422.116, including, the circumstances under which an MA 
organization may request an exception (Sec.  422.116(f)(1)) and the 
factors that CMS considers when evaluating an MA organization's request 
for an exception (Sec.  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:
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    \157\ https://www.cms.gov/files/document/medicare-advantage-and-section-1876-cost-plan-network-adequacy-guidance12-12-2023.pdf.
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     Provider is no longer practicing (for example, deceased, 
retired).

[[Page 99425]]

     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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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 by-pass 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 Sec.  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 
Sec.  422.204(b)(4)).
     Provider is a sanctioned provider on the List of Excluded 
Individuals and Entities (in compliance with Sec.  422.204); or 
provider is on the CMS preclusion list (in compliance with Sec.  
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 Sec.  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 Sec.  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 Sec.  
422.116(f)(2)(iii). Finally, CMS is retaining the last exception 
currently

[[Page 99426]]

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 Sec.  
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 (Sec.  422.116(f)(2)(ii)) or that approval of 
the exception is in the best interests of beneficiaries (Sec.  
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 Sec.  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 Sec.  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 Sec.  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 network-based MA plan as 
described in Sec.  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

[[Page 99427]]

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 
(Sec. Sec.  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 Sec. Sec.  422.2274 and 423.2274 in the April 2023 final 
rule, which defined a CMS-developed 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 Sec. Sec.  
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 CMS-developed lists provided at Sec. Sec.  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.
---------------------------------------------------------------------------

    \158\ https://www.commonwealthfund.org/publications/2023/feb/challenges-choosing-medicare-coverage-views-insurance-brokers-agents.
---------------------------------------------------------------------------

    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 Sec. Sec.  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 Sec. Sec.  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 Sec.  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

[[Page 99428]]

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 Sec.  
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 Sec.  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 Sec.  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 Sec. Sec.  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 
Sec.  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 Sec.  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 Sec.  
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 Sec.  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).
---------------------------------------------------------------------------

    \159\ https://www.cms.gov/medicare/enrollment-renewal/part-d-plans/low-income-subsidy/eligibility-low-income-subsidy.
---------------------------------------------------------------------------

    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 Sec. Sec.  422.2274(b)(1) and 
423.2274(b)(1). We would encourage agents and brokers to use CMS-
developed 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 Sec. Sec.  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.
---------------------------------------------------------------------------

    \160\ See 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.
    \161\ United States Centers for Medicare & Medicaid Services, 
Medicare Savings Programs, https://www.medicare.gov/basics/costs/help/medicare-savings-programs.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \162\ See section 1882(s)(3)(A) of the SSA.
---------------------------------------------------------------------------

    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

[[Page 99429]]

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 Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \163\ The MA ``trial right'' period and other Federal Medigap GI 
rights are described in CMS' Choosing 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-health-insurance.pdf.
    \164\ See 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.
---------------------------------------------------------------------------

    Under this proposal, at Sec.  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 
beneficiary-focused 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 Sec.  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.
---------------------------------------------------------------------------

    \165\ Centers 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-medigap-guide-health-insurance.pdf.
---------------------------------------------------------------------------

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 Sec.  
422.2274(c)(12), we propose to delete the ``and'' that comes before 
``specific health care needs'' and create Sec.  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 Sec.  
423.2274(c)(12), we propose to delete the ``and'' that comes before 
``services and incentives'' and create Sec.  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

[[Page 99430]]

final rule regarding Sec. Sec.  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.
---------------------------------------------------------------------------

    \166\ United 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).
    \167\ Riaz 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-influence-medicare-beneficiaries-plan-choices] 
(August 21, 2024).
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4. Technical Changes
    We are also proposing technical changes to Sec. Sec.  
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 Sec. Sec.  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 Sec. Sec.  422.2274(c)(12)(iv) through (vi), respectively. The two 
newly proposed topics (LIS, MSP) under Sec.  423.2274(c)(12) will be 
included as new Sec. Sec.  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 Sec.  422.2274(c)(12)(xi) 
and 423.2274(c)(12)(vii).
    In addition, we are also proposing a minor technical correction to 
Sec.  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 
Sec. Sec.  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 Sec.  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 Sec. Sec.  
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 (Sec. Sec.  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

[[Page 99431]]

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.
---------------------------------------------------------------------------

    \168\ MedPAC (2023). ``Report to Congress: Medicare and the 
Health Care Delivery System'' June 2023.
    \169\ Rollins, Eric (2023). ``Standardized benefits in Medicare 
Advantage plans'' MedPAC presentation, September 7, 2023. Downloaded 
from https://www.medpac.gov/document/standardized-benefits-in-medicare-advantage-plans/ on September 11, 2024.
    \170\ Lieberman, 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.''
    \171\ Pearson, 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.
    \172\ Taylor, 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.
    \174\ Abaluck, 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.
    \176\ Bhargava, 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.
    \177\ Bundorf, 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.
    \178\ McWilliams 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.
    \179\ Ericson, Keith (2014). ``Consumer Inertia and Firm Pricing 
in the Medicare Part D Prescription Drug Insurance Exchange.'' 
American Economic Journal: Economic Policy, February 2014, 6(1): 38-
64.
---------------------------------------------------------------------------

    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 Sec.  422.2267(e), as well as the requirements 
under Sec.  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\
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    \180\ https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/.
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    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 Sec.  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 (Sec.  
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 Sec.  
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 Sec.  422.119(c). The Interoperability and 
Patient Access final rule, also included in Sec.  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 Sec.  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 two-prong 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

[[Page 99432]]

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 
Sec.  422.2267(e)(11), as well as a searchable online directory as 
required under Sec.  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 Sec.  
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 (Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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 
Sec.  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 Sec.  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 Sec.  422.111(m) and 
we thank commenters in advance for their feedback.

[[Page 99433]]

Q. Promoting Informed Choice--Enhancing Review of Marketing & 
Communications (Sec. Sec.  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 Sec.  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 Sec. Sec.  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 Sec. Sec.  
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 Sec. Sec.  
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, retention-based marketing).'' In addition, Sec. Sec.  
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 Sec. Sec.  
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 Sec.  
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 Sec. Sec.  422.2261(b) 
and 423.2261(b).
    Prior to 2018, for over two decades, CMS had a broad regulatory 
definition of marketing at Sec. Sec.  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.

[[Page 99434]]

    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, 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 Sec. Sec.  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.
---------------------------------------------------------------------------

    \181\ 83 FR 16627.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \188\ https://www.cms.gov/Medicare/Health-Plans/ManagedCareMarketing/Downloads/CY2019-Medicare-Communications-and-Marketing-Guidelines_Updated-090518.pdf.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \189\ 88 FR 22240.
    \190\ 88 FR 22253.
---------------------------------------------------------------------------

    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

[[Page 99435]]

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 
Sec. Sec.  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 Sec. Sec.  
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 Sec. Sec.  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 four-fold 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.
---------------------------------------------------------------------------

    \191\ Complaints Tracking Module (CTM) Marketing 
Misrepresentation Reports from 2018 to 2024.
---------------------------------------------------------------------------

    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

[[Page 99436]]

protect beneficiaries against misleading, inaccurate or confusing 
marketing tactics, in addition to expediting our ability to more 
quickly act on non-compliant 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.
---------------------------------------------------------------------------

    \192\ HPMS 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-insurers-and-brokers-are-marketing-medicare-report/#flooded-with-ads] (August 6th, 2024).
    \194\ How Health Insurers and Brokers Are Marketing Medicare, 
(KFF, [September 20, 2023]) [https://www.kff.org/report-section/how-health-insurers-and-brokers-are-marketing-medicare-report/#flooded-with-ads] (August 6th, 2024).
---------------------------------------------------------------------------

    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 Sec. Sec.  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 Sec. Sec.  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

[[Page 99437]]

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.
---------------------------------------------------------------------------

    \195\ United 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.
---------------------------------------------------------------------------

    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 Sec. Sec.  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 
Sec. Sec.  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.
---------------------------------------------------------------------------

    \198\ https://www.cms.gov/files/document/medicare-communications-marketing-guidelines-2-9-2022.pdf.
    \199\ https://www.cms.gov/files/document/medicare-communications-marketing-guidelines-2-9-2022.pdf.
---------------------------------------------------------------------------

    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 Sec. Sec.  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 Sec. Sec.  422.2267(e) and 
423.2267(e) and continue excluding those materials required under 
Sec. Sec.  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 
Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  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.
---------------------------------------------------------------------------

    \200\ 83 FR 16629.
---------------------------------------------------------------------------

    We are proposing conforming edits to the definition of 
``Advertisement (Ad)'' in Sec. Sec.  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

[[Page 99438]]

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 Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  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 
Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  
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 Sec. Sec.  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 (Sec.  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\
---------------------------------------------------------------------------

    \201\ OMB 0938-0982, CMS-10174, expiration February 28, 2025 
(available at https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=202403-0938-002).
---------------------------------------------------------------------------

    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,

[[Page 99439]]

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.
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    \202\ The PDE file layouts are available at https://www.csscoperations.com/internet/csscw3.nsf/DID/M7XCJKG0JI.
    \203\ 42 CFR 423.505(k)(3).
    \204\ For 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).
    \205\ For additional information and examples that result in 
adjustment and deletion PDE records, see HPMS memorandum, PDE 
Guidance for Post Point-of-Sale Claim Adjustments, July 3, 2013, 
available at https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/post%20pos%20adjustments_247.pdf.
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    CMS uses accepted PDE records in the Part D payment reconciliation 
described at Sec.  423.336 and 423.343(c) and (d), reopenings of Part D 
payment reconciliations described at Sec.  423.346, the Coverage Gap 
Discount Program invoicing process described generally at Sec.  
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 
Sec.  423.505(n)(1)(i) and may be subject to compliance actions 
described at Sec.  423.505(n)(3).
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    \206\ HPMS memorandum, Medicare Part D Manufacturer Discount 
Program Final Guidance, November 17, 2023 (available at https://www.cms.gov/files/document/manufacturer-discount-program-final-guidance.pdf).
    \207\ Medicare 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-price-negotiation-program-guidance-june-2023.pdf.
    \208\ Medicare Drug Price Negotiation Program: Final Guidance, 
Implementation of Sections 1191--1198 of the Social Security Act for 
Initial Price Applicability Year 2027 and Manufacturer Effectuation 
of the Maximum Fair Price in 2026 and 2027 https://www.cms.gov/files/document/medicare-drug-price-negotiation-final-guidance-ipay-2027-and-manufacturer-effectuation-mfp-2026-2027.pdf.
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    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.
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    \209\ HPMS memorandum, Revision to Previous Guidance Titled 
``Timely Submission of Prescription Drug Event (PDE) Records and 
Resolution of Rejected PDEs'', October 6, 2011, available at https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/hpms_memo_pde_timeliness_clarification_240.pdf.
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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 
plan-reported 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.
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    \210\ HPMS memorandum, Timely Submission of Prescription Drug 
Event (PDE) Records and Resolution of Rejected PDEs, May 16, 2011, 
available at https://www.cms.gov/httpseditcmsgovresearch-statistics-data-and-systemscomputer-data-and-systemshpmshpms-memos-archive/hpms-memo-qtr1-4.
    \211\ HPMS memorandum, Revision to Previous Guidance Titled 
``Timely Submission of Prescription Drug Event (PDE) Records and 
Resolution of Rejected PDEs'', October 6, 2011, available at https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/hpms_memo_pde_timeliness_clarification_240.pdf.
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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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    \212\ Medicare Drug Price Negotiation Program: Final Guidance, 
Implementation of Sections 1191--1198 of the Social Security Act for 
Initial Price Applicability Year 2027 and Manufacturer Effectuation 
of the Maximum Fair Price in 2026 and 2027 https://www.cms.gov/files/document/medicare-drug-price-negotiation-final-guidance-ipay-2027-and-manufacturer-effectuation-mfp-2026-2027.pdf.

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[[Page 99440]]

    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 claim-level data 
elements that verify the selected drug was dispensed to an MFP-eligible 
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.
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    \213\ See 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.
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    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.
---------------------------------------------------------------------------

    \214\ 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 https://www.cms.gov/files/document/medicare-drug-price-negotiation-draft-guidance-ipay-2027-and-manufacturer-effectuation-mfp-2026-2027.pdf.
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    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

[[Page 99441]]

Part D sponsors may face in implementing the proposed timeframe.
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    \215\ Insert link to final guidance when it is available.
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    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.
[GRAPHIC] [TIFF OMITTED] TP10DE24.019

    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

[[Page 99442]]

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 Sec.  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'').
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    \216\ Medicare Drug Price Negotiation Program: Final Guidance, 
Implementation of Sections 1191-1198 of the Social Security Act for 
Initial Price Applicability Year 2027 and Manufacturer Effectuation 
of the Maximum Fair Price in 2026 and 2027 https://www.cms.gov/files/document/medicare-drug-price-negotiation-final-guidance-ipay-2027-and-manufacturer-effectuation-mfp-2026-2027.pdf.
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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.
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    \217\ See 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.
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    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 the MTF DM 
and return certain claim-

[[Page 99443]]

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 Sec.  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

[[Page 99444]]

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.

[[Page 99445]]

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\
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    \218\ See: https://www.cms.gov/inflation-reduction-act-and-medicare.
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T. Proposed Regulatory Changes to Medicare Advantage (MA) and Part D 
Medical Loss Ratio (MLR) Standards (Sec. Sec.  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 Sec.  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 Sec.  423.2430. The percentage of revenue that 
is used for other items such as administration, marketing, and profit 
is excluded from the numerator of the MLR for MA and Part D (see 
Sec. Sec.  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 Sec. Sec.  
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 
Sec. Sec.  422.2410 and 423.2410). We also established at Sec. Sec.  
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 Sec.  
422.2410 or Sec.  423.2410.
    To facilitate the submission of MLR data, CMS developed a 
standardized MLR Report template that MA organizations and Part D 
sponsors are

[[Page 99446]]

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 Sec. Sec.  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 Sec. Sec.  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

[[Page 99447]]

Liability'' (81 FR 27853), which appeared in the May 6, 2016, Federal 
Register, we also established Medicaid and CHIP managed care 
regulations at Sec. Sec.  438.8(k) and 457.1203(f) respectively, that 
require managed care plans to annually submit reports of their MLR to 
States, and, at Sec. Sec.  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 Sec. Sec.  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.
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    \219\ https://www.federalregister.gov/d/2022-00117/p-656.
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    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 Sec.  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 Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  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 
Sec. Sec.  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 Sec.  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 
Sec. Sec.  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 (Sec.  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 
Sec. Sec.  422.2420(b) and 423.2420(b). Specifically, under Sec. Sec.  
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 
Sec. Sec.  422.2430 and 423.2430; and, under Sec.  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 Sec.  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

[[Page 99448]]

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 well-documented 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.
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    \220\ https://www.govinfo.gov/content/pkg/FR-2022-05-06/pdf/2022-09438.pdf.
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    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 Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  423.2420(b)(2)(x) to 
mirror the proposed change to Sec.  422.2420(b)(2)(xi).
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    \221\ For additional discussion of negative DIR, please review 
the Final Medicare Part D DIR Reporting Guidance, which is released 
by CMS annually.
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    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 
(Sec. Sec.  422.2430 and 423.2430)
    Under Sec. Sec.  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 
Sec. Sec.  422.2430 and 423.2430, respectively. As specified at 
paragraph (a)(2) of Sec. Sec.  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.

[[Page 99449]]

    As specified at paragraph (a)(3) of Sec. Sec.  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 evidence-based 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 Sec. Sec.  422.2430 and 
423.2430, QIAs include Medication Therapy Management Programs that meet 
the requirements of Sec.  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 Sec. Sec.  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, Sec. Sec.  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\
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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.
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    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\
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    \225\ https://www.federalregister.gov/d/2024-08085/p-1297.
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    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 Sec. Sec.  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 (Sec. Sec.  422.2420 and 423.2420)
    Under Sec. Sec.  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.''
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    \226\ https://www.cms.gov/medicare/health-drug-plans/medical-loss-ratio.
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    Commercial regulations at 45 CFR 158.170(b) and Medicaid and CHIP

[[Page 99450]]

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 Sec. Sec.  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 Sec. Sec.  
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 Sec. Sec.  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 (Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  
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 Sec. Sec.  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

[[Page 99451]]

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 Sec. Sec.  422.2450 and 423.2450 to regulations 
to establish the audit process to validate MA organization and Part D 
sponsors' MLR compliance. At Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  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 
Sec. Sec.  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 Sec. Sec.  
422.2450(d) and 423.2450(d), CMS would review and consider such 
response before finalizing the audit findings. At Sec. Sec.  
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 Sec. Sec.  
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 Sec. Sec.  
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 Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  
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 Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  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.

[[Page 99452]]

c. Process for Appealing the MLR Audit Remittance
    We propose to add Sec. Sec.  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 Sec. Sec.  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

[[Page 99453]]

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 Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  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 (Sec. Sec.  422.2490 and 423.2490)
    Part C MLR data defined at Sec.  422.2490(a) and Part D MLR data 
defined at Sec.  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 Sec. Sec.  422.2460 and 423.2460. For the 
purpose of the data release under Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  
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 
Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  422.2490(b)(4) and 423.2490(b)(4), we exclude from 
release any MLR review correspondence.
    At Sec. Sec.  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 (Sec. Sec.  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

[[Page 99454]]

MLR numerator at Sec. Sec.  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 D-related 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
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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.
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    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 (Sec.  422.2420)
    In the course of this rulemaking, we noticed the need for a 
technical correction at regulation Sec.  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 (Sec. Sec.  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 value-based 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 value-based payment arrangements between providers and 
plans. \239\
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    \231\ https://www.techtarget.com/revcyclemanagement/answer/Value-Based-Reimbursement-Grows-as-Providers-Take-on-More-Risk.
    \232\ https://hcp-lan.org/workproducts/apm-methodology-2023.pdf.
    \233\ https://www.cms.gov/medicare/quality/value-based-programs.
    \234\ https://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-value-based-contracting-in-organizations-with-medicare-acos.
    \237\ https://www.regulations.gov/document/CMS-2024-0008-0001/comment.
    \238\ https://www.brookings.edu/articles/medicare-advantage-spending-medical-loss-ratios-and-related-businesses-an-initial-investigation/.
    \239\ https://www.govinfo.gov/content/pkg/FR-2024-01-30/pdf/2024-01832.pdf.
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    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 Sec.  
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 Sec.  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,

[[Page 99455]]

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 Sec.  422.2410.
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    \240\ https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-422/subpart-X/section-422.2420.
    \241\ https://www.cms.gov/files/document/cy2024-part-c-reporting-requirements.pdf.
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    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
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    \242\ https://www.cms.gov/priorities/innovation/innovation-models/health-care-payment-learning-and-action-network.
    \243\ https://hcp-lan.org/workproducts/apm-methodology-2023.pdf.
    \244\ https://hcp-lan.org/workproducts/apm-refresh-whitepaper-final.pdf.
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    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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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

[[Page 99456]]

specific requirements at Sec.  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 Sec.  422.112(b)(8)) and required 
MA organizations to establish a utilization management committee that 
reviews and approves all plan utilization management policies (at Sec.  
422.137). These rules were applicable to coverage for MA organizations 
beginning January 1, 2024.
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    \245\ 88 FR 22189.
    \246\ 88 FR 22187.
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    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 
Sec. Sec.  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 Sec.  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 Sec.  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.
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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/determinationprocess/downloads/fr08072013.pdf; and Medicare Program 
Integrity Manual Chapter 13-Local Coverage Determinations (February 
2, 2019) available at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/pim83c13.pdf.
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    First, we propose to replace the term ``general provisions'' at 
Sec.  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 Sec.  
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 Sec.  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 Sec.  
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

[[Page 99457]]

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 Sec.  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 Sec.  422.101(b)(6)(i)(A).
    As a possible alternative, we solicit comment on replacing the 
existing requirement at Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 non-Medicare 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 Sec.  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 Sec.  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

[[Page 99458]]

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 
Sec.  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 Sec.  
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 Sec.  
422.101(b)(6)(i)(A) and, therefore, must meet all regulatory 
requirements at Sec.  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 Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \248\ February 2024 HPMS memo, page 2.
---------------------------------------------------------------------------

    In the proposed definition of internal coverage criteria to be 
added at Sec.  422.101(b)(6)(iii), we use a non-exhaustive 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 Sec.  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

[[Page 99459]]

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.
---------------------------------------------------------------------------

    \249\ 42 CFR 422.503(b)(4)(vi).
---------------------------------------------------------------------------

    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 Sec.  
422.101(b)(6); but internal coverage criteria applied during one of 
these interventions (i.e., prior authorization) are subject to the 
rules at Sec.  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 Sec.  
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 Sec.  
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.
---------------------------------------------------------------------------

    \250\ https://www.ncbi.nlm.nih.gov/books/NBK560806/.
---------------------------------------------------------------------------

    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-of-network. 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, Sec. Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 99460]]

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 Sec.  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, Sec.  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, 
Sec.  422.110(a), and Sec.  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 Sec.  422.101(b)(6) or the anti-discrimination 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 Sec.  
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 Sec.  
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 Sec.  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 Sec.  422.101(b)(6) and Sec.  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 Sec.  
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 Sec.  
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 Sec.  422.101(b)(6)(i)(A) 
by replacing ``general provisions'' with ``the plain language of 
applicable Medicare coverage and benefit criteria'' and

[[Page 99461]]

removing the ``clinical benefits that are highly likely to outweigh any 
clinical harms'' requirement. Additionally, we are changing 
``criteria'' to ``criterion'' in Sec.  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\
---------------------------------------------------------------------------

    \251\ We 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.
---------------------------------------------------------------------------

    In addition to the public posting of this content, we are 
considering an annual reporting to CMS of the information in Sec.  
422.101(b)(6)(ii)(A)-(D) under our reporting requirements listed at 
Sec.  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 (Sec. Sec.  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 (Sec.  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 Sec.  422.562(c)(1) states that 
if an enrollee receives immediate QIO review (as provided in Sec.  
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 Sec.  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

[[Page 99462]]

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 Sec.  422.520. In addition, the MA organization 
must calculate the enrollee's applicable cost-sharing and/or financial 
liability for the furnished service (when issuing a partially or fully 
adverse decision) including considering applicable beneficiary 
protections related to plan-directed 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 Sec.  422.105). Accordingly, under existing Sec.  
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\
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    \252\ We 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 Sec.  405.908 and incorporated into part 
422, subpart M through Sec.  422.562(d)(1). The right for a state 
Medicaid agency to appeal an adverse payment decision may exist even 
when Sec.  422.562(c)(2) would otherwise preclude the right to 
appeal.
    \253\ We note that the provision at Sec.  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 
Sec.  422.574(b), and then may utilize the administrative appeals 
process established at Sec. Sec.  422.578 through 422.616 to appeal 
adverse payment determinations in their capacity as an assignee of 
the enrollee.
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    CMS has historically interpreted the limitations of Sec.  
422.562(c)(2) to apply to payment determinations, not coverage 
decisions (that is, those addressed under Sec.  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 Sec.  
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 plan-directed care prevent the enrollee from 
being financially liable for more than their applicable cost-sharing, 
when a request for payment is ultimately submitted, Sec.  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 cost-sharing if the enrollee's level of care 
is changed from inpatient to outpatient during their hospital stay. 
Further, the application of Sec.  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 Sec.  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 Sec.  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

[[Page 99463]]

rendered. Section 1852(a)(1) of the Act and CMS regulations at Sec.  
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 (Sec. Sec.  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, Sec. Sec.  422.566 
through 422.572 establish the requirements related to organization 
determinations. Existing Sec.  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 non-contracted providers.
    An ``organization determination,'' as defined by Sec.  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 Sec.  422.568(e)), within designated timeframes (see Sec. Sec.  
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 Sec.  422.566(d)). 
In accordance with Sec.  422.576, an ``organization determination is 
binding on all parties unless it is reconsidered under Sec. Sec.  
422.578 through 422.596 or is reopened and revised under Sec.  
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 Sec. Sec.  422.578 and 
422.584(a)). However, pursuant to Sec.  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 
Sec. Sec.  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 Sec. Sec.  422.578 through 422.596 or are 
reopened and revised under Sec.  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, post-acute 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

[[Page 99464]]

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 non-covered 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 
cost-sharing.\255\
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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.
---------------------------------------------------------------------------

    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 Sec.  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 
Sec.  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 Sec. Sec.  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 
non-compliance 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 Sec.  
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

[[Page 99465]]

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 
Sec.  422.566(b). Specifically, we are proposing to revise Sec.  
422.566(b)(3) to clarify that a decision by an MA organization made 
pre-service, 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 
Sec.  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 pre-service in proposed Sec.  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 Sec.  422.568(b) or Sec.  422.572(a).\256\
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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).
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    The reference to post-service in our proposed addition to Sec.  
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 post-
payment 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 Sec.  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.
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    \257\ Post-payment reviews are performed under the reopening 
rules at Sec. Sec.  405.980-405.986 and 422.616 (see Sec.  405.929). 
Pursuant to Sec.  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 cost-sharing for the enrollee, 
Sec.  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.
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    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 Sec. Sec.  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.

[[Page 99466]]

    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 Sec.  
422.566(b)(3). As we mentioned above, we have proposed adding 
references to Sec.  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 post-service 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\
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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, post-service 
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 case-by-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.
---------------------------------------------------------------------------

    In accordance with Sec.  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 (Sec.  422.568(e)(1)), state the 
specific reasons for the denial (Sec.  422.568(e)(2)), inform the 
enrollee of their right to appeal (Sec.  422.568(e)(3)), describe the 
standard reconsideration process and the rest of the appeal process 
(Sec.  42.568(e)(4)(ii)), and comply with any other notice requirements 
specified by CMS (Sec.  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.
---------------------------------------------------------------------------

    \259\ An EOB is a model communication material which must also 
contain the information required under Sec.  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-Enrollee-Grievances-Organization-Coverage-Determinations-and-Appeals-Guidance.pdf.
---------------------------------------------------------------------------

    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 Sec.  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 Sec.  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 Sec.  
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 cost-sharing 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 Sec.  
422.138(c), to include concurrent reviews as a type of determination 
subject to the rules at Sec.  422.138(c). Per CMS regulations at Sec.  
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

[[Page 99467]]

of lack of medical necessity and may not reopen such a decision for any 
reason except for good cause (as provided at Sec.  405.986 of this 
chapter) or if there is reliable evidence of fraud or similar fault per 
the reopening provisions at Sec.  422.616. We propose to add concurrent 
review decisions to Sec.  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 
(Sec. Sec.  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, Sec.  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 Sec.  
422.568(f), if a MA organization fails to timely meet applicable notice 
requirements, the failure constitutes an appealable adverse 
organization determination.
    Existing Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    The existing notice requirements for standard organization 
determinations at Sec.  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 Sec.  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 Sec.  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.''
---------------------------------------------------------------------------

    \263\ https://www.cms.gov/medicare/appeals-and-grievances/mmcag/
downloads/parts-c-and-d-enrollee-grievances-organization-coverage-
determinations-and-appeals-guidance.pdf.
---------------------------------------------------------------------------

    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 Sec.  
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 Sec.  422.631. Under Sec.  
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 Sec.  422.631(d)(2). 
Existing Sec.  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 
Sec.  422.631(d)(1)(iii). The existing notice requirements at Sec.  
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 Sec.  422.568(b)(3) that require notice to the

[[Page 99468]]

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 Sec.  422.568 in paragraph 
(b)(1) and the introductory text for paragraph (d) and integrated 
organization determinations at Sec.  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 non-drug item 
or service (in addition to the existing requirement related to 
notifying an enrollee). Note that ``as appropriate'' means, as with 
similar requirements in Sec. Sec.  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 enrollee-submitted request.
    We are also proposing corresponding amendments to Sec. Sec.  
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 Sec.  422.572(f) is a technical 
change to expedited organization determination requirements. Under 
existing rules at Sec.  422.572(a), MA organizations are required to 
provide notice of an expedited organization determination to the 
physician or prescriber, as appropriate. However, existing Sec.  
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 Sec.  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 Sec.  
422.631(a) to reference the correct Part B drug regulation at Sec.  
422.568(b)(3) rather than the current reference to Sec.  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 Federally-Facilitated 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 Sec.  422.568(b)(2) as Sec.  
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 
Sec.  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 Sec.  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 Sec. Sec.  422.568, 422.572 and 422.631. Our 
proposal at Sec. Sec.  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 Sec. Sec.  
422.570(c)(2) and 422.631(c)(3).
4. Modifying Reopening Rules Related to Decisions on an Approved 
Hospital Inpatient Admission (Sec. Sec.  422.138 and 422.616)
    Under the regulations at Sec.  422.576, an organization 
determination is binding on all parties unless it is reconsidered under 
the rules at Sec. Sec.  422.578 through 422.596 or is reopened and 
revised under Sec.  422.616. The reopening rules at Sec.  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 Sec. Sec.  405.980 through 405.986. The reopening rules in 
part 405, subpart I are based on Sec.  1869(b)(1)(G) of the Act which 
states that the Secretary may reopen or revise any initial

[[Page 99469]]

determination or reconsidered determination described in this 
subsection under guidelines established in regulations. While the 
reopening rules in Sec. Sec.  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 Sec. Sec.  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 Sec.  422.616(d), once an adjudicator 
issues a revised determination, any party may file an appeal. Pursuant 
to the applicable reopening regulations at Sec.  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 Sec.  422.138(c), if an 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 of lack of medical necessity 
and may not reopen such a decision for any reason except for good cause 
(as provided at Sec.  405.986) or if there is reliable evidence of 
fraud or similar fault per the reopening provisions at Sec.  
422.616.\264\ Under Sec.  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 Sec.  405.980(b)(1). While the rules at Sec.  
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 Sec.  
405.986, we believe a proposed modification to the MA reopening rules 
at Sec.  422.616 is necessary with respect to favorable organization 
determinations on inpatient hospital admissions.
---------------------------------------------------------------------------

    \264\ See 88 FR 22120, 22185-22217.
---------------------------------------------------------------------------

    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 Sec.  422.568, some MA organizations are not 
consistently providing notice or appeal rights to the enrollee for 
these decisions.
    The rules at Sec.  405.980(b) permit reopening of a decision if 
there is a finding of good cause as defined in Sec.  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 Sec.  
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 Sec.  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 Sec.  405.986. The inpatient hospital 
admission rules at Sec.  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 Sec.  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 Sec.  422.138(c), we propose to 
amend Sec.  422.616(a) to state that the reopening provisions are 
subject to the rules at Sec.  422.138(c) and propose a new paragraph 
(e) of Sec.  422.616 that would place a limitation on reopening 
determinations related to favorable inpatient hospital admissions. 
Specifically, proposed Sec.  422.616(e) would state that if an MA 
organization approved an inpatient hospital admission under the rules 
at Sec.  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 
Sec.  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 Sec.  412.3(d)(1) or (d)(3) are based on whether the 
complex medical factors documented in the clinical record

[[Page 99470]]

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 Sec.  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 Sec.  412.3(d)(2) relates to inpatient 
admission for a surgical procedure specified by Medicare as inpatient 
only under Sec.  419.22(n). The exception in Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  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 Sec.  
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 Sec.  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 Sec.  
422.138 to add a cross reference to the rules at Sec.  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,

[[Page 99471]]

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\
---------------------------------------------------------------------------

    \265\ https://oig.hhs.gov/reports/all/2022/ medicare-part-d-and-
beneficiaries-could-realize-significant-spending-reductions-with-
increased-biosimilar-use/.
---------------------------------------------------------------------------

    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-of-pocket costs for patients.'' \266\
---------------------------------------------------------------------------

    \266\ https://www.ftc.gov/system/files/ftc_gov/pdf/pharmacy-benefit-managers-staff-report.pdf (page 68).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \267\ Compl., 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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \269\ https://www.cms.gov/medicare/health-plans/medicareadvtgspecratestats/downloads/announcement2020.pdf (pages 
210-211).
    \270\ With 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \271\ Id.
---------------------------------------------------------------------------

    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 Sec.  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 Sec.  423.153(b) makes clear that a UM program cannot be 
considered cost-effective 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

[[Page 99472]]

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\
---------------------------------------------------------------------------

    \272\ https://www.cms.gov/medicare/prescription-drug-coverage/prescriptiondrugcovcontra/downloads/dwnlds/chapter7pdf (page 28).
---------------------------------------------------------------------------

    CMS currently conducts an extensive formulary review process to 
ensure Part D sponsors provide an adequate formulary consistent with 
Sec.  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 Sec.  
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 (Sec. Sec.  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 Sec. Sec.  417.472(j) and (k), 
422.152(b), 423.153(c), and 423.156, require plans to report on quality 
improvement and quality assurance and to provide data which help 
beneficiaries compare plans. The methodology for the Star Ratings 
system for the MA/Part C and Part D programs is codified at Sec. Sec.  
422.160 through 422.166 and 423.180 through 423.186, respectively, and 
we have specified the measures used in setting Star Ratings through 
rulemaking. In addition, the cost plan regulation at Sec.  417.472(k) 
requires cost contracts to be subject to the Parts 422 and 423 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.
---------------------------------------------------------------------------

    \273\ We generally use ``Part C'' to refer to the quality 
measures and ratings system that apply to MA plans and cost plans.
---------------------------------------------------------------------------

    We have continued to identify enhancements to the Star Ratings 
program to ensure it is aligned with the CMS Quality Strategy as that 
Strategy \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,

[[Page 99473]]

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 
cross-comparisons 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.
---------------------------------------------------------------------------

    \274\ https://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
    \275\ https://www.nejm.org/doi/full/10.1056/NEJMp2215539 and 
https://www.cms.gov/medicare/quality/cms-national-quality-strategy/aligning-quality-measures-across-cms-universal-foundation.
    \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-and-reports.
---------------------------------------------------------------------------

    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 Sec.  
422.107(e), beginning with the 2029 Star Ratings. Additionally, we are 
proposing to clarify at Sec. Sec.  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 rating-specific 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 Sec. Sec.  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 Sec. Sec.  422.166(g) and 423.186(g), as well 
as proposing a technical clarification at Sec. Sec.  
422.162(b)(3)(iv)(A)(2) and (B)(2) and Sec. Sec.  
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 measure-
threshold 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 (Sec. Sec.  422.164 and 
423.184)

    The regulations at Sec. Sec.  422.164 and 423.184 specify the 
criteria and procedures for adding, updating, and removing measures for 
the Part C and 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 Sec. Sec.  422.164(d) and 423.184(d) 
rules for measure updates based on whether they are substantive or non-
substantive. The regulations, at paragraph (d)(1), list examples of 
non-

[[Page 99474]]

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 Sec. Sec.  422.164(c)(1) and 423.184(c)(1), 
we continue to review measures that are nationally endorsed and in 
alignment with the private sector. 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\
---------------------------------------------------------------------------

    \277\ See 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.
---------------------------------------------------------------------------

    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 Sec. Sec.  422.164(c)(3) and 
(4) and 423.184(c)(3) and (4), as new performance measures are 
developed and adopted, they are initially posted on the display page 
for at least 2 years. We 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.
---------------------------------------------------------------------------

    \278\ The Quality Rating System public use file shows the 
averaged rate of initiation and engagement: https://www.cms.gov/files/zip/qrs-nationwide-puf-py2023.zip.
---------------------------------------------------------------------------

    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 Pre-Rulemaking 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

[[Page 99475]]

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.
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    \279\ https://p4qm.org/sites/default/files/2023-09/Guidebook-of-Policies-and-Procedures-for-Pre-Rulemaking-Measure-Review-%28PRMR%29-and-Measure-Set-Review-%28MSR%29-Final_0.pdf.
    \280\ PRMR-2023-MUC-Recommendations-Report-Final-.pdf 
(p4qm.org).
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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 Sec.  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 Sec.  423.184(c)(3). 
Consistent with Sec.  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.
---------------------------------------------------------------------------

    \281\ Display Page Technical Notes and Measure Data available 
at: https://www.cms.gov/medicare/health-drug-plans/part-c-d-performance-data.
    \282\ https://www.cms.gov/files/document/2021-announcement.pdf.
    \283\ Pre-Rulemaking Measure Review Measures Under Consideration 
2023 Recommendations Report: https://p4qm.org/sites/default/files/2024-02/PRMR-2023-MUC-Recommendations-Report-Final-.pdf.
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    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.
---------------------------------------------------------------------------

    \284\ The Pharmacy Quality Alliance Patient & Caregiver Advisory 
Panel Meeting Minutes. https://www.pqaalliance.org/assets/docs/PQA_2018_PCAP_Excerpt.pdf.
    \285\ The Patient Safety Final Technical Report--Spring 2020 
Cycle. https://www.qualityforum.org/Publications/2021/03/Patient_Safety_Final_Technical_Report_-Spring_2020_Cycle.aspx.
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    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.
---------------------------------------------------------------------------

    \286\ Licensing and Using PQA Measures. https://www.pqaalliance.org/measure-licensing-use.
---------------------------------------------------------------------------

    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).

[[Page 99476]]

    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.''
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    \287\ https://www.cdc.gov/mmwr/volumes/71/rr/rr7103a1.htm?s_cid=rr7103a1_w.
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    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.''
---------------------------------------------------------------------------

    \288\ Mundkur 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.
    \289\ https://www.fda.gov/media/167058/download.
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

    \290\ Shah 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.
---------------------------------------------------------------------------

    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 
na[iuml]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 dose-response 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-na[iuml]ve individuals to only those individuals who 
were opioid na[iuml]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.
---------------------------------------------------------------------------

    \291\ Shah 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.
---------------------------------------------------------------------------

    Another study by Hadlandsmyth replicated Shah et al.'s methodology 
and researched the relationship between initial opioid exposure and 
long-term

[[Page 99477]]

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 long-term 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 
long-term 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.
---------------------------------------------------------------------------

    \292\ Hadlandsmyth 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/S1544319118304059?via%3Dihub.
---------------------------------------------------------------------------

    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 long-
term 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\
---------------------------------------------------------------------------

    \293\ Mojtabai, R. (2018). National trends in long[hyphen]term 
use of prescription opioids. Pharmacoepidemiology and drug safety, 
27(5), 526-534 at https://pubmed.ncbi.nlm.nih.gov/28879660/.P>\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).
---------------------------------------------------------------------------

    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 Sec.  
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 na[iuml]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 
na[iuml]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 na[iuml]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 na[iuml]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 one-size-fits-all prescribing limit or 
as a substitute for individual clinical judgment. Implementation of 
opioid safety edits, including the opioid na[iuml]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.
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    \294\ HPMS 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-opioid-safety-edit-reminders-and-recommendations.pdf.
    \295\ HPMS 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.
    \296\ Medicare Part D Opioid Policies: Information for 
Prescribers available at: https://www.cms.gov/medicare/coverage/prescription-drug-coverage-contracting/improving-drug-utilization-review-controls-part-d.
---------------------------------------------------------------------------

    The IOP-LD measure complements the opioid na[iuml]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 Sec.  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 opioid-related 
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

[[Page 99478]]

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).
---------------------------------------------------------------------------

    \297\ CMS 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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \298\ See 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 retired from the 2022 
display page as announced in the Announcement of Calendar Year (CY) 
2022 Medicare Advantage (MA) Capitation Rates and Part C and Part D 
Payment Policies available at: https://www.cms.gov/files/document/2022-announcement.pdf.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \299\ Refer to 2024 Medicare part C & D Display Measure 
Technical Notes available at: https://www.cms.gov/medicare/health-drug-plans/part-c-d-performance-data.
    \300\ These 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.
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    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.
---------------------------------------------------------------------------

    \301\ CDC 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.
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    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.
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    \302\ JAMA Internal Medicine: Overdose, Behavioral Health 
Services, and Medications for Opioid Use Disorder After a Nonfatal 
Overdose at https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2820177.
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    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

[[Page 99479]]

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-cancer-screening-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 Sec.  
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.
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    \303\ https://www.uspreventiveservicestaskforce.org/uspstf/recommendation/breast-cancer-screening#bcei-recommendation-title-area.
    \304\ See Announcement of Calendar Year (CY) 2025 Medicare 
Advantage (MA) Capitation Rates and Part C and Part D Payment 
Policies (cms.gov) page 138.
---------------------------------------------------------------------------

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 Sec.  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 Sec.  422.590(f). These 
timeframes apply as well to Medicare cost plans under Sec.  417.600.
---------------------------------------------------------------------------

    \305\ https://www.medicareappeal.com/sites/default/files/New%20Manual%20with%20Timefram%20Updates%2010%207%2024.pdf.
---------------------------------------------------------------------------

    The regulations do not provide any additional time for mail delays 
and Medicare health plans are not required to use overnight delivery 
for non-expedited 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 Sec.  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

[[Page 99480]]

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 Sec.  
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

[[Page 99481]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.020

[[Page 99482]]

BILLING CODE 4120-01-C

C. Health Equity Index Reward (Sec. Sec.  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 Sec. Sec.  
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 Sec. Sec.  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 one-half 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 Sec. Sec.  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 
Sec. Sec.  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 Sec.  422.107(e). Finally, we 
propose to revise Sec. Sec.  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 rating-specific 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 Sec. Sec.  
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 Sec. Sec.  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 Sec. Sec.  
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 Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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 Sec. Sec.  
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 Sec. Sec.  422.166(f)(3)(i)(A) and 423.186(f)(3)(i)(A). As 
such, MA organizations operating in states that elected Sec.  
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 high-quality integrated products 
that better

[[Page 99483]]

suit the dually eligible population. To address this, we propose at 
Sec. Sec.  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 Sec.  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 Sec. Sec.  
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 Sec.  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 Sec. Sec.  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 Sec.  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 
Sec. Sec.  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 
Sec. Sec.  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 Sec. Sec.  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 rating-specific HEI score calculated 
based on its own enrollment as described at Sec. Sec.  
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 Sec. Sec.  422.166(f)(3)(viii)(C)(2) 
and 423.186(f)(3)(viii)(C)(2) that if the D-SNP-only contract 
established under Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec. Sec.  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 
Sec. Sec.  422.166(f)(3)(vii) and 423.186(f)(3)(vii) or if the legacy 
MA contract's performance on the rating-specific HEI based on its own 
enrollment is less than the performance on the rating-specific HEI of 
the D-SNP-only contract established under Sec.  422.107(e).
    If both the legacy MA contract and the D-SNP-only contract 
established under Sec.  422.107(e) can reliably have the rating-
specific HEI scores calculated as defined at Sec. Sec.  
422.166(f)(3)(iv) and (vi) and Sec. Sec.  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 Sec. Sec.  
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 Sec. Sec.  
422.166(f)(3)(viii)(C)(4)(i) and 423.186(f)(3)(viii)(C)(4)(i) to base 
the enrollment threshold at Sec. Sec.  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 Sec.  422.107(e) 
from the most recent measurement year used in calculating the HEI. 
Additionally, we propose at Sec. Sec.  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 Sec. Sec.  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 
Sec.  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 Sec. Sec.  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 Sec.  422.107(e) as defined at 
Sec. Sec.  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 Sec.  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 Sec. Sec.  422.166(f)(3)(viii)(C)(5) and

[[Page 99484]]

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 Sec.  422.107(e), the combined enrollment from the 
multiple legacy MA contracts and the D-SNP-only 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 rating-specific HEI, we require at 
Sec. Sec.  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 
Sec. Sec.  422.166(f)(3)(iv) and 423.186(f)(3)(iv) for at least half of 
the measures included in the rating- specific 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 Sec. Sec.  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 
Sec. Sec.  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 
Sec. Sec.  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 Sec. Sec.  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 
Sec. Sec.  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-SNP-only contracts 
and are not reflective of the population served by I-SNP-only 
contracts.
    Finally, we propose changes at Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  
422.166(f)(3)(v) and 423.186(f)(3)(v). We also propose at Sec. Sec.  
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 summary-level HEDIS data to NCQA would 
receive -1 points for that measure in the calculation of a contract's 
HEI score at Sec. Sec.  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 Sec.  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-SNP-only contract is required 
to be established by the state or until additional SRFs are added to 
the HEI.

D. Applying the Improvement Measure Scores (Sec. Sec.  422.166(g) and 
423.186(g))

    We propose to clarify at Sec. Sec.  422.166(g)(1)(i) and (ii) and 
Sec. Sec.  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 Sec. Sec.  
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 Sec. Sec.  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 (Sec.  422.162(b)(3) and Sec.  
423.182(b)(3))

    We are proposing a technical clarification of existing policy at 
Sec. Sec.  422.162(b)(3)(iv)(A)(2) and (B)(2) and Sec. Sec.  
423.182(b)(3)(ii)(A)(2) and (B)(2) to provide details about how the 
enrollment-weighted measure score is calculated when a consumed or 
surviving contract is missing data for a measure. In the first year of 
the consolidation when a measure score for a consumed or surviving 
contract is missing as a result of not having enough data to meet the 
measure technical specification or for a CAHPS measure having 
reliability less than 0.6, CMS 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

[[Page 99485]]

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 Sec.  423.182(b)(3)(ii)(A)(2) and (B)(2) we 
also removed reference to Sec.  423.184(g)(1)(ii) since it was reserved 
in the Medicare Program; Changes to the Medicare Advantage and the 
Medicare Prescription Drug Benefit Program for Contract Year 2024--
Remaining Provisions and Contract Year 2025 Policy and Technical 
Changes to the Medicare Advantage Program, Medicare Prescription Drug 
Benefit Program, Medicare Cost Plan Program, and Programs of All-
Inclusive Care for the Elderly (PACE) final rule (pages 30639-30642).

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 Sec.  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 (Sec. Sec.  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 person-centered 
coordination of Medicare and Medicaid services; (2) mitigate cost-
shifting incentives between the two programs; and (3) create a seamless 
experience for dually eligible individuals.
    In recent years, we have advanced integrated care by:
     Incorporating features of the Medicare-Medicaid Financial 
Alignment Initiative's (FAI) Medicare-Medicaid 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.
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    \306\ CMS commissioned studies on experiences and terms 
pertaining to integrated care and solicited feedback from States and 
plans on integrated member ID cards.
    \307\ Rachelle 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/wp-content/uploads/2023/06/Person-Centered-Enrollment-Strategies-for-Integrated-Care.pdf.
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    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

[[Page 99486]]

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 Sec.  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 Sec.  422.561, to use at least some integrated 
materials for CY 2025, as shown in table 15. 
[GRAPHIC] [TIFF OMITTED] TP10DE24.021

    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 Sec. Sec.  
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 Sec. Sec.  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 Sec.  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, Sec.  438.3(s)(7) 
would still apply to the AIP.
    We note that the September 2024 Medicaid final rule states that 
Sec.  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 Sec. Sec.  422.2267 and 423.2267 are applicable 
for contract year 2027, beginning October 1, 2026, the requirements at 
Sec.  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 Sec. Sec.  422.2267(e)(30) and 423.2267(e)(32) would be 
applicable for all contract year 2027 marketing and

[[Page 99487]]

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.
---------------------------------------------------------------------------

    \308\ Rachelle 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/wp-content/uploads/2023/06/Person-Centered-Enrollment-Strategies-for-Integrated-Care.pdf.
---------------------------------------------------------------------------

    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-for-service 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 Sec.  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 Sec.  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 Medicare-required HRA with a State Medicaid-required 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 Sec.  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 
Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \309\ 2024 Part C Reporting Technical Specifications: https://www.cms.gov/files/document/cy2024-part-c-technical-specifications-02222024.pdf.
---------------------------------------------------------------------------

    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.
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    \310\ CMS review and analysis of State SMACs.
    \311\ https://www.macpac.gov/wp-content/uploads/2019/03/Care-Coordination-in-Integrated-Care-Programs-Serving-Dually-Eligible-Beneficiaries.pdf.
---------------------------------------------------------------------------

    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

[[Page 99488]]

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 Sec.  422.101(f)(1)(v) that would require D-SNPs that are AIPs (as 
defined in Sec.  422.561) to conduct a comprehensive HRA that meets all 
requirements at Sec.  422.101(f)(1)(i) through (v) as well as any 
applicable Medicaid requirements, including those at Sec.  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 
Sec. Sec.  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 Sec. Sec.  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 Sec.  438.54 do not specify 
the timelines or deadlines by which any enrollment must be effective. 
Some States have cut-off 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.
---------------------------------------------------------------------------

    \312\ Based on CMS review of 2024 SMACs.
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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 Sec.  422.101(f)(1)(i), using the term ``health risk 
assessment,'' as a required component of the SNP MOC. Specifically, 
Sec.  422.101(f)(1)(i) requires

[[Page 99489]]

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, Sec.  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.
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    \313\ https://www.cms.gov/medicare/enrollment-renewal/health-plans/part-c.
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    In addition, Sec.  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 Sec.  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, Sec.  
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 
person-centered care planning process. For section 1915(c) Medicaid 
HCBS waiver programs, these requirements are set forth at Sec.  
441.301(c)(1) through (3); for section 1915(k) Medicaid HCBS State plan 
amendments, these requirements are set forth at Sec.  441.540; and for 
section 1915(i) Medicaid State plan HCBS benefits, these requirements 
are set forth at Sec.  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 (Sec. Sec.  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 (Sec. Sec.  441.301(c)(1); 441.540(a); 
441.725(a)). The resulting person-centered 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 (Sec. Sec.  
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 person-
centeredness 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

[[Page 99490]]

our experiences in other programs and demonstrations.
    We propose amendments to Sec.  422.101(f)(1) to codify timeliness 
standards, improve the organization of the various HRA and ICP 
requirements, and strengthen these requirements. First, in Sec.  
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 Sec.  438.208(b)(3) and, for 
Medicare, conform to Sec.  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 Sec.  422.101(f)(1)(i) to Sec.  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 
Sec.  422.101(f)(1)(i) to Sec.  422.101(f)(1)(iii). This is a technical 
change to improve the organization of the rule.
    Fourth, we propose a new Sec.  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 Sec.  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 Sec.  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 Sec.  422.101(f)(1)(vi).
    Seventh, we propose to add a new Sec.  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 Person-
Centered 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 person-centered 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.
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    \314\ https://www.resourcesforintegratedcare.com/wp-content/uploads/2020/04/Using_Person_Centered_Language_Tip_Sheet.pdf.
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    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 
Sec.  422.2267(a)(3) requires that ICPs be

[[Page 99491]]

provided to enrollees on a standing basis in any non-English language 
identified in paragraphs (a)(2) and (a)(4) of Sec.  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\
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    \315\ https://thinkculturalhealth.hhs.gov/.
    \316\ https://thinkculturalhealth.hhs.gov/education/communication-guide.
    \317\ https://www.cms.gov/About-CMS/Agency-Information/OMH/Downloads/Language-Access-Plan.pdf.
---------------------------------------------------------------------------

    Proposed Sec.  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 Sec.  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\
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    \318\ https://www.resourcesforintegratedcare.com/wp-content/uploads/2022/11/Locating-and-Engaging-Members-Key-Considerations-for-Plans-Serving-Members-Dually-Eligible-for-Medicare-and-Medicaid-Brief.pdf?csrt=17807429552740464906.
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    In addition, as a result of these updates, we propose to 
redesignate Sec.  422.101(f)(1)(iii) as Sec.  422.101(f)(1)(ix) and 
redesignate Sec.  422.101(f)(1)(iv) as Sec.  422.101(f)(1)(x) and 
change the term ``individual's'' to ``enrollee's''.
    Collectively, our proposals would promote more timely and person-
centered HRAs and ICPs for SNP enrollees. Our proposals at Sec. Sec.  
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 Sec.  
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 person-
centered 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.
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    \319\ https://www.kff.org/medicare/issue-brief/10-things-to-know-about-medicare-advantage-dual-eligible-special-needs-plans-d-snps/.
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    Finally, for Sec.  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 Sec.  441.540(a) as written, 
a subset of those elements, or a different definition. Cross-
referencing the person-centered planning process at Sec.  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 
Sec.  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 Sec.  
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 Sec.  422.107(f) to include 
updates to MOCs as described at Sec.  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.

[[Page 99492]]

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 Sec.  
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 
(Sec.  422.2)

    The definition of HIDE SNPs is codified at Sec.  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 Sec.  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\
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    \320\ https://www.oregon.gov/oha/HPA/Pages/CCOs-Oregon.aspx.
    \321\ https://oregon.public.law/statutes/ors_414.572.
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    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

[[Page 99493]]

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 three-county 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 Sec.  
422.2 to make clear that it applies to this type of arrangement, 
whether in Oregon or elsewhere.
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    \322\ CMS considers a parent organization to be the legal entity 
that owns a controlling interest in a contracting organization.
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    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 
Sec.  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 Sec.  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 for-profit 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 (Sec.  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 Sec.  
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 (Sec. Sec.  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

[[Page 99494]]

the language that each participant has the right to appropriate and 
timely treatment for their health conditions in Sec.  460.112(b) 
instead of in Sec.  460.112(a).
    We also finalized two paragraphs under Sec.  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 Sec.  
460.112(a), (a)(1) and (a)(2), more appropriately align with the 
requirement in the ``right to treatment'' paragraph, we propose to 
redesignate Sec.  460.112(a)(1) and (a)(2) as Sec.  460.112(b)(1) and 
(b)(2). The subparagraphs under Sec.  460.112(b) more appropriately 
align with the ``respect and nondiscrimination'' paragraph. Therefore, 
we propose to redesignate the paragraphs under Sec.  460.112(b)(1) 
through (b)(8) as Sec.  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, Sec.  460.112 to the extent it 
``extend[s] discrimination on the basis of sex to include 
discrimination on the basis of gender identity'' and Sec.  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\
---------------------------------------------------------------------------

    \323\ For updated information about court orders impacting the 
Nondiscrimination in Health Programs and Activities 2024 Final Rule, 
please see hhs.gov/1557.
---------------------------------------------------------------------------

    This provision is technical and is therefore not expected to have 
economic impact beyond current operating expenses.
2. Technical Change to PACE Contracted Services (Sec.  460.70(e)(2))
    In the April 2024 final rule, we finalized changes to the PACE 
service delivery requirements at Sec.  460.98. Specifically, we removed 
paragraph (b)(4), added a new paragraph at Sec.  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 Sec.  460.98(c) to Sec.  460.98(d). 
However, the April 2024 final rule did not include a correction to the 
cross-reference at Sec.  460.70(e)(2) to reflect the redesignation of 
``Minimum services furnished at each PACE center'' requirements from 
Sec.  460.98(c) to Sec.  460.98(d).
    Therefore, we are proposing a technical change at Sec.  
460.70(e)(2) to update the cross-reference from Sec.  460.98(c) to 
Sec.  460.98(d), which would affirm the connection between Sec.  
460.70(e)(2) and the ``Minimum services furnished at each PACE center'' 
requirements at the redesignated Sec.  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 (Sec.  423.2267(e)(33))
    In the April 2024 final rule, we finalized changes at Sec.  
422.2267(e)(31) and (e)(33) to--(1) update multi-language 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 Sec.  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 Sec.  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 Sec.  
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.

[[Page 99495]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.022

    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 (Sec.  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 Sec.  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).

[[Page 99496]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.023

    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 two-person 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 x [($91.90/hr x 50 hr) + ($85.70/hr x 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 x [($100.78/hr x 50 
hr) + ($106.54/hr x 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).

[[Page 99497]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.024

2. ICRs Regarding Medicare Prescription Payment Plan Eligibility and 
Election Requirements (Sec.  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 Sec.  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 Sec.  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).
[GRAPHIC] [TIFF OMITTED] TP10DE24.025

    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 x [($129.28/hr x 2 hr) + ($85.70/hr x 
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

[[Page 99498]]

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 x 
[($129.28/hr x 2 hr) + ($85.70/hr x 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).
[GRAPHIC] [TIFF OMITTED] TP10DE24.026

[[Page 99499]]

3. ICRs Regarding Medicare Prescription Payment Plan Part D Enrollee 
Targeted Outreach (Sec.  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 x 20 hr) + ($91.90/hr x 
20 hr) + ($132.80/hr x 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).
[GRAPHIC] [TIFF OMITTED] TP10DE24.027

4. ICRs Regarding Medicare Prescription Payment Plan Termination of 
Election, Reinstatement, and Preclusion (Sec.  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 one-time burden of 24,210 hours (807 Part D contracts * 30 hr) at a 
cost of $2,504,928 (807 contracts x [($85.70/hr x 10 hr) + ($91.90/hr x 
10 hr) + ($132.80/hr x 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 x [($85.70/hr x 2 hr) + ($132.80/hr x 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 x [($85.70/hr x 10 hr) + ($91.90/hr x 
10 hr) + ($132.80/hr x 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.

[[Page 99500]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.028

5. ICRs Regarding Medicare Prescription Payment Plan Pharmacy POS 
Notification Process (Sec.  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 x 20 hr) at a cost of $164,923,059 (73,397 pharmacies x 
[($91.90/hr x 10 hr) + ($132.80/hr x 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 (Sec.  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 (Sec.  
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 Sec.  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

[[Page 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 x 40 hr) at a cost of $133,692 (1,560 
hr x $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 x 20 hr) at a cost of $66,846 (780 hr x $85.70/hr).
8. ICRs Regarding Part D Medication Therapy Management (MTM) Program 
Eligibility Criteria (Sec.  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 Sec.  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 x 54,503,892 Part D enrollees based on internal 
data from 2023) to 7,954,197 (14.6 percent x 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 Sec.  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 Sec.  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 Sec.  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 x $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

[[Page 99502]]

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) (Sec.  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 Sec.  
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 
(Sec. Sec.  417.454 and 422.100)
    As discussed in section III.M. of this proposed rule, we propose to 
amend the existing requirements at Sec. Sec.  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 
Sec.  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 
Sec. Sec.  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.
---------------------------------------------------------------------------

    \324\ Bid submissions from coordinated care plans, including 
regional MA plans and specialized MA plans for special needs 
beneficiaries (described at Sec.  422.4(a)(1)(iv)), and MA private 
fee-for-service plans are subject to these actuarial guidelines.
    \325\ Cost Plans are not required to report information for all 
services in their plan benefit package.
---------------------------------------------------------------------------

    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 (Sec.  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 Sec.  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

[[Page 99503]]

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/mcradvpartdenroldata/monthly/contract-summary-2024-07. 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 (Sec.  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 Sec.  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 Sec. Sec.  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 Sec. Sec.  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

[[Page 99504]]

required for submission to CMS, as per Sec. Sec.  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
[GRAPHIC] [TIFF OMITTED] TP10DE24.029

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.

[[Page 99505]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.030

    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 * 1.1015\3\) 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.
[GRAPHIC] [TIFF OMITTED] TP10DE24.031

    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 (Sec.  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 Sec.  422.2420(b)(2) to clarify that only 
provider incentives and bonuses tied to clearly defined, objectively 
measurable, and well-documented 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 one-time 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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[[Page 99506]]

15. ICRs Related to Proposal To Add Provider Payment Arrangement 
Reporting in the Medicare MLR Report Regulations (Sec. Sec.  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 Sec. Sec.  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\
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16. ICRs Related To Prohibit Administrative Costs From Being Included 
in Quality Improving Activities in the MA and Part D MLR Numerator 
(Sec. Sec.  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 Sec. Sec.  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\
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17. ICRs Related to Establish Standards for MA and Part D MLR Audit 
Examinations (Sec. Sec.  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\
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    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\
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18. ICRs Regarding Improving Access--Enhancing Rules on Internal 
Coverage Criteria (Sec.  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 Sec.  
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 Sec.  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

[[Page 99507]]

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-data-and-systems/statistics-trends-and-reports/mcradvpartdenroldata/monthly/contract-summary-2024-07.
19. ICRs Regarding Clarifying MA Organization Determinations To Enhance 
Enrollee Protections in Inpatient Settings (Sec. Sec.  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 Sec.  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 Sec.  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 one-time, 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 risk-adjustment 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

[[Page 99508]]

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 
Sec.  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 Sec.  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 Person-Centeredness in SNP ICPs and 
Timeliness of HRAs and ICPs (Sec. Sec.  422.101(f) and 422.107(e))
    In section V.A. of this proposed rule, we propose amendments to 
Sec.  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 
Sec.  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 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. 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 Sec.  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 Sec.  422.107(f) to include 
updates to MOCs as described at Sec.  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 Sec.  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 (Sec. Sec.  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 Sec.  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

[[Page 99509]]

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 (Sec.  
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 Sec.  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 Sec.  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 long-term 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

BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TP10DE24.033

[[Page 99512]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.034

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[[Page 99513]]

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/regulations-and-guidance/legislation/paperworkreductionactof1995/pra-listing, or call the Reports Clearance 
Office at 410-786-1326.
    We invite public comments on these potential information collection 
requirements. If you wish to comment, please submit your comments 
electronically as specified in the DATES and ADDRESSES sections of this 
proposed rule and identify the rule (CMS-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 All-
Inclusive 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 each entity that reviews the rule, the

[[Page 99514]]

estimated cost is therefore $2,022 (19 hours x $106.42). Therefore, we 
estimate that the maximum total cost of reviewing this proposed rule is 
$4.04 million ($2,022 x 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 low-income beneficiaries, Part D plans receive special 
government payments to cover most of premium and cost sharing amounts 
those beneficiaries would otherwise pay.
    Thus, the cost of providing services by these insurers is funded by 
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

[[Page 99515]]

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 non-contracted 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.
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    \331\ We request comment--especially data or other quantitative 
evidence--on costs, benefits and transfers attributable to the 
provisions of this proposed rule.
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BILLING CODE 4120-01-P

[[Page 99516]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.035

BILLING CODE 4120-01-C

[[Page 99517]]

1. Effects of Coverage of Adult Vaccines Recommended by the Advisory 
Committee on Immunization Practices under Medicare Part D (Sec. Sec.  
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 ACIP-recommended 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\
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    \332\ https://www.cbo.gov/system/files/2022-09/PL117-169_9-7-22.pdf
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2. Effects of Appropriate Cost-Sharing for Covered Insulin Products 
under Medicare Part D (Sec. Sec.  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-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 Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \333\ https://www.cms.gov/inflation-reduction-act-and-medicare/medicare-drug-price-negotiation.
---------------------------------------------------------------------------

    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 claim-level 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.

[[Page 99518]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.036

3. Effects of Part D Coverage of Anti-Obesity Medications (AOMs) (Sec.  
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 Sec.  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 FDA-approved 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.
---------------------------------------------------------------------------

    \334\ Lilly. 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-release-details/lillys-tirzepatide-reduced-obstructive-sleep-apnea-osa-severity.
---------------------------------------------------------------------------

    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.

[[Page 99519]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.037

    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\
---------------------------------------------------------------------------

    \335\ Rodriguez 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.
---------------------------------------------------------------------------

    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 near-term, 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.
[GRAPHIC] [TIFF OMITTED] TP10DE24.038

    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

[[Page 99520]]

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.
---------------------------------------------------------------------------

    \337\ Gleason PP, Urick BY, Marshall LZ, Friedlander N, Qiu Y, 
Leslie RS. Real-world persistence and adherence to glucagon-like 
peptide-1 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.
    \338\ Cohen, 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-for-weight-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.
    \340\ Stierman, 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.
    \341\ https://www2.ccwdata.org/web/guest/condition-categories-chronic and https://www2.ccwdata.org/web/guest/condition-categories-other.
    \342\ Lincoff 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \343\ Under 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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
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    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

[[Page 99521]]

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).
---------------------------------------------------------------------------

    \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/health-information/health-statistics/overweight-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.
[GRAPHIC] [TIFF OMITTED] TP10DE24.039

    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 diagnosis-level 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 weight-related 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 (Sec.  423.153)
    We propose modifying the regulatory text at Sec.  
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

[[Page 99522]]

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 Cost-Sharing Limits (Sec. Sec.  
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 Sec. Sec.  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 Medicare-eligible 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 cost-sharing 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.
---------------------------------------------------------------------------

    \347\ McGinty, 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-health-coverage-included-changed-gaps-remain.
    \348\ For example, MA plans are not required to provide hospice 
services--a service covered in Traditional Medicare.
    \349\ CMS. Contract Summary 2024. Data as of July 2024. 
Retrieved from: https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/mcradvpartdenroldata/monthly/contract-summary-2024-07.
    \350\ We note that enrollees in Cost Plans can access basic 
benefits out-of-network at cost sharing in Traditional Medicare.
---------------------------------------------------------------------------

    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 Sec. Sec.  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
---------------------------------------------------------------------------

    \351\ Cost 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.
---------------------------------------------------------------------------

     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 life-threatening 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 cost-sharing limits 
will pose varying

[[Page 99523]]

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-of-network. 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
[GRAPHIC] [TIFF OMITTED] TP10DE24.040

[GRAPHIC] [TIFF OMITTED] TP10DE24.041

[[Page 99524]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.042

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 plan-level 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 
non-behavioral 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.

[[Page 99525]]

     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 long-term effects of lower behavioral health cost sharing begin 
to show, the out-of-pocket 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 non-behavioral 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 non-behavioral 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--
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    \352\ Trivedi 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.
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     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--
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    \353\ Cook, 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.
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     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

[[Page 99526]]

providers, or community- or person-level 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 human-centered 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.
---------------------------------------------------------------------------

    \354\ Egizi, 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-and-creating-an-accessible-system.html.
    \355\ Milliman. Potential economic impact of integrated medical-
behavioral healthcare: Updated projections for 2017. February 2018. 
Retrieved from: https://www.milliman.com/en/insight/potential-economic-impact-of-integrated-medical-behavioral-healthcare-updated-projections.
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    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 Sec.  
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--
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    \356\ These actuarial requirements do not apply to Cost Plans.
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     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 cost-sharing 
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 Sec.  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 
(Sec. Sec.  422.2260 and 423.2260)
    CMS is proposing to expand the definition of marketing under 
Sec. Sec.  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

[[Page 99527]]

a beneficiary's decision to stay enrolled in a plan (as described in 
the current intent standard of the marketing definition in Sec. Sec.  
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 Sec. Sec.  
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 (Sec.  422.2420(b)(2))
    We propose to amend Sec.  422.2420(b)(2) to clarify that only 
provider incentives and bonuses tied to clearly defined, objectively 
measurable, and well-documented 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.
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    \357\ https://www.govinfo.gov/content/pkg/FR-2022-01-05/pdf/2021-28317.pdf, page 133.
    \358\ https://www.govinfo.gov/content/pkg/FR-2023-05-03/pdf/2023-08961.pdf, page 139.
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8. Proposal To Prohibit Administrative Costs From Being Included in 
Quality Improving Activities in the MA and Part D MLR Numerator 
(Sec. Sec.  422.2430(a) and 423.2430(a))
    We also propose to amend Sec. Sec.  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 (Sec. Sec.  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 Sec. Sec.  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

[[Page 99528]]

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\
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    \359\ https://www.cms.gov/medicare/health-drug-plans/medical-loss-ratio.
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    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.
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    \360\ https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/MLR_examinations_reports.
    \361\ https://www.cms.gov/data-research/statistics-trends-reports/marketplace-products/2024-marketplace-open-enrollment-period-public-use-files.
    \362\ https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-advantagepart-d-contract-and-enrollment-data/monthly-contract-and-enrollment-summary-report.
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10. Proposal To Add Provider Payment Arrangement Reporting in the 
Medicare MLR Reporting Regulations (Sec. Sec.  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).
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    \363\ https://hcp-lan.org/workproducts/apm-methodology-2023.pdf.
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    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 (Sec. Sec.  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 non-quantified 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 (Sec. Sec.  
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-
over-year 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

[[Page 99529]]

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 real-time 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 real-time 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 pre-funded 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) (Sec.  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

[[Page 99530]]

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 weight-related 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 
weight-related 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).
[GRAPHIC] [TIFF OMITTED] TP10DE24.043

    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.
---------------------------------------------------------------------------

    \364\ https://www.niddk.nih.gov/health-information/health-statistics/overweight-obesity.
---------------------------------------------------------------------------

    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 Cost-Sharing Limits (Sec. Sec.  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) in-network 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 Sec.  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

[[Page 99531]]

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.
---------------------------------------------------------------------------

    \365\ CMS. Contract Summary 2024. Data as of July 2024. 
Retrieved from: https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/mcradvpartdenroldata/monthly/contract-summary-2024-07.
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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 
cost-sharing 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 cost-sharing (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\
---------------------------------------------------------------------------

    \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 cost-sharing limits and 
plan amounts for this service category.
---------------------------------------------------------------------------

     Mental health specialty services \367\
---------------------------------------------------------------------------

    \367\ Beginning 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.
---------------------------------------------------------------------------

     Psychiatric services
     Partial hospitalization \368\
---------------------------------------------------------------------------

    \368\ Beginning 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.
---------------------------------------------------------------------------

     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 (Sec.  
422.100(f)(6)(ii)) that apply to MA copayment limits and are proposed 
to apply to Cost Plan copayment limits per Sec.  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.
---------------------------------------------------------------------------

    \369\ Excludes employer, D-SNPs, and MSAs.
---------------------------------------------------------------------------

     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

[[Page 99532]]

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 cost- sharing 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 cost-
sharing 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 Sec.  422.100(f)(6) and (j)(1); (2) the cost-sharing 
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 cost-sharing 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 cost-sharing 
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 Sec.  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.
---------------------------------------------------------------------------

    \370\ As 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.
---------------------------------------------------------------------------

    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--
---------------------------------------------------------------------------

    \371\ Contract 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 Sec.  
422.100(f)(7)).
---------------------------------------------------------------------------

     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

[[Page 99533]]

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 cost-sharing 
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 cost-sharing 
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 
cost-sharing limits set for the lower and mandatory MOOP types 
(continuing current policy \372\).
---------------------------------------------------------------------------

    \372\ While 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.
---------------------------------------------------------------------------

     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 cost-sharing 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 cost-sharing 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, zero-
dollar 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 
cost-sharing 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 cost-sharing limit 
differentiation between the MOOP types for the professional service 
categories from a coinsurance increment of 10 to 5 percent.

[[Page 99534]]

    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 cost-sharing 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--:
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    \373\ As 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.
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     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 cost-sharing 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.
---------------------------------------------------------------------------

    \374\ The 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.
---------------------------------------------------------------------------

    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 
cost-

[[Page 99535]]

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 cost-sharing 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).
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    \375\ The 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.
    \376\ The 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.
---------------------------------------------------------------------------

(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 Sec.  
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 
cost-sharing 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 cost-sharing 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 Sec.  
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:

[[Page 99536]]

     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 Sec. Sec.  
417.454(e) and Sec.  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 cost-sharing 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 
Sec.  417.454(e) or Sec.  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 cost-sharing 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

[[Page 99537]]

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, cost-sharing 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\
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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.
    \378\ 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/.
    \379\ See 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-and-affordable-care-act-hhs-notice-of-benefit-and-payment-parameters-for-2024.
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    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

[[Page 99538]]

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 (Sec.  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 x 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 x 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 
(Sec. Sec.  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 x 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 x 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 (Sec. Sec.  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

[[Page 99554]]

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 
x 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 x 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 (Sec. Sec.  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.

[[Page 99555]]

[GRAPHIC] [TIFF OMITTED] TP10DE24.066

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

0
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.

0
2. Section 417.454 is amended by revising paragraph (e) and adding 
paragraph (f) to read as follows:

Sec.  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

[[Page 99556]]

benefit using the Medicare Advantage rules at Sec.  422.100(j)(1)(ii) 
of this chapter and Medicare FFS data projections as defined in Sec.  
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 in-network 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 Sec.  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).
0
3. Section 417.486 is amended by adding paragraph (a)(3) to read as 
follows:

Sec.  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 Sec.  
422.310 shall be read to mean HMOs and CMPs.
* * * * *

PART 422--MEDICARE ADVANTAGE PROGRAM

0
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.

0
5. Section 422.2 is amended by--
0
a. Adding in alphabetical order definitions for ``Automated system'', 
``Community-based organizations'', and ``Direct furnishing entity'';
0
b. Revising the definition of ``Hierarchical condition categories 
(HCC)'' and paragraph (1) of the definition of ``Highly integrated dual 
eligible special needs plan'';
0
c. Adding in alphabetical order a definition for ``In-home or at-home 
supplemental benefit provider''; and
0
d. Revising the definition of ``Service area''.
    The additions and revisions read as follows:

Sec.  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-
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.
* * * * *
    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

[[Page 99557]]

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 Sec.  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:
* * * * *
0
6. Section 422.100 is amended by:
0
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);
0
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);
0
c. Revising paragraphs (f)(6)(iv)(B) and (f)(6)(iv)(D) introductory 
text;
0
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;
0
e. Revising paragraph (j)(1)(i)(C);
0
f. Adding paragraphs (j)(1)(i)(G) and (H); and
0
g. Revising paragraph (o)(2).
    The revisions and additions read as follows:

Sec.  422.100  General requirements.

* * * * *
    (f) * * *
    (6) * * *
    (iv) * * *
    (B) Cost sharing limits for inpatient hospital acute service 
categories are calculated for the following length-of-stay 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 Sec.  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.
0
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:

Sec.  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 
meta-analyses 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

[[Page 99558]]

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 machine-readable 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 Sec.  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 Sec.  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 
Sec.  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 Sec.  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-to-face 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.
* * * * *
0
8. Section Sec.  422.102 is amended by--
0
a. Revising paragraphs (a)(6)(i) and (f)(1)(i)(A);
0
b. Adding paragraphs (f)(1)(i)(C) and (f)(1)(iii);
0
c. Revising paragraph (f)(4)(iii); and
0
d. Adding paragraph (g).
    The revisions and additions read as follows:

[[Page 99559]]

Sec.  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 Sec. Sec.  422.100(c)(2) and 
422.102(a) through (f) and appropriate access to all covered items and 
services, in accordance with Sec.  422.112(a).
    (2) Provision of benefits through debit card. MA organizations that 
administer reductions in cost sharing or provide coverage of 100 
percent of the cost of a mandatory supplemental benefit through use of 
a debit card must do all of the following:
    (i) Provide debit cards that are electronically linked to plan 
covered items and services through a real-time identification mechanism 
to verify eligibility of plan covered benefits at the point of sale.
    (ii) Provide instructions for debit card use and customer service 
support to enrollees.
    (iii) Have an alternative process that allows for reimbursement of 
eligible expenses for plan covered benefits.
    (iv) Ensure debit cards are limited to the specific plan year.
0
9. Section 422.107 is amended by revising paragraph (f)(1) to read as 
follows:

Sec.  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 Sec.  422.101(f), and health equity 
for underserved populations.
* * * * *
0
10. Section 422.111 is amended by revising paragraphs (b)(3)(i) and 
(b)(6) and adding paragraph (m) to read as follows:

Sec.  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 Sec.  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 
community-based organizations (CBOs) (as defined in Sec.  422.2).
    (D) Easily identifiable notations, filters, or other distinguishing 
features to indicate in-home or at-home supplemental benefit providers 
(as defined in Sec.  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 Sec. Sec.  
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-the-counter 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

[[Page 99560]]

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 Sec.  
422.116(a)(1)(i).
0
11. Section 422.112 is amended by revising paragraph (a)(8) to read as 
follows:

Sec.  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.
* * * * *
0
12. Section 422.116 is amended by--
0
a. Redesignating paragraphs (a)(1) through (4) as paragraphs (a)(2) 
through (5);
0
b. Adding a new paragraph (a)(1) and
0
c. Revising paragraph (f)(1)(i)(A).
    The addition and revision read as follows:

Sec.  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 (Sec.  422.116(a)(4)(ii)).
    (3) Provider does not provide services for the specialty type 
listed in the Provider Supply file (Sec.  422.116(a)(4)(ii)).
    (4) Provider has opted out of Medicare (in compliance with Sec.  
422.204(b)(4)).
    (5) Provider is a sanctioned provider on the List of Excluded 
Individuals and Entities (in compliance with Sec.  422.204); or 
provider is on the CMS preclusion list (in compliance with Sec.  
422.222).
    (6) Provider is at capacity and is not accepting new patients; and
* * * * *
0
13. Section Sec.  422.137 is amended by revising paragraphs 
(d)(6)(iii)(A) through (H) and adding paragraph (d)(7)(v) to read as 
follows:

Sec.  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.
0
14. Section 422.138 is amended by revising paragraph (c) to read as 
follows:

Sec.  422.138  Prior authorization.

* * * * *
    (c) Effect of prior authorization, pre-service, or concurrent 
approval. If the MA organization approved the furnishing of a covered 
item or service through a prior authorization pre-service 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 Sec. Sec.  405.986 and 422.616 of this chapter) or if there 
is reliable evidence of fraud or similar fault per the reopening 
provisions at Sec.  422.616. The definitions of the terms ``reliable 
evidence'' and ``similar fault'' in Sec.  405.902 of this chapter apply 
to this provision.
0
15. Section 422.162 is amended by revising paragraphs (b)(3)(iv)(A)(2) 
and (b)(3)(iv)(B)(2) to read as follows:

Sec.  422.162   Medicare Advantage Quality Rating System.

* * * * *
    (b) * * *
    (3) * * *
    (iv) * * *
    (A) * * *
    (2) For contract consolidations approved on or after January 1, 
2022, if a measure score for a consumed or surviving contract is 
missing due to a data integrity issue as described in Sec.  
422.164(g)(1)(i) and (ii), CMS assigns a score of zero for the missing 
measure score in the calculation of the enrollment-weighted measure 
score. If a measure score for a consumed or surviving contract is 
missing due to not having enough data to meet the measure technical 
specification or the reliability is less than 0.6 for a CAHPS measure, 
CMS treats this measure score as missing in the calculation of the 
enrollment-weighted measure score.

[[Page 99561]]

    (B) * * *
    (2) For contract consolidations approved on or after January 1, 
2022, for all measures except HEDIS, CAHPS, and HOS, if a measure score 
for a consumed or surviving contract is missing due to a data integrity 
issue as described in Sec.  422.164(g)(1)(i) and (ii), CMS assigns a 
score of zero for the missing measure score in the calculation of the 
enrollment-weighted measure score. For all measures except HEDIS, 
CAHPS, HOS, and call center measures, if a measure score for a consumed 
or surviving contract is missing due to not having enough data to meet 
the measure technical specification, CMS treats this measure score as 
missing in the calculation of the enrollment-weighted measure score.
* * * * *
0
16. Section 422.166 is amended by:
0
a. Revising paragraph (f)(3)(iv) introductory text;
0
b. Adding paragraphs (f)(3)(iv)(C), (f)(3)(v)(A), and reserved 
paragraph (f)(3)(v)(B);
0
c. Revising paragraphs (f)(3)(vi) and (f)(3)(viii)(B);
0
d. Adding paragraph (f)(3)(viii)(C); and
0
e. Revising paragraphs (g)(1)(i) and (ii).
    The revisions and additions read as follows:

Sec.  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 Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 rating-specific HEI 
score of the MA contract established under Sec.  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 Sec.  422.107(e), and using the HEI score for the MA 
contract established under Sec.  422.107(e).
    (5) When multiple legacy MA contracts move their D-SNP plan benefit 
package(s) to the same MA contract established under Sec.  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

[[Page 99562]]

section, and both the legacy MA contracts and the MA contract 
established under Sec.  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 Sec.  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 contract-type 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).
* * * * *
0
17. Section 422.562 is amended by revising paragraph (c)(2) to read as 
follows:

Sec.  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.
* * * * *
0
18. Section 422.566 is amended by revising paragraph (b)(3) to read as 
follows:

Sec.  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.
* * * * *
0
19. Section 422.568 is amended by revising paragraphs (b)(1) 
introductory text, (d) introductory text, and (f) to read as follows:

Sec.  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.
* * * * *
0
20. Section 422.572 is amended by revising paragraph (f) to read as 
follows:

Sec.  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.
0
21. Section 422.616 is amended by revising paragraph (a) and adding 
paragraph (e) to read as follows:

Sec.  422.616  Reopening and revising determinations and decisions.

    (a) Subject to paragraph (e) of this section and the rules at Sec.  
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 Sec.  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 Sec.  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.
0
22. Section 422.631 is amended by revising paragraphs (a) and (d)(1)(i) 
and (ii) to read as follows:

Sec.  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 Sec. Sec.  
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

[[Page 99563]]

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.
* * * * *
0
23. Section 422.2260 is amended by revising the definitions of 
``Advertisement (Ad)'' and ``Marketing'' to read as follows:

Sec.  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 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), except those required 
materials specified in Sec.  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.
* * * * *
0
24. Section 422.2263 is amended by adding paragraph (b)(11) to read as 
follows:

Sec.  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.
* * * * *
0
25. Section 422.2267 is amended:
0
a. In paragraph (e)(30)(vi) by removing the word ``and'';
0
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
0
c. By adding paragraph (e)(30)(viii).
    The addition reads as follows:

Sec.  422.2267  Required materials and content.

* * * * *
    (e) * * *
    (30) * * *
    (viii) For dual eligible special needs plans that are applicable 
integrated plans, as defined in Sec.  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.
* * * * *
0
26. Section 422.2274 is amended by revising paragraph (c)(12) to read 
as follows:

Sec.  422.2274  Agent, broker, and other third-party 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 Sec.  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.
* * * * *
0
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:

Sec.  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.
* * * * *
0
28. Section 422.2420 is amended by--
0
a. Revising paragraph (b)(2)(xi);
0
b. Adding paragraph (b)(4)(i)(D);
0
c. Revising paragraph (c)(2)(iv)(B);
0
d. Redesignating paragraphs (d)(2)(i) through (iii) as paragraphs 
(d)(2)(ii) through (iv); and
0
e. Adding new paragraph (d)(2)(i).
    The additions and revisions read as follows:

[[Page 99564]]

Sec.  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 Sec.  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.
* * * * *
0
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:

Sec.  422.2430  Activities that improve health care quality.

    (a) General requirements. The report required in Sec.  422.2460 
must include expenditures directly related to activities that improve 
health care quality, as such activities are described in this section.
* * * * *
0
30. Section 422.2450 is added to read as follows:

Sec.  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 Sec.  422.2480, it may order the MA organization 
to pay those remittances consistent with Sec.  422.2452.
0
31. Section 422.2452 is added to read as follows:

Sec.  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 Sec.  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 Sec.  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-
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 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 Sec.  422.2454.
0
32. Section 422.2454 is added to read as follows:

Sec.  422.2454  MLR audit remittance appeals process.

    (a) Appeals process. If an MA organization does not agree with the 
MLR audit remittance described in Sec.  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 Sec.  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.

[[Page 99565]]

    (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.
0
33. Section 422.2460 is amended by revising paragraph (a) to read as 
follows:

Sec.  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 Sec.  422.2410.
* * * * *
0
34. Section 422.2480 is amended by revising paragraph (d) introductory 
text to read as follows:

Sec.  422.2480  MLR review and non-compliance.

* * * * *
    (d) Data submitted under Sec.  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--
* * * * *
0
35. Section 422.2490 is amended by adding paragraphs (b)(6) and (7) to 
read as follows:

Sec.  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

0
36. The authority for part 423 continues to read as follows:

[[Page 99566]]

    Authority: 42 U.S.C. 1302, 1306, 1395w-101 through 1395w-152, 
and 1395hh.

0
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:

Sec.  423.100  Definitions.

    ACIP-recommended adult vaccine means a covered Part D drug, as 
defined at Sec.  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 Sec.  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 non-insulin 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 Sec.  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-of-pocket 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 Sec.  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.
* * * * *
0
38. Section 423.120 is amended by adding paragraphs (g) and (h) to read 
as follows:

Sec.  423.120  Access to covered Part D drugs

* * * * *
    (g) Coverage of ACIP-recommended adult vaccines. With respect to an 
ACIP-recommended 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 Sec.  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 Sec.  
423.124(a) and (c).
    (h) Appropriate cost-sharing for covered insulin products. With 
respect to a covered insulin product, as defined at Sec.  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 one-month supply does not exceed the covered insulin product 
applicable cost-sharing amount defined at Sec.  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 Sec.  
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.
0
39. Section 423.137 is added to subpart C to read as follows:

Sec.  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 non-calendar 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 Sec.  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-of-pocket 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.

[[Page 99567]]

    (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-of-pocket 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 Sec.  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-of-pocket 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 Sec.  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 Sec.  423.137(d)(3).
    (C) If information necessary to consider the request complete, as 
required at Sec.  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 Sec.  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 Sec.  423.137(d)(3).
    (C) If information necessary to consider the request complete, as 
required at Sec.  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:

[[Page 99568]]

    (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 Sec.  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 Sec. Sec.  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 Sec.  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 Sec.  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

[[Page 99569]]

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 Sec.  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 
Sec.  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 Sec.  
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.

[[Page 99570]]

    (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

[[Page 99571]]

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 Sec.  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.

[[Page 99572]]

    (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 Sec.  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 Sec.  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 Sec.  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

[[Page 99573]]

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 plan-specific 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 Sec.  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 Sec.  
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 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.
    (2) Websites. In addition to meeting requirements described at 
Sec. Sec.  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 Sec.  
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 Sec.  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.
0
40. Section 423.153 is amended revising paragraph (d)(2)(iii)(A) to 
read as follows:

Sec.  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.
* * * * *
0
41. Section 423.182 is amended by revising paragraphs (b)(3)(ii)(A)(2) 
and (b)(3)(ii)(B)(2) to read as follows:

Sec.  423.182  Part D Prescription Drug Plan Quality Rating System.

* * * * *
    (b) * * *
    (3) * * *
    (ii) * * *
    (A) * * *
    (2) For contract consolidations approved on or after January 1, 
2022, if

[[Page 99574]]

a measure score for a consumed or surviving contract is missing due to 
a data integrity issue as described in Sec.  423.184(g)(1)(i), CMS 
assigns a score of zero for the missing measure score in the 
calculation of the enrollment-weighted measure score. If a measure 
score for a consumed or surviving contract is missing due to not having 
enough data to meet the measure technical specification or the 
reliability is less than 0.6 for a CAHPS measure, CMS treats this 
measure score as missing in the calculation of the enrollment-weighted 
measure score.
    (B) * * *
    (2) For contract consolidations approved on or after January 1, 
2022, for all measures except CAHPS, if a measure score for a consumed 
or surviving contract is missing due to a data integrity issue as 
described in Sec.  423.184(g)(1)(i), CMS assigns a score of zero for 
the missing measure score in the calculation of the enrollment-weighted 
measure score. For all measures except CAHPS and call center measures, 
if a measure score for a consumed or surviving contract is missing due 
to not having enough data to meet the measure technical specification, 
CMS treats this measure score as missing in the calculation of the 
enrollment-weighted measure score.
* * * * *
0
42. Section 423.186 is amended by:
0
a. Revising paragraph (f)(3)(iv) introductory text;
0
b. Adding paragraphs (f)(3)(iv)(C), (f)(3)(v)(A), and reserved 
paragraph (f)(3)(v)(B);
0
c. Revising paragraph (f)(3)(vi) and (f)(3)(viii)(B);
0
d. Adding paragraph (f)(3)(viii)(C); and
0
e. Revising paragraphs (g)(1)(i) and (ii).
    The revisions and additions read as follows:

Sec.  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 Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 rating-specific HEI score of the MA contract 
established under Sec.  422.107(e), then the HEI reward for the legacy 
MA contract is calculated following paragraph

[[Page 99575]]

(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 Sec.  422.107(e), and using the HEI score for the MA 
contract established under Sec.  422.107(e).
    (5) When multiple legacy MA contracts move their D-SNP plan benefit 
package(s) to the same MA contract established under Sec.  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 Sec.  
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 Sec.  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 contract-type 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).
* * * * *
0
43. Section 423.325 is added to read as follows:

Sec.  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.
0
44. Section 423.505 is amended by adding paragraphs (i)(7) and (8) and 
(q) to read as follows.

Sec.  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-to-date, 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.
0
45. Section 423.2265 is amended by adding paragraph (b)(16) to read as 
follows:

Sec.  423.2265  Websites.

* * * * *
    (b) * * *
    (16) Information about the Medicare Prescription Payment Plan as 
described in Sec.  423.137(m)(2).
* * * * *
0
46. Section 423.2260 is amended by revising the definitions of 
``Advertisement'' and ``Marketing'' to read as follows:

Sec.  423.2260  Definitions.

* * * * *

[[Page 99576]]

    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 decision-making 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 Sec.  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.
* * * * *
0
47. Section 423.2267 is amended by--
0
a. Removing the word ``and'' at the end of paragraph (e)(32)(vi);
0
b. Removing the period and adding in its place ``; and'' at the end of 
paragraph (e)(32)(vii);
0
c. Adding paragraphs (e)(32)(viii);
0
d. Revising paragraphs (e)(33)(i) introductory text and (e)(33)(ii) 
introductory text; and
0
e. Adding paragraphs (e)(45) through (51).
    The revisions and additions read as follows:

Sec.  423.2267  Required materials and content.

* * * * *
    (e) * * *
    (32) * * *
    (viii) For dual eligible special needs plans that are applicable 
integrated plans, as defined in Sec.  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 Sec.  
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 Sec.  
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 
Sec.  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 Sec.  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 Sec.  
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 Sec.  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 
Sec.  423.137(d)(10)(iv).
0
48. Section 423.2274 is amended by revising paragraph (c)(12) to read 
as follows:

Sec.  423.2274  Agent, broker, and other third-party 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 Sec.  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.
* * * * *
0
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:

Sec.  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.

[[Page 99577]]

    (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.
* * * * *
0
50. Section 423.2420 is amended by--
0
a. Adding paragraph (b)(4)(i)(D);
0
b. Redesignating paragraphs (d)(2)(i) through (iii) as paragraphs 
(d)(2)(ii) through (d)(2)(iv); and
0
c. Adding new paragraph (d)(2)(i).
    The additions read as follows:

Sec.  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 Sec.  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.
* * * * *
0
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:

Sec.  423.2430  Activities that improve health care quality.

    (a) General requirements. The report required in Sec.  423.2460 
must include expenditures directly related to activities that improve 
health care quality, as such activities are described in this section.
* * * * *
0
52. Section 423.2450 is added to read as follows:

Sec.  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 Sec.  423.2480, it may order the Part D sponsor 
to pay those remittances consistent with Sec.  423.2452.
0
53. Section 423.2452 is added to read as follows:

Sec.  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 Sec.  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 Sec.  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 Sec.  423.2454.
0
54. Section 423.2454 is added to read as follows:

Sec.  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 Sec.  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 Sec.  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.

[[Page 99578]]

    (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.
0
55. Section 423.2480 is amended by revising paragraph (d) introductory 
text to read as follows:

Sec.  423.2480   MLR review and non-compliance.

* * * * *
    (d) Data submitted under Sec.  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--
* * * * *
0
56. Section 423.2490 is amended by adding paragraph (b)(6) to read as 
follows:

Sec.  423.2490   Release of Part D MLR data.

* * * * *
    (b) * * *
    (6) DIR information reported within the MLR data as part of 
incurred claims.
* * * * *
0
57. Section 423.2536 is amended by--
0
a. Redesignating paragraphs (c) through (k) as paragraphs (d) through 
(l);
0
b. Adding a new paragraph (c); and
0
c. Revising newly redesignated paragraphs (i)(1) and (4).
    The addition and revisions to read as follows:

Sec.  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 ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)

0
58. The authority for part 460 continues to read as follows:

    Authority:  42 U.S.C. 1302, 1395, 1395eee(f), and 1396u-4(f).

Sec.  460.70  [Amended]

0
59. Section 460.70 is amended in paragraph (e)(2) by removing the 
reference ``Sec.  460.98(c)'' and adding in its place the reference 
``Sec.  460.98(d)''.
0
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

[[Page 99579]]

Sec.  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.
* * * * *
0
61. Section 460.180 is amended by revising paragraph (b)(3) to read as 
follows:

Sec.  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 Sec.  
422.310 of this chapter apply to PACE organizations and risk adjustment 
data submitted by PACE organizations to CMS. In applying Sec.  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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