On November 26, 2024, the Centers for Medicare & Medicaid Services (“CMS”) released the contract year 2026 proposed rule for the Medicare Advantage (“MA”) program, Medicare Prescription Drug Benefit Program (“Part D”), Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly (the “Proposed Rule”). Likely one of the last significant Medicare reform initiatives of the Biden administration, the Proposed Rule incorporates many of the Administration’s broader policy priorities, focusing on equity, transparency, and modernization in healthcare delivery and oversight.

We’ve summarized some of the key changes in the Proposed Rule. Comments are due January 27, 2025.

Expanding Part D Coverage: Anti-Obesity Medication and Covered Insulin Product

In response to the increasing prevalence of obesity and other considerations, CMS proposes a “reinterpretation” of the Part D coverage exclusion for weight loss drugs to cover anti-obesity medications (“AOMs”) when used for the treatment of obesity. Under current Medicare policy, AOMs are only covered when used to treat another medically accepted condition, such as type 2 diabetes or cardiovascular risk. However, citing the changing medical consensus towards recognizing obesity as a disease, CMS now proposes to reinterpret the statutory Medicare coverage exclusion of “[a]gents when used for . . . weight loss” at section 1927(d)(2)(A) of the Social Security Act, such that the exclusion would not apply to drugs when used for weight loss or chronic weight management for the treatment of obesity.

CMS does not propose any definition of obesity for the purpose of determining eligibility for Part D coverage of AOMs and “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.” By contrast, CMS does not propose to permit Part D coverage of AOMs used to treat overweight individuals, which the Proposed Rule distinguishes on the basis that overweight “is not recognized as a disease.”

CMS states that the changes align with current policies that permit Part D coverage for drugs typically excluded, when used to treat specific diseases. The reinterpretation would apply to both Medicare and Medicaid. As a result, AOMs could not be excluded from Medicaid coverage and would be considered covered outpatient drugs when used to treat obesity.

CMS estimates that the proposal would increase federal costs by $24.8 billion due to expanded Part D coverage and $14.8 billion due to expanded Medicaid coverage.

CMS also proposes a relatively modest expansion of the definition of a “covered insulin product” under Part D. If finalized, the proposed change would include Part D coverage for drug products that are a combination of more than one type of insulin or both insulin and non-insulin drugs.

Medicare Prescription Payment Plan

CMS proposed to codify prior agency guidance implementing section 11202 of the Inflation Reduction Act of 2022 (“IRA”), which establishes the Medicare Prescription Payment Plan and requires each Medicare Prescription Drug Plan (“PDP”) sponsor and Medicare Advantage prescription drug (“MA-PD”) plan to provide enrollees with the option to pay cost-sharing under the plan in capped monthly amounts. The proposals, which would be applicable for 2026 and subsequent years, aim to ease the financial burden for those with high cost-sharing early in the year.

As background, in order to implement the Medicare Prescription Payment Plan for CY 2025, CMS previously released related two-part final guidance on operational requirements and Part D enrollee education, outreach, and communications, respectively, which CMS proposed to codify without modification. In addition, CMS proposes to modify existing requirements for how Part D sponsors handle adjustments for Part D claims, the timing requirements for the grace period and initial notice of failure to pay, and proposes new requirements related to the following:

• Requirements for year-over-year participation for existing participants in the Medicare Prescription Payment Plan, including an automatic renewal process that extends Part D enrollee participation through the next calendar year, unless they choose to opt out, 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;
• Several new Part D required materials and content, 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 to require Medicare Prescription Payment Plan information; and
• Waiving requirements related to the Medicare Prescription Payment Plan for the Limited Income Newly Eligible Transition (“LI NET”) program.
• CMS also solicits comment on whether to require Part D sponsors to process election requests made via phone or web in real-time from 2026 onwards. CMS is seeking comments on this proposal for purposes of future rulemaking.

Formulary Inclusion and Placement of Generics and Biosimilars

CMS notes that concerns have been raised that Part D sponsors and their pharmacy benefit managers (“PBMs”) may be engaging in practices that favor expensive brand-name drugs and reference biological products over more affordable options, such as generics and biosimilars, leading to higher out-of-pocket prescription drug costs for Medicare beneficiaries. In response, CMS reminds Part D sponsors of the statutory requirement[1] that they implement cost-effective drug utilization management programs that include incentives to use generics and biosimilars when medically appropriate. In the Proposed Rule, CMS clarifies that plan formularies must ensure beneficiaries have broad access to generics, biosimilars, and other lower-cost drugs in order to comply with the statutory requirement. This clarification expands on the CY2025 final rule, which introduced changes to permit more flexibility for enrollees in the cost and accessibility of drug products under their Part D plan.

Although CMS has been monitoring beneficiary access to generics and biosimilars, CMS now plans 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 utilization management practices are cost effective, reasonable and appropriate, and inclusive of incentives to reduce costs. This would include an evaluation of whether the formulary includes lower cost drugs and whether such drugs are on a lower formulary tier. 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 under section 1860D—11(d)(2) to negotiate the terms and conditions of Part D sponsors’ bids if a plan’s proposed formulary does not appear to provide broad access to lower cost drugs. Further, CMS intends to monitor and analyze plan sponsors’ inclusion of lower cost drugs.

Promoting Transparency for Pharmacies and Protecting Beneficiaries from Disruptions

CMS proposes the following two new provisions aimed at enhancing services for Part D beneficiaries and ensuring stability in pharmacy networks by promoting transparency in pharmacy network contracts:

• Mandating that Part D plans, (or first tier, downstream, or related entities, such as PBMs) must inform contracted pharmacies of the Part D plans they are in-network with before October 1 of the year prior to the plan year and upon request thereafter. The requirement aims to ensure that pharmacies can provide accurate information during the Annual Enrollment Period, which begins on October 15. 
• Requiring Part D sponsors (or their FDRs) to allow pharmacies the right to terminate their network contracts without cause, following the same notice period that Part D sponsors have for terminating contracts without cause. This provision would only apply if the network pharmacy contract allowed terminations without cause by the sponsor. In support of the proposal, CMS notes that it has received increasing numbers of complaints from pharmacies about their Part D network contracts, expressing dissatisfaction with reimbursement terms and the inability to exit the contract without extensive notice. CMS also notes anecdotal reports that pharmacies unable to formally terminate their network contracts are “simply refusing to fill prescriptions for Part D beneficiaries covered by the plans using those networks.”
• CMS proposes to adopt both proposals pursuant to its authority at section 1857(e) of the Social Security 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. Notably, CMS did not address the permissibility of the proposal in light of the statutory “noninterference clause”, which, among other requirements, prohibits CMS from interfering with the negotiations between drug manufacturers and pharmacies and PDP sponsors.[2] 

Part D Medication Therapy Management (MTM) Program Eligibility Criteria

Under existing regulations, Part D sponsors are required to have a Medication Therapy Management (“MTM”) program aimed at ensuring that targeted beneficiaries appropriately use covered Part D drugs to optimize therapeutic outcomes and minimize the risk of adverse events. The MTM program is also to target enrollees with multiple chronic diseases, who take multiple Part D medications, and those likely to exceed an annual cost threshold for covered Part D drugs. Effective January 1, 2025, CMS established improved targeting criteria for the program to ensure consistent and equitable access to MTM services. Part D sponsors must include 10 core chronic diseases, including Alzheimer’s disease, in their targeting criteria for identifying beneficiaries with multiple chronic diseases. Following suggestions from the Contract Year 2024 MA and Part D rule, which increased eligibility for the MTM program, CMS now proposes expanding the regulatory 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 other causes of dementia in addition to Alzheimer’s.

Strengthening Prior Authorization and Utilization Review Guardrails

CMS proposes significant reforms to the prior authorization process, requiring plans to adopt electronic systems for streamlining requests, maintain approvals for the duration of treatment, and ensure that clinical decisions are made based on evidence-based guidelines. Specifically, to address inappropriate prior authorization and utilization management practices that hinder access to care, CMS proposes the following modifications to existing regulations:

• Define “internal coverage criteria” and clarify that MA plans may only apply such criteria when Medicare coverage policies are insufficient. Any such criteria must be:
  • Publicly available and transparent;
  • Based on current evidence and widely accepted guidelines from recognized professional medical societies or consensus-based organizations; and
  • Consistent with Medicare’s regulatory requirements.
• Require that once a prior authorization is approved, it remains valid for the entire course of treatment, preventing the need for repeated approvals and ensuring continuity of care.
• Mandate that plans provide specific reasons for coverage denials, including the exact Medicare or plan coverage rule or guideline used in the determination, and a detailed explanation of how the criteria were applied.
• Reaffirm beneficiaries’ rights to appeal denied services and require that plans inform enrollees of their appeal rights.
• Address retroactive coverage denials, particularly for rural hospitals and critical access facilities, by ensuring that utilization management practices do not disrupt payments or access to care.

Additionally, CMS plans to collect detailed information from initial coverage decisions and plan-level appeals to better understand utilization management practices.

Artificial Intelligence Guardrails

Artificial Intelligence (“AI”) is increasingly deployed in health care, from decision-making tools to administrative processes. Recognizing both the potential and risks of AI in MA and Part D, CMS introduced critical guardrails for MA plans to enhance algorithmic transparency, monitor and mitigate potential biases, and maintain human oversight, ensuring that clinicians retain authority over medical judgments impacting patient care. The key guardrails are:

• AI and automated systems must be utilized in a manner that preserves equitable access to Medicare Advantage services.
• The use of AI must adhere to existing Medicare regulations that prohibit discrimination and promote equal access to MA services.
• MA plans are required to disclose their use of AI tools, ensuring beneficiaries and providers are informed about how AI influences coverage and care decisions.

Enhanced Provider Directories for Improved Accessibility

The Proposed Rule aims to improve provider directories by mandating real-time updates and integrating the provider directory information into Medicare Plan Finder. Currently, provider directories must be accessible on MA plans’ websites. The Proposed Rule builds on existing CMS regulations requiring plans to update directories monthly, which have faced criticism for inconsistent enforcement and limited impact. By emphasizing real-time accuracy and accountability, CMS seeks to address one of the most common complaints from MA beneficiaries: the difficulty of determining whether a provider is in-network and accepting new patients. As part of CMS’s plan to enhance transparency and accessibility for beneficiaries, CMS proposes to require MA plans to:

• Integrate their provider directory information directly into the Medicare Plan Finder tool;
• Ensure that their provider directory data is accurate, complete, and updated at least every 30 days;
• Provide directory information in a standardized format to facilitate easier comparisons across plans, including provider name, contact details, specialty, network status, and telehealth availability;
• Ensure that the integrated provider directory is accessible to all beneficiaries, including those with disabilities and those who are non-English speakers; and
• Promptly notify beneficiaries promptly when there are any changes to network providers, including if a provider leaves the network or is no longer accepting new patients.

Behavioral Health Parity

Behavioral health reform remains one of the Biden administration’s central equity-driven initiatives. The Proposed Rule strengthens behavioral health protections by requiring plans to meet more rigorous network adequacy standards, enforce balanced cost-sharing, and provide cultural competency training for providers. Under the Proposed Rule, MA plans’ cost sharing for behavioral health must not be greater than the cost sharing for Traditional Medicare. CMS proposes a 20% coinsurance or equivalent copayment limit for certain mental health services and outpatient substance abuse services. The cost sharing for inpatient psychiatric services would be capped at 100% of the fee-for-service rate. CMS further proposes zero cost sharing for opioid treatment.

Bolstering Consumer Protection – Agent and Broker Oversight

CMS’s proposed oversight of agents and brokers addresses growing concerns about high-pressure sales tactics and misinformation in MA and Part D plan marketing. The Proposed Rule tightens oversight of agents and brokers, requiring enhanced training, greater transparency in compensation disclosures, and stricter plan monitoring of marketing practices. Notably, CMS proposes to expand the definition of “advertisement” to encompass digital platforms, including websites, social media, and email campaigns, ensuring that all promotional materials are subject to regulatory oversight.

Additionally, CMS has crafted a list of topics that agents and brokers must discuss with beneficiaries during the plan selection process. The Proposed Rule builds on these topics to include Low-Income Subsidy and information about state programs like Medicare Savings Programs eligibility. For 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, the agent or broker must inform beneficiaries of their 12-month trial right period. These provisions aim to curb deceptive practices and ensure beneficiaries have access to accurate information when selecting plans.

Administration of Supplemental Benefits

MA rebate dollars continue to represent a significant portion of MA spending, with estimates that MA rebate dollars used for supplemental benefits and premium buy-downs will total over $79 billion in 2026 and amount to approximately $500 billion over a 5-year period starting in 2026. Current law and regulation allow MA plans to offer supplemental benefits to enrollees, subject to CMS bid approval and regulations that govern how supplemental benefits may be offered. The Proposed Rule includes various proposals intended to increase transparency and clarify regulatory requirements for proper administration of MA plan supplemental benefit offerings.

• Administration of Supplemental Benefits Coverage Through Debit Cards

In the Proposed Rule, CMS observes that MA plans 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. CMS proposes new requirements on the use debit cards to administer plan-covered benefits, including new guardrails to ensure that beneficiaries are fully aware of covered supplemental benefits and how to access those benefits:

• CMS proposes to require MA plans to have processes for delivering all MA plan covered supplemental benefits to enrollees that ensure compliance with new and existing regulatory standards, including appropriate access to providers and suppliers. For MA coordinated care plans, this includes providing 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. And for PPOs, supplemental benefits must be provided through out-of-network providers at in-network cost sharing.
• When administering a mandatory supplemental benefit through plan debit cards, CMS proposes that an MA plan 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. The debit card must also include some sort of mechanism that ensures the enrollee may only use the card to purchase the covered item or service.
• CMS proposes to revise existing regulations to clearly limit when a plan may offer reduced cost sharing as a mandatory supplemental benefit through the use of reimbursement, through a debit card or other means, to either manual reimbursement or to a debit card governed by the proposed new requirement for real-time verification mechanism, to prevent the use of unrestricted cards or other vague mechanisms that cannot be exclusively linked to covered benefits and limited to the plan year requirements. Current regulations allow use of reimbursement through a debit card “or other means.” CMS requests comment on what “other means” might be unintentionally removed from the scope of the rule if finalized.
• CMS proposes to require MA plans to have an alternative process that allows for reimbursement of eligible expenses for plan covered services, in order to ensure that the enrollee has access to the benefit if there is a technical or non-technical (user-related) issue with the debit card. CMS proposes to require MA plans to provide instructions for debit card use and customer support services.
• CMS proposes a new regulation to prohibit MA plans from marketing a dollar value of a supplemental benefit or the method by which it is administered. The proposal is intended to prevent certain concerning advertisements that CMS has become aware of, which “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 encourages, but does not require, MA 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 the same time, CMS recognizes that in some areas there may be a limited number of community-based providers, including small businesses.
• Special Supplemental Benefits For The Chronically Ill

The Balanced Budget Act of 2018 introduced new authorities concerning supplemental benefits that may be offered to chronically ill enrollees in MA plans, known as Special Supplemental Benefits For The Chronically Ill (“SSBCI”). In the Proposed Rule, CMS notes that the number of MA plans that offer SSBCI—and the number and scope of SSBCI offered by an individual plan—has significantly increased over the last 5 years. In the Proposed Rule, CMS proposes various changes intended to clarify the two separate determinations that MA plans must make to satisfy the statutory and regulatory requirements for SSBCI benefits:

1. Eligibility: Whether the enrollee is eligible for SSBCI by satisfying the three-part statutory definition of “chronically ill enrollee,” defined as an MA plan enrollee 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; and
   • Requires intensive care coordination.
2. Allowable SSBCI Benefit: Whether the SSBCI has a reasonable expectation of improving or maintaining the health or overall function of the enrollee.[3]

[Under existing regulations, SSBCI are not required to be primarily health related but must have a reasonable expectation of improving or maintaining the health or overall function of the enrollee, as established by the MA plan based on a bibliography of relevant acceptable evidence. In the Proposed Rule, CMS proposes to codify at § 422.102(f)(1)(iii) 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. CMS’ proposed list of services that cannot be offered as SSBCI includes the following, on which the Agency solicits comment:

• Procedures that are solely cosmetic in nature and do not extend upon Traditional Medicare coverage — Examples include cosmetic surgery such as facelifts or cosmetic treatment for facial lines, atrophy of collagen and fat, and bone loss due to aging. CMS notes that some plans have proposed in their bids to offer cosmetic services for aesthetic purposes only, such as botulinum toxin (Botox) injections for lines and wrinkles. CMS disapproved these proposals during bid review but notes 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 (such as Botox injections to treat overactive bladder and other medical conditions).
• Alcohol, tobacco, and cannabis products — CMS reiterates that tobacco and alcohol are expressly prohibited under a 2019 HPMS memo, as neither is considered food or nutritional, and states that medical marijuana and its derivatives, such as cannabis oil, are prohibited as illegal substances under Federal law.
• Funeral planning and expenses — While MA plans may provide services to assist in the establishment of decision-making authority for healthcare needs (e.g., power of attorney for health services) and may provide education, such as financial literacy classes, technology education, and language classes, 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.
• Life insurance — Similarly, life insurance cannot be tied to improving or maintaining that individual’s health or overall function and would not be permissible as SSBCI.
• Hospital indemnity insurance — Regulations governing SSBCI require that an MA plan must incur a non-zero, direct non-administrative cost for offering an SSBCI that is not primarily health related. According to CMS, paying for separate, third-party insurance for the enrollee does not incur a direct cost on behalf of the enrollee but simply shifts payment for medical costs to another payer.
• Broad membership-type programs inclusive of multiple unrelated services and discounts — CMS states that it has received and declined proposals from MA plans to offer broad membership programs, inclusive of multiple unrelated services discounts (such as Amazon Prime, Costco, and others), as SSBCI. According to CMS, 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. CMS notes, however, that an MA plan might contract with such retailers to offer covered benefits in some other capacity (for example, benefits administered via a restricted debit card), so long as there is a mechanism to ensure enrollees receive only covered benefits.
• Cash and monetary rebates — These are prohibited by 1851(h)(4)(A) of the Social Security Act.
• Gambling items (e.g., online casino games, lottery tickets), firearms and ammunition — Not intended to improve the enrollee’s health.

CMS also proposes several amendments to clarify MA plans’ obligations related to determining SSBCI eligibility, including requirements to increase transparency with respect to eligibility criteria and scope of benefits:

• CMS clarifies that MA plans must properly evaluate all three components of the statutory definition of “chronically ill enrollee.” CMS proposes technical changes to amend the regulatory definitions to align with statutory requirements and previously issued guidance. In addition, CMS proposes to codify a new provision prohibiting MA plans from using the presence of a chronic illness as the sole basis for determining eligibility for SSBCI.
• CMS proposes new regulations requiring an MA plan to demonstrate that an enrollee has satisfied all three criteria through the use of an objective process (such as a health risk assessment, a claims review, or other similar means).
  • CMS states that the proposal is intended to address variability, inconsistency and subjective eligibility determinations observed by CMS through its routine monitoring, noting examples such as MA plans allowing an enrollee to self-attest to SSBCI eligibility without additional criteria and verification from the MA plan, or determining 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 states that the proposal would continue to allow plans flexibility in the methods they use to determine that enrollees have met all three criteria.
• CMS proposes to require MA plans to publish on their public-facing website the objective criteria developed and used by the MA plan to determine whether an enrollee is eligible to receive any, and which particular, SSBCI benefits the plan offers.
  • Currently, CMS may review SSBCI eligibility criteria by requesting it from plans on a case-by-case basis. In the Proposed Rule, CMS expresses concern that the lack of transparency under current regulations, leaves enrollees “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.”
  • CMS acknowledges that there is currently not a consistent manner by which plans publicly report this information or submit the information directly to CMS but believes the proposals will increase compliance and patient awareness as compared with making the information available only upon request.

Improving Experiences for Dually Eligible Enrollees

Building on past efforts to enhance integration and care coordination, as well as accessibility for dual-eligible individuals, CMS proposes new requirements for certain dual-eligible Special Needs Plans (“D-SNPs”), to further streamline and organize care delivery. Specifically, CMS plans to:

•  Require integrated member ID cards for both Medicare and Medicaid plans. The proposal is limited to Applicable Integrated Plans (“AIPs”).;
• Require plans to conduct a single, integrated Health Risk Assessment (“HRA”) for both Medicare and Medicaid, replacing the separate HRAs currently utilized for each. CMS also proposes to adopt specific standards to implement the requirement that all MA SNPs conduct an initial assessment and an annual reassessment of the individual’s physical, psychosocial, and functional needs.
• Codify timeframes for all SNPs to conduct HRAs and develop Individualized Care Plans (“ICPs”), emphasizing active participation by enrollees or their representatives in the ICP development process. Specifically, CMS proposes to require that SNPs conduct the initial HRA within 30 days of the effective date of enrollment. CMS also proposes new requirements for all SNPs related to outreach to enrollees regarding completion of the HRA. CMS proposes that the SNP make at least three non-automated phone call attempts. If the enrollee has not responded, the SNP must send a follow-up letter. The SNP must document attempts to contact the enrollee, and if applicable, the enrollee’s choice not to participate.
• Require that SNPs update ICPs as warranted when there are changes in an enrollee’s health status or they have a healthcare transition.

Promoting Community-Based Services and Enhancing Transparency of In-Home Service Contractors

CMS has identified concerns about the exclusion of certain benefit providers from MA organizations’ provider directories. These concerns relate to safety and a lack of transparency regarding supplemental benefit service providers’ access to enrollees’ homes and sensitive personal information. Additionally, CMS is focused on ensuring that individuals are aware of which providers are deeply rooted within the communities they serve. As such, CMS proposes to:

• Codify definitions of community-based organizations (“CBOs”), in-home or at-home supplemental benefit providers, and direct furnishing entities. CMS proposes to define these terms as follows:
  • Direct furnishing entity — Any individual or entity that delivers or furnishes covered benefits to the enrollee, including Medicare Part A and B covered benefits, as well as all types of supplemental benefits. CMS proposes that the definition of direct furnishing entities may include first tier, downstream, or related entities (FDRs) from whom enrollees may expect to receive directly furnished services. CMS solicits comment on: (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.
  • CBOs — 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. CMS proposes to define this term consistent with the discussion of CBOs in the 2023 physician fee schedule proposed rule.
  • In-home/at-home supplemental benefit provider — Any direct furnishing entity in which the entity or an employee is given the enrollee’s physical address to provide in-person supplemental benefits or SSBCI items to that enrollee. CMS also proposes that this definition state that an in-home/at-home supplemental benefit provider may include direct furnishing entities who offer in-office as well as home supplemental benefits.
• Require plans to identify, within the provider directory, which providers and direct furnishing entities meet the proposed definition of a CBO;
• Require plans to identify in-home/at-home supplemental benefit service providers, including hybrid providers (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. The list must be easily accessible on the plan’s public facing website; and
• Clarify existing policy by stating that all direct furnishing entities must be included in the provider directory.

MA and Part D Medical Loss Ratio (MLR) Reporting

CMS proposes several changes to the MA and Part D MLR regulations that are intended to improve the meaningfulness and comparability of the MLR across plan contracts, as well as align the MA and Part D MLR regulations with the regulations in the commercial and Medicaid MLR programs. These proposals include:

• Requiring provider incentive and bonus arrangements are tied to clinical or quality improvement standards in order to be included in the MA MLR numerator;
• Requiring administrative costs to be excluded from quality-improving activities in the MA and Part D MLR numerators;
• Codifying the current practice by which MA and Part D MLR reports include a description of how expenses are allocated across lines of business; and
• Exclude Medicare Prescription Payment Plan unsettled balances from the MLR. 

Risk Adjustment Data

In addition to technical changes to the regulatory definitions relevant to risk adjustment data validation, CMS proposes to codify existing practice of requiring mandatory submission of risk adjustment data by PACE organizations and Section 1876 Cost plans, consistent with the risk adjustment data requirements applicable to MA plans.

Notably, the Proposed Rule does not provide any further guidance regarding CMS’ revised risk adjustment data validation (“RADV”) audit methodology, which allows CMS to audit a sample of an MA plan’s diagnoses reported for risk adjustment purposes (from 2018 and later) and then use the audit findings to calculate an extrapolated improper payment amount for the MA plan’s contract. On November 14, 2024, CMS issued the audit methods and instructions for the program year 2018 RADV audits, which provide little insight into the 60 MA contracts that have been selected for audit. CMS expects to begin issuing audit findings mid-year in 2026.

FOOTNOTES

[1] See 1860D-4(c)(1)(A) of the Social Security Act.

[2] 42 U.S.C. 1395w-111(i)(1).

[3] Per § 422.102(f)(1)(i)(B), CMS may publish a non-exhaustive list of conditions that are medically complex chronic conditions that are life-threatening or significantly limit the overall health or function of an individual. This list of chronic conditions is the same as the list for which MA organizations may offer chronic condition special needs plans (C-SNPs), which can be found in the definition of “severe or disabling chronic condition” within § 422.2.