The Centers for Medicare & Medicaid Services (CMS) released on April 4, 2025, the final rule for contract year (CY) 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 (CMS-4208). The provisions in this final rule are applicable to coverage beginning Jan. 1, 2026, except as otherwise noted.
The proposed rule, released in November 2024 under the previous administration, included a wide array of provisions. However, as it was drafted by the outgoing administration, the final rule ended up being relatively brief, with CMS finalizing only a select number of policies. What stands out most is what was not finalized. Since much was left unaddressed, future rulemaking may be needed to finalize additional proposals.
CMS did not finalize:
- the proposal to reinterpret the statutory exclusion of agents when used for weight loss, such that it would not apply to drugs when used for weight loss or chronic weight management for the treatment of obesity, meaning that anti-obesity medications (AOMs) – when used for weight loss or chronic weight management for the treatment of obesity – would continue to be excluded from Part D coverage
- provisions on Enhancing Health Equity Analyses: Annual Health Equity Analysis of Utilization Management Policies and Procedures and Ensuring Equitable Access to Medicare Advantage Services – Guardrails for Artificial Intelligence (AI); the agency, however, acknowledges "broad interest in regulation of AI and will continue to consider the extent to which it may be appropriate to engage in future rulemaking in this area"
- CMS noted it is not requiring Medicare Advantage (MA) plans to report health equity analyses of prior authorization (PA) by individual item or service, rather than in aggregate, to better identify disparities.
CMS did finalize:
- codified Part D provisions in the Inflation Reduction Act (IRA) eliminating cost-sharing for adult vaccines and restricting cost-sharing for a one-month supply of insulin
- regulatory changes to codify agency guidance implementing the Medicare Prescription Payment Plan (MPPP), with some modifications
- established a shortened prescription drug event (PDE) submission timeline for drugs selected for negotiation under the Medicare Drug Price Negotiation Program
- clarified MA organization determinations in the inpatient setting
- implemented policies aimed at integrating care for dually eligible individuals
Regarding future rulemaking, CMS noted that it solicited public comment on several provisions that "may be finalized in subsequent rulemaking, as appropriate," including Ensuring Equitable Access to Behavioral Health Benefits through Section 1876 Cost Plan and MA Cost Sharing Limits, Format Provider Directories for Medicare Plan Finder, Promoting Informed Choice – Enhancing Review of Marketing and Communications and Enhancing Rules on Internal Coverage Criteria.
Key Updates
Vaccine Cost-Sharing Changes
CMS is finalizing its proposal to codify Section 11401 of the IRA to ensure there is no cost-sharing in Part D for an adult vaccine recommended by the Advisory for Committee on Immunization Practices (ACIP) covered under Part D.
- Definition of ACIP-Recommended Adult Vaccine. CMS acknowledges that several commenters requested the agency release a Health Plan Management System (HPMS) memorandum that includes a list of ACIP-recommended adult vaccines and the dates on which the vaccines should be covered with no cost-sharing. CMS notes it will not issue separate guidance given that the most updated information regarding ACIP-recommended adult vaccines and the effective date of ACIP recommendations is available on the Centers for Disease Control and Prevention's (CDC) website.
- No Deductible or Cost Sharing for ACIP-Recommended Adult Vaccines. CMS states that several commenters expressed concern about Part D sponsors restricting coverage for specific vaccine products and having a "preferred" brand of vaccine, requesting CMS not allow these strategies to be implemented. The agency expressed it "appreciate[s] the concerns these commenters shared about the potential negative impacts of Part D sponsors restricting coverage for certain brands of a vaccine" and reiterates its rules outlined in Chapter 6, Section 30.2.7 of the Prescription Drug Benefit Manual, underscoring "Part D sponsors may not implement utilization management, including step therapy and NDC blocks."
- Coverage Determinations for Vaccines. CMS outlines several comments regarding clarification on coverage decisions, notably acknowledging that "it is up to Part D sponsors to establish their own policies on whether to accept OON claims directly from providers or pharmacies, and, if they do, to establish an agreed upon reimbursement amount with the OON provider or pharmacy that could include a prohibition on balance billing the enrollee."
- Effective Date of ACIP Recommendations. CMS states it is finalizing changes as proposed, namely its proposal to add at Section 423.100 a definition of "effective date of the ACIP recommendation" that means the date specified on the CDC website and noting the date the CDC director adopted the ACIP recommendation. CMS highlights that "it is highly unlikely that an ACIP recommendation will be posted without the date on which it was adopted by the CDC director. CMS further outlines that "If a Part D sponsor is not able to effectuate $0 cost sharing for an ACIP recommended adult vaccine as of the 'effective date of the ACIP recommendation' and an enrollee pays cost sharing for the ACIP-recommended adult vaccine after the 'effective date of the ACIP recommendation,' the Part D sponsor will need to reimburse the beneficiary for any cost sharing paid for the vaccine."
Insulin Cost-Sharing Changes
CMS is finalizing its proposal to codify Section 11406 of the IRA, the $35 insulin co-pay cap.
- Duration of Supply. CMS underscores that "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'."
- Tier Placement & Utilization Management. CMS emphasizes that it "agree[s] with the commenters that out-of-network access should not routinely be used to access covered insulin products" and reiterates "existing requirements at § 423.124, under which a Part D sponsor must ensure that enrollees have access to covered Part D drugs at out-of-network pharmacies only if they cannot reasonably be expected to obtain such drugs at a network pharmacy and do not access covered Part D drugs at an out-of-network pharmacy on a routine basis."
- MPPP Program. CMS is finalizing its proposal to codify agency guidance implementing the MPPP. This is also known as "smoothing," and the IRA policy is allowing enrollees to make prescription cost-sharing payments in monthly, capped installments up to the annual out-of-pocket (OOP) threshold.
Program Guidance for the IRA MPPP Codified with Modifications
Section 11202 of the IRA establishes the MPPP, which mandates that each Prescription Drug Plan (PDP) sponsor and each MA organization offering an MA-PD plan must provide enrollees, including those eligible for subsidies, the option to pay their cost-sharing in monthly capped amounts for each plan year. After reviewing public comments on its draft guidance, CMS issued two final guidance documents to implement the MPPP for 2025. The first, released on Feb. 29, 2024, focused on operational requirements, while the second, issued on July 16, 2024, covered Part D enrollee education, outreach and communications.
CMS has proposed to codify the requirements from these two guidance documents for 2026 and beyond, with a few modifications, including:
- Grace Period and Notice of Nonpayment. Under the final Part One guidance, CMS stated that the grace period would begin either on the first day of the month in which the balance is unpaid or the first day of the month following the payment request, whichever is later. CMS finalizes its proposal to adjust the start date for the grace period to the first day of the month following the date the initial notice is sent.
- Adjustments to Part D Claims. In the final Part One guidance, CMS required plans to work with participants to either refund overpayments or apply them to remaining OOP costs. CMS finalizes its proposal to modify that requirement to allow a plan to follow its normal processes for adjustments and issuing refunds. Additionally, CMS finalizes its proposal so that when adjustments increase the amount owed by the participant, plans "must" include the additional costs in the revised OOP balance, rather than "should" as previously stated.
CMS also addresses several new requirements:
- Renewal Process and Notice. CMS finalizes an automatic renewal system in which participants will be automatically renewed in the MPPP unless they choose to opt out, eliminating the need for new paperwork each year. CMS modifies its proposed timing requirement for the renewal notice to be sent out. Under the final policy, the renewal notice must be sent after the end of the annual coordinated election period but before the beginning of the plan year.
- Effective Date of Voluntary Terminations. CMS finalizes its proposal to maintain the requirement for Part D sponsors to send the notice of voluntary termination within 10 calendar days of receipt. CMS proposed to require that the effective date of termination must be within 24 hours of receipt of the voluntary termination request but finalizes a three-calendar-day requirement instead.
- Pharmacy Access to Part D Enrollee's OOP Costs. CMS does not finalize requirements for Part D sponsors to ensure that pharmacies can provide information on a Part D enrollee's OOP costs for the MPPP for prescriptions processed under the program at the point of sale (POS).
PDE Submission Timeline for Drugs Selected for Negotiation
CMS finalizes its proposal to require that for drugs selected for negotiation under the Medicare Drug Price Negotiation Program, Part D sponsors must submit initial PDE records within seven calendar days from the date the Part D sponsor receives the claim.
Part D Plans Must Continue Broad Access to Generics, Biosimilars and Other Low-Cost Drugs
CMS has reiterated that Part D plans must ensure broad access to generics, biosimilars and other lower-cost drugs, in line with Section 1860D-49(c)(1)(A) of the Social Security Act. This includes cost-effective drug utilization management programs that incentivize the use of generics and biosimilars. CMS has identified concerns that Part D sponsors and pharmacy benefit managers (PBMs) may prioritize higher-cost brand-name drugs, leading to higher OOP costs for beneficiaries and potential non-compliance with Part D requirements. The agency clarified that "broad access" refers not only to formulary inclusion but also to tier placements and utilization management practices.
CMS had proposed adding a step to its formulary review process to ensure compliance, but this step will not be implemented. However, the clarifications from the proposed rule remain in effect, and CMS may address additional formulary requirements in future rulemaking. CMS also sought feedback on the impact of manufacturer rebates and whether further programmatic actions are needed to prevent formularies from disfavoring lower-cost drugs, but did not address this feedback in the final rule.
Clarifying MA Organization Determinations to Enhance Enrollee Protections in Inpatient Settings
CMS is finalizing its proposal to clarify that the definition of "organization determination" includes MA plan decisions made concurrent to the enrollee's receipt of services. CMS is also finalizing proposals to codify existing guidance that requires plans give a provider notice of a coverage decision, in addition to the enrollee, whenever the provider submits a request on behalf of an enrollee, as well as its proposal, until an MA organization has made a claims payment determination.
Risk Adjustment Updates
CMS is finalizing a series of provisions related to risk adjustment data updates, including a technical change to the definition of Hierarchical Condition Categories (HCCs) to remove the reference to a specific version of the International Classification of Diseases (ICD), as well as substituting the terms ''disease codes'' with ''diagnosis codes'' and ''disease groupings'' with ''diagnosis groupings'' to be consistent with ICD terminology. CMS is also codifying the "longstanding practice of requiring the collection and mandatory submission of risk adjustment data by PACE organizations."
Enhancing the Health Equity Analysis: Annual Health Equity Analysis of Utilization Management Policies and Procedures
In response to comments the agency received in the April 2024 final rule, CMS did not finalize the proposal 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.
Ensuring Equitable Access to Medicare Advantage Services: Guardrails for Artificial Intelligence (AI)
In the proposed rule, CMS noted that the policies included in this portion of the rulemaking build on several of the Biden-Harris Administration's previous actions on AI. CMS did not finalize guardrails for AI, but "does want to acknowledge the broad interest in regulation of AI and will continue to consider the extent to which it may be appropriate to engage in future rulemaking in this area."
Promoting Community-Based Services and Enhancing Transparency of In-Home Service Contractors
In the proposed rule, CMS addressed four key policies and solicited comments on each, noting that the agency "may consider finalizing revisions based on the comments received." CMS did not finalize any community-based services proposal.
CY 2026 Rate Announcement for MA and Medicare Part D Programs
CMS released on April 7, 2025, the CY 2026 MA Capitation Rates, Part C and Part D Payment Policies, and Final CY 2026 Part D Redesign Program Instructions. The notice outlines changes to MA capitation rates applied under Part C and Part D for CY 2026 and other regulatory changes that will affect plan reimbursement. The instructions center on implementing provisions of the IRA of 2022 related to the Part D benefit for 2026.
CMS states that payments from the government to MA plans are expected to increase on average by 5.06 percent from 2025 to 2026. This is an increase of 2.83 percentage points since the CY 2026 Advance Notice, which CMS notes is "largely attributable to an increase in the effective growth rate" which increased from 5.93 percent in the Advance Notice to 9.04 percent as reported in the rate announcement.
In the final CY 2026 Part D Redesign Program Instruction, CMS made only one update from the Draft Instructions, revising Section 50 to state that CY 2026 is setting the minimum threshold for evaluating Medicare Part D Standalone Prescription Drug Plan, meaningful differences to 10 percent from 15 percent threshold are included in the Draft CY 2026 Program Instructions.
Now that the MA and Part D payment methodologies have been finalized, it's full steam ahead for plans preparing their bids for 2026. The final payment policies determine how plans approach bidding. Plans will have until June 2, 2025, to submit their bids.
Additional CMS finalized proposals include:
- change the effective growth rate and benchmark rate for MA payments
- implement changes related to the IRA Part D benefit redesign for 2026
- complete the three-year phase-in of the 2024 CMS-Hierarchical Condition Category (CMS-HCC) risk adjustment model
- begin to transition to the 2024 CMS-HCC risk adjustment model for Program of All-Inclusive Care for the Elderly (PACE) Organizations
- continue the Part D risk adjustment model with plans for 2026 IRA-related changes
- continue the end-stage renal disease (ESRD) risk adjustment model
- continue the frailty adjustment for Fully Integrated Dually Eligible (FIDE) Special Needs Plans (SNPs) and changes to adjustments for PACE, and;
- continue the adjustments to fee-for-service (FFS) per capita costs in Puerto Rico
