Large MA And Part D Rule Issued For 2026

2026 Medicare Advantage and Part D rule has major changes to the programs

The Biden administration issued its draft 2026 Medicare Advantage (MA) and Part D rule last week. A draft is available, but the Federal Register indicates the rule was pulled back for additional clarifications and would be reposted on December 10. Due to its late posting, the rule will not be finalized before the Trump administration takes office and therefore could simply be revamped rather than be rescinded.

In some ways, the rule does not have some of the mega changes that some expected in the areas of Star, risk adjustment, and more. This could be due to some sensitivity to the current financial woes of the MA industry. But there is plenty for the industry to object to. I have read the 700-plus page draft rule and reviewed the Centers for Medicare and Medicaid Services (CMS) Fact Sheet and the agency’s Press Release.

So, here is my take on the major items. Note that I have not included the Star program changes for either Part C or Part D or the road map laid out by CMS.  That will be covered in my blog on Thursday.

Specific Part D changes

Coverage of anti-obesity medication (AOM)/GLP-1 coverage: The biggest change in my view in the proposed 2026 rule is the coverage of weight-loss drugs for obesity, including very expensive GLP-1 drugs.

The rule would reinterpret the existing Part D statute to no longer exclude anti-obesity medications for the treatment of obesity from coverage under Medicare Part D and to require Medicaid programs to cover these medications when used to treat obesity. Today, the rule is interpreted to be available in Part D for those who are obese or overweight and have a qualifying disease state. The change would classify obesity as a disease state to enable coverage (those who are only overweight would not be covered).

Now, the big question from many is whether such drugs are mandatory to be covered.  My reading is that if it is not a strict requirement, it certainly points in this direction. The below excerpt from the rule indicates that the drugs would have to be offered on the formulary and that prior authorization (PA) criteria would have to be pretty flexible in terms of initial and ongoing coverage.

“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. 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 (step therapy) requirements for AOMs that are inconsistent with clinical guidelines.”

Whatever the facts may be on long-term savings derived from covering such drugs, there is no question that including GLP-1 and related weight-loss drugs in Part D will serve to further drive up premiums and costs in the short term. MA would be hurt, but standalone Part D (PDP) plans could be crippled. The administration is expected to make some GLP-1s subject to drug price negotiation, but that alone will not mitigate huge costs to the program. We know that price reductions in the negotiation process have not been terribly aggressive. Expanding Medicare coverage for GLP-1s likely will cost $35 billion over nine years, according to a Congressional Budget Office (CBO). CMS ridiculously argues there would be no short-term impact on premiums. CMS and the CBO famously said the Inflation Reduction Act’s (IRA) Part D cost-sharing changes would not impact premiums, either. 

Formulary inclusion and placement of generics and biosimilars: In an effort to stop pharmacy benefits managers (PBMs) from favoring brand drugs due to the rebate arrangements with brand drug makers, the new rule would require plan formularies to provide enrollees with broad access to generics, biosimilars, and other lower-cost drugs. This will help with the uptake of biosimilars and likely help consumers at the point of sales as brand rebates often do not get passed through in part or full at the drug counter.

To implement this goal, the rule says CMS will expand its formulary evaluation to:

• Assess 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.
• Assess whether a formulary incorporates fewer utilization controls on brand drugs and reference products than on lower cost alternatives
• CMS will also use its authority to negotiate the terms and conditions of submitted Part D sponsors’ bids if a plan’s proposed formulary does not appear to provide broad access to generics, biosimilars, and other lower cost drugs.

In addition, the rule indicates CMS is seeking comments on:

• 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.
• 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.

Pharmacy network changes: The rule proposes a series of changes related to pharmacy networks. CMS is increasingly concerned about MA plan and pharmacy relationships, especially regarding independent pharmacies.

• It would require MA plans (or first tier, downstream, or related entities (FDRs), such as pharmacy benefit managers (PBMs) 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. It would require MA plans to provide pharmacies a list of these plans to network pharmacies on request after October 1.
• It would also allow a pharmacy in a Part D network to terminate the contract with and MA plan without cause (with the same notice period) if the MA plan or FDR has that right.
• It would require that pharmacies be enrolled in the Medicare Drug Price Negotiation Program’s Medicare Transaction Facilitator Data Module (MTF DM).

Vaccine and insulin cost-sharing: The rule proposes that the Medicare Part D deductible shall not apply to and there is no cost-sharing for an adult vaccine. There would be no deductible for insulin products, either.  In addition, insulin costs will be capped at the lesser of $35 per month or other calculations that could over time drive down the cost of insulin further. This proposal in part implements changes made in the IRA.

Part D Medication Therapy Management (MTM) Program eligibility criteria: The rule would 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. The rule would add Alzheimer’s disease as well as all other causes of dementia. The change is aimed at improving medication adherence and to reduce the risk of adverse events.

Medicare Prescription Payment Plan: The rule implements the IRA’s Medicare Prescription Payment Plan, known as MP3. The program essentially allows enrollees to “smooth” their cost-sharing over 12 months and not face significant peaks in cost-sharing early on in the year. I have been critical of the program as administratively expensive, especially in light of the substantial reductions the IRA already put in place for cost-sharing. It also can create significant risk for plans. The rule thoroughly implements the new IRA provisions. The text starts on page 40 and goes to 108 of the current unpublished version. It covers operational items, required outreach and education, enrollment, claims payment, and member rights.

Specific Part C changes

Strengthening prior authorization and utilization management guardrails/ further prior authorization reforms: For 2024, CMS included via rule major restrictions on the prior authorization process for MA plans by requiring them to follow fee-for-service program policies. Now, CMS is proposing further changes.

CMS is proposing to define “internal coverage criteria” to clarify when MA plans can apply utilization management and prior authorization; establish policy guardrails to ensure access to benefits; ensure plan internal coverage policies are transparent and readily available to the public; and ensure plans are making enrollees aware of appeals rights. Additional gathering of data and reporting to examine prior authorization processes are included as well.

Additional changes proposed include:

• If an enrollee has no further liability to pay for services furnished by an MA plan, a determination regarding these services is not subject to CMS’ administrative appeal process.
• An enrollee’s further liability to pay for services cannot be determined until an MA plan has made a determination on a request for payment.
• A coverage decision made by an MA plan contemporaneously with 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.
• Additional 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.

The rule also proposes to revise the required metrics for the annual health equity analysis of the use of PA to require the metrics be reported by each item or service, rather than aggregated for all items and services.

Clarifying MA organization determinations to enhance enrollee protections in inpatient settings: The rule would also bar after-the-fact overturns of prior authorization that can negate claims payments. The rule states that if an MA plan approved an inpatient hospital admission, 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.

Guardrails for Artificial Intelligence (AI): The rule would also increase guardrails on the use of artificial intelligence (AI) to protect access to health services. MA plans must provide all enrollees equitable access to services, including when MA organizations use AI or other automated systems to aid their decision-making. MA plans cannot discriminate on the basis of any factor that is related to the enrollee’s health status.

Equitable access to behavioral health benefits: The rule proposes a series of changes to ensure better access to mental health and substance abuse services. The rule would limit MA plan in-network cost sharing to what is charged in the traditional program.

Supplemental benefits coverage: CMS has already promoted some major reforms to ensure better utilization of supplemental benefits, including submission of such benefits and services via encounter data as well as new education and outreach requirements. It adds to these provisions in the proposed rule, including:

• Introducing additional disclosure requirements to increase transparency, including additional disclosure rules around supplemental benefits and plan debit cards.
• Specifying allowable and impermissible supplemental over-the-counter (OTC) benefits.
• Clarifying what types of over the counter (OTC) products are acceptable.
• Limiting marketing of supplemental benefits, including those surrounding the chronically ill.
• Prohibiting MA organizations from marketing the dollar value of a supplemental benefit or the method by which a supplemental benefit is administered.
• Requiring processes for delivering all MA plan-covered supplemental benefits to enrollees that ensure compliance with regulations.
• Specifying the networks of providers from whom enrollees may obtain services for all benefits, including supplemental benefits.
• Describing when, how, and in what manner debit cards can be used by an MA organization and enrollee.
• Requiring plans to allow an enrollee to receive covered benefits through an alternative process if there is an issue with a plan debit card.
• Ensuring debit cards are electronically linked to plan covered items and services through a real-time identification mechanism.

Promoting community-based services and enhancing transparency of in-home service contractors: Related to supplemental benefits, the rule aims to strengthen beneficiary protections and transparency around community-based organizations (CBOs), in-home or at-home supplemental benefit providers and direct furnishing entities. The rule codifies definitions of these entities and requires plans to identify them within the provider directory.

Dual eligible simplification: The rule also seeks to simplify healthcare access for members of an Applicable Integrated (Plan) Special Needs Plans (AIP SNP).These plans are the most integrated between Medicare and Medicaid.  The rules would require integrated member identification (ID) cards that serve as the ID cards for both the Medicare and Medicaid plans in which an enrollee is enrolled. The MA plan would have to conduct an integrated health risk assessment (HRA) for Medicare and Medicaid.

The rule also codifies for integrated SNPs a number of HRA and care plan issuance policies that are applicable to SNPs generally elsewhere in regulation. These are on the timelines for and HRA, timely issuance of a care plan, and what must be included in care plans. 

General programmatic changes

Medical loss ratio changes: MA medical loss ratio (MLR) regulations will be changed to improve the meaningfulness and comparability of the MLR across plan contracts and align them with commercial and Medicaid requirements.

The rule would require that provider incentive and bonus arrangements are tied to clinical or quality improvement standards in order to be included in the minimum MLR calculation. Specifically, the rule would establish clinical and quality improvement standards for provider incentives and bonus arrangements to qualify for inclusion in the MA MLR numerator. This would align such bonus payments with care outcomes and avoid excess premium transfer to providers. Administrative costs would be excluded from being included in quality improvement activities in both the MA and Part D MLR numerator. The rule would adopt additional requirements for the allocation of expenses in the MLR. New audit and appeals processes are introduced.

The rule would also require plans to provide detailed information regarding provider payment arrangements. CMS is also seeking 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.

Many of these provisions are a clear shot across the bow regarding intracompany arrangements between health plans and related entities to get around the minimum 85% MLR. To see how serious CMS may get on this issue, consider this verbiage directly from the rule:

“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. As such, we propose to amend § 422.2420(b)(2)(xi) such that only those provider incentives and bonuses made, or expected to be made, that are tied to clearly defined, objectively measurable, and well documented clinical or quality improvement standards that apply to providers may be included in incurred claims in the numerator for MA MLR reporting and remittance purposes.”

Marketing reforms to promote informed choice: Surprisingly, CMS is not seeking to reimplement the overturned rule barring extraordinary compensation to brokers that essentially steer members to certain plans. That was a great proposal.

CMS proposes the following reforms in the rule:

• Expanding marketing material oversight by broadening the definition of marketing so as to expand the scope of materials that must be prospectively submitted to CMS for review. CMS says this would allow the agency to better ensure that MA and Part D plans and their downstream entities are not providing misleading, inaccurate, or confusing information to current or potential enrollees, or engaging in activities that could misrepresent benefits or services.
• Expanding what agents and brokers must discuss with potential enrollees. These new requirements include:
  • The availability of low-income supports, including the Part D Low-Income Subsidy 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.
  • 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.

Medigap education is a sore topic for opponents of MA, who argue many are choosing MA, have a bad experience, and then cannot obtain Medigap when seeking to enroll in the traditional program. Just a small number of states have expansive guaranteed issue post an initial period of enrollment in Medicare. While I think opponents’ arguments are overplayed, the change is nonetheless good policy.

Format provider directories for Medicare Plan Finder (MPF):  The rule proposes that MA provider directory data be submitted for use to populate the Medicare Plan Finder (MPF).

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— Marc S. Ryan