Medicare Program; Contract Year 2027 and Certain Contract Year 2026 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, and Medicare Cost Plan Program

MA organizations are required to have contracts with CMS to operate each year. Section 1857(h)(2) of the Act provides authority for the Secretary to immediately terminate a contract with an MA organization in instances where the Secretary determines that a delay in termination resulting from compliance with the procedures in section 1857(h)(1) of the Act would pose an imminent and serious risk to the health of enrolled Medicare beneficiaries. In the final rule titled “Medicare Program; Establishment of the Medicare+Choice Program,” which appeared in the Federal Register on June 26, 1998 (hereafter referred to as the June 1998 final rule; 63 FR 35018), we finalized regulations at Sec. 422.510 which outline processes for terminations of contracts by CMS, while providing conditions in which contracts may be found terminable. Such conditions include failure to carry out the contract, carrying out the contract in a manner that is inconsistent with the efficient and effective administration of MA regulations, and no longer being able to meet the applicable conditions put forth in MA regulations. In the decades since this rule was first finalized, we have continued to refine the conditions in which CMS may terminate an MA contract at Sec. 422.510 and elsewhere in Part 422.

D-SNPs are MA plans that coordinate the delivery of Medicare and Medicaid services for individuals who are eligible for such services and enrolled in the plan. In addition to the standard contract an MA organization must have with CMS to operate, per section 1859(f)(3)(D) of the Act, MA organizations offering D-SNPs must also have a contract with the State Medicaid agency to provide benefits, or arrange for benefits to be provided, for individuals entitled to Medicaid. Because D-SNPs are required to have State Medicaid agency contracts (SMACs), States have significant control over the availability of D-SNPs in their markets given the State's discretion in contracting with D-SNPs in combination with the State's control over its Medicaid program. We discussed this relationship between States and MA organizations 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, specifically at 87 FR 27763.

Because of the relationship between the State and the D-SNP, the provision and continuation of SMACs are sensitive to State policy changes and operational choices. To illustrate this, we look to Medicaid MCO procurement timelines and decisions. The timeline and duration for these procurements is distinct to each State and may operate off-cycle from MA contracting at the Federal level, meaning that if a State decides not to contract with a particular Medicaid MCO, which may occur off-cycle from the calendar year, such a procurement decision may require termination of a Medicaid MCO contract. Termination of the Medicaid MCO contract would trigger termination of the SMAC, if the terminating Medicaid MCO is an affiliated entity with a D-SNP that has a SMAC in effect.

As was noted earlier in this preamble, D-SNPs are statutorily required to have a SMAC to operate in a State. In the example given previously, if a Medicaid MCO that is an affiliated entity with a D-SNP loses a State procurement or otherwise has its Medicaid MCO contract terminated, the State also terminates the SMAC and the D-SNP cannot continue to operate. This action requires that the contract between the D-SNP and CMS be terminated. As more States move towards integrated care and contract with Medicaid MCOs through the result of procurements, we have encountered instances where a SMAC is terminated by a State during the plan year. In those instances, CMS has worked with the respective State and the MA organization whose SMAC is being terminated to mutually terminate the contract per Sec. 422.508, a process by which CMS, the State and the D-SNP agree on a timeline for termination and the provision of notice to enrollees of such termination, in an effort to create a smoother transition to an alternative plan for the plan's enrollees.

However, an MA organization with a terminating SMAC is not required to seek a mutual termination of its MA contract with CMS. Absent the cooperation of the MA organization to mutually terminate in situations where the MA organization no longer holds a SMAC with the State, we are concerned that enrollees may experience harm by losing access to their integrated care, including access to known providers and care plans, as the D-SNP in which they are enrolled is no longer able to provide benefits, or arrange for benefits to be provided, for individuals entitled to Medicaid. In these instances, CMS will need to seek immediate termination to protect beneficiaries.

At Sec. 422.510(a)(4), we first proposed to add a new paragraph (xvii) to establish that CMS may terminate a contract if the MA organization is no longer eligible to offer a D-SNP because the MA organization does not hold a contract with the State Medicaid agency consistent with Sec. 422.107(b). Our goal in adding this new clause was to codify that the loss of a SMAC constitutes a valid basis for contract termination under CMS authority per section 1859(f)(3)(D) of the Act.

Secondly, at Sec. 422.510(b)(2)(i), we proposed to add paragraph (D) to state that the procedures specified in paragraph (b)(1), related to when CMS notifies the MA organization and when the MA organization must notify its enrollees and the general public, do not apply if the contract is being terminated based on the proposed addition of Sec. 422.510(a)(4)(xvii). We proposed that when a D-SNP contract is terminated because the State has terminated the affiliated contract with the Medicaid MCO or the State has terminated the SMAC, it is cause for CMS to make the MA contract termination immediate. When a State terminates the Medicaid MCO affiliated with the D-SNP or terminates the SMAC, D-SNP enrollees who are otherwise entitled to medical

assistance under a State plan under title XIX of the Act would be in jeopardy of not having access to the Medicaid services to which they are entitled, given that, as required by Sec. 422.2, D-SNPs coordinate the delivery of Medicare and Medicaid services for eligible individuals and may provide coverage of Medicaid services. It is our belief that a delay in D-SNP contract termination could disrupt access to Medicaid benefits for those who are eligible, which would pose an imminent and serious risk to the health of the organization's enrollees, rising to the standard put forth in section 1857(h)(2) of the Act and warranting immediate termination of contract by CMS. We stated that where the MA organization does not agree to a mutual termination in coordination with the termination of the affiliated Medicaid MCO contract and/or SMAC, an immediate termination would be appropriate. However, we noted that our proposed amendments to Sec. Sec. 422.510(a)(4)(xvii) and (b)(2)(i)(D) did not preclude a MA organization from seeking termination of a contract by mutual consent, per Sec. 422.508.

We noted that when an MA organization has multiple plans under one contract, per Sec. 422.503(e) CMS may sever the D-SNP from the rest of the contract, in effect allowing CMS to renew only the portion of the contract that does not include the D-SNP affiliated with the terminated SMAC.

Proposed Sec. 422.510(b)(2)(i)(D) would codify the process of immediate termination of contract by CMS when the D-SNP does not have a SMAC. We stated that the MA organization in this situation does not need and would not benefit from an opportunity to develop and implement a corrective action plan as required at Sec. 422.510(c)(1) given that the only way to correct the issue would be to execute a SMAC with the State. States have the ability to issue corrective action plans to the D-SNPs with whom they hold contracts. Many States, in their SMACs, include language to this effect. Additionally, as in the example given previously, if a Medicaid MCO that is an affiliated entity with a D-SNP loses a State procurement, the State also terminates the SMAC. In either of these instances, allowing D-SNPs the opportunity to develop and implement a corrective action plan per Sec. 422.510(c)(1) would not provide the D-SNP with an avenue to correct any underlying issue that resulted in the State's termination of the SMAC. The SMAC termination, including any related opportunity to pursue a corrective action plan offered by the State, will have already occurred by the time the MA contract is terminated. Moreover, State procurement decisions operate separately from MA contracting decisions through CMS and would not be amenable to a cure or a corrective action plan as described in Sec. 422.510(c)(1). Furthermore, any further delay in termination of the D-SNP contract poses imminent and serious risk to the health of the organization's enrollees as previously described in this preamble, rising to the standard put forth in section 1857(h)(2) of the Act. As such, we proposed that termination of a SMAC be included as an exception to the opportunity for plans to develop and implement a corrective action plan, at Sec. 422.510(c)(2)(iv).

We requested comment on this proposal, including but not limited to whether this package of provisions would accomplish the goals we have laid out in this preamble and whether there should be any other additional modifications to consider.

We received the following comments on this proposal and respond to them below:

Comment: Many commenters supported CMS' proposal to codify in regulation at Sec. 422.510(a)(4) that CMS may terminate a contract if the MA organization is no longer eligible to offer a D-SNP because the MA organization does not hold a contract with the State Medicaid agency consistent with Sec. 422.107(b). Commenters expressed their appreciation for CMS clarifying the administrative process in such situations and stated that the proposed provision would provide clarity and codify necessary Federal authority when State contract terminations occur off-cycle from MA contracting.

Response: We thank the commenters for their support of this proposal and agree that the proposed language provides clarity on the administrative process when an MA organization is no longer eligible to offer a D-SNP due to not holding the required SMAC.

Comment: A few commenters opposed our proposal, stating that immediate terminations would cause disruption of care for vulnerable populations and create obstacles for beneficiaries to transition to new plans. Commenters further opined that CMS should establish reasonable transitional periods to ensure beneficiaries' continued access to medical services.

Response: We appreciate the commenters' concern for possible disruption of care and beneficiary well-being. We would like to reiterate that the purpose of this proposal was to codify that loss of a SMAC is a valid basis for contract termination under CMS authority per section 1859(f)(3)(D) of the Act. As we discussed in the preamble to the Contract Year 2027 proposed rule, in some instances where a SMAC was terminated by a State during the plan year, CMS has worked with the respective State and the MA organization whose SMAC is being terminated to mutually terminate the contract per Sec. 422.508. This is a process by which CMS, the State and the D-SNP are able to mutually agree on a timeline for termination and the provision of notice to enrollees of such termination, in an effort to create a smoother transition to an alternative plan for the plan's enrollees. (90 FR 54976). This process will continue to be available. Our goal in adding new (xvii) at Sec. 422.510(a)(4) is to establish a an express pathway by which CMS may immediately terminate contracts based on termination of a SMAC, since, as discussed in preamble to the Contract Year 2027 proposed rule, an MA organization with a terminating SMAC is not required to seek a mutual termination of its MA contract with CMS. (90 FR 54977). Our proposed language does not preclude an eligible plan from seeking mutual termination, per Sec. 422.508. We believe that where the MA organization does not agree to a mutual termination in coordination with the termination of the affiliated Medicaid MCO contract and/or SMAC, an immediate termination would be appropriate and could limit potential disruption of beneficiary access to integrated care.

Further, we would like to take the opportunity to clarify that while we refer to this process as an “immediate termination,” as stated previously in this section and in the Contract Year 2027 proposed rule, we generally receive advance notice when a State is terminating or ending a Medicaid MCO contract or their SMAC contract. In instances where an MA organization does not agree to a mutual termination, or where the timeline of a mutual termination would pose risks to beneficiaries, an immediate termination allows us to accommodate an orderly shutdown of operations. An immediate termination does not mean that a termination would occur without notice but rather allows for a more expedited process when necessary to protect enrollee health and safety.

Comment: A few commenters expressed their view that the provision that was proposed was too broad. Commenters believed that there was not a clear enough connection between the preamble language and the regulatory text, stating that the preamble language

that used Medicaid MCO procurement timelines presented a narrower scope than the language proposed in regulation at Sec. 422.510(a)(4)(xvii).

Response: We thank the commenters for their feedback on this, though we respectfully disagree. In the Contract Year 2027 proposed rule, we emphasize that D-SNPs are statutorily required to have a SMAC to operate in a State per section 1859(f)(3)(D) of the Act. In the preamble to the Contract Year 2027 proposed rule, we used Medicaid MCO procurement timelines as an example to illustrate how the relationship between the State and the D-SNP and the provision and continuation of SMAC, are sensitive to State policy changes and operational choices. (90 FR 54976) However, our use of State procurement decisions as an example of a scenario in which a D-SNP may lose its SMAC does not mean that that is the only process by which a SMAC can be terminated, or in turn, an MA contract can be terminated. Ultimately, per Sec. 422.107(a), a SMAC is a contract between an MA organization and the State Medicaid agency. If the State or the MA organization terminate the contract, then the MA organization is statutorily prohibited from operating that D-SNP in the State.

Further, in the Contract Year 2027 proposed rule, we pointed to 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, specifically to draw attention to previous preamble that discussed how States have significant control over the availability of D-SNPs in their markets. (see 90 FR 54976 (citing 87 FR 27763)) Therefore, we do not believe there to be a mismatch between our proposed regulatory text and the preamble in the Contract Year 2027 proposed rule.

Comment: We received several comments objecting to the proposed provision, stating that while the regulatory language ties immediate termination to the loss of a SMAC, the preamble suggests that CMS intends to apply immediate termination authority when an affiliated Medicaid MCO contract is terminated, even where the SMAC itself remains in effect. Commenters suggested that termination of the affiliated Medicaid MCO contract would not necessarily prevent the D-SNP from continuing to meet its obligations to coordinate Medicare and Medicaid benefits under Sec. 422.2 or from supporting CMS' broader goals of continuity of coverage and beneficiary stability. Other commenters suggested that this proposal should only apply to AIP D-SNPs.

Response: We thank the commenters for engaging with this proposal. As we explained in the Contract Year 2027 proposed rule, termination of the Medicaid MCO contract would trigger termination of the SMAC, if the terminating Medicaid MCO is an affiliated entity with a D-SNP that has a SMAC in effect (90 FR 54976). If the Medicaid MCO is terminated and is not an affiliated entity with a D-SNP, then it would not trigger a SMAC termination, since there would be no SMAC to terminate. Additionally, we respectfully disagree with the commenters that suggest that this proposal only be applicable to AIP D-SNPs. Per section 1859(f)(3)(D) of the Act, all MA organizations offering D-SNPs must have a contract with the State Medicaid agency to provide benefits, or arrange for benefits to be provided, for individuals entitled to Medicaid. Therefore, this policy would apply to all D-SNPs.

Comment: Many commenters opined on the concept of immediate termination. Commenters noted that immediate termination of a D-SNP contract has the potential to increase the risk of beneficiary confusion or disruption in care and access, and that alternatively, mutual termination allows CMS, States, and MA organizations to prepare for enrollee transitions and reduce care disruptions. Other commenters recommended that CMS wait until the end of the plan year for a contract termination to take effect, or at the very least, CMS should work closely with the State Medicaid agencies to determine a reasonable termination date and consider defining “immediate” as a mutually agreed upon termination date between CMS and the D-SNP. Other commenters encouraged CMS to avoid immediate contract terminations and only invoke the ability to immediately terminate a D-SNP contract after significant efforts have been made to collaborate with the State Medicaid agency and the respective MA plan.

Response: We appreciate the commenters' concern and share their interest in minimizing risk of beneficiary confusion or disruption in care and access. As discussed previously in this preamble, the preamble to the Contract Year 2027 proposed rule included reference to actual instances where a SMAC has been terminated by a State during the plan year, and CMS has worked with the respective State and the MA organization whose SMAC was being terminated to mutually terminate the contract per Sec. 422.508. This is a process by which CMS, the State and the D-SNP are able to agree on a timeline for termination and notice to enrollees of such termination, in an effort to create a smooth transition to an alternative plan for the plan's enrollees (90 FR 54976). Our goal in proposing paragraph (xvii) at Sec. 422.510(a)(4) is to codify an express pathway by which CMS may immediately terminate contracts based on termination of a SMAC, since, as discussed in preamble to the Contract Year 2027 proposed rule, an MA organization with a terminating SMAC is not required to seek a mutual termination of its MA contract with CMS (90 FR 54977). As stated previously in this section, an immediate termination allows for a more expedited process when necessary to protect enrollee health and safety and accommodate an orderly shutdown of operations.

Our intent is to minimize enrollee disruption to the extent possible and collaborate with the State Medicaid agency and the respective MA plan in instances where a contract must be terminated. Our proposed language does not preclude an eligible plan from seeking mutual termination, per Sec. 422.508, which would be our preference, and we welcome working with State Medicaid agencies and plans to minimize enrollee disruption where possible.

Comment: We received many comments regarding the relationship between States and plans. Several commenters supported the overall proposal, noting that finalizing such a provision would improve a State's ability to engage in D-SNP oversight or empower States to have more control over which D-SNPs are offered in their State and support further Medicare-Medicaid integration and increased enrollment in integrated D-SNPs. These commenters noted that when plan performance leads to low quality of care, States should be able to terminate that D-SNP. A few commenters objected to our proposal, opining that the proposed provision could provide States with additional motivation to negotiate midyear changes to the terms of the SMAC with the penalty of rescinding the SMAC if the new terms are not accepted. The commenters strongly urged CMS to view this proposal considering the negotiation dynamics between health plans and States.

Response: We appreciate the commenters' thoughts on this matter. However, we would like to take this opportunity to underscore that this proposed language does not confer any new or different power on the State with regard to their ability to contract with D-SNPs. As discussed in preamble to the Contract Year 2027 proposed rule, in addition to the standard contract an MA organization must have with CMS to operate, per section 1859(f)(3)(D) of the Act, MA organizations offering D-SNPs must also have a contract with the State Medicaid agency to provide benefits, or arrange for benefits to be provided, for individuals entitled to Medicaid (90 FR 54976). Federal requirements for SMACs are codified in CMS regulations at Sec. 422.107, but as stated at Sec. 422.107(a), the SMAC is an agreement between an MA organization and the State Medicaid agency. At Sec. 422.510(a)(4), we proposed to add a new paragraph (xvii) to establish that CMS may terminate a contract if the MA organization is no longer eligible to offer a D-SNP because the MA organization does not hold a contract with the State Medicaid agency consistent with Sec. 422.107(b). We note that under Sec. 422.510(a)(4)(ix), CMS already has the authority to terminate a contract for failure to comply with regulatory requirements in 42 CFR part 422. Our goal in adding this new clause is to specifically codify that the loss of a SMAC constitutes a valid basis for contract termination under CMS authority per section 1859(f)(3)(D) of the Act. We did not propose nor are we finalizing any new language with regard to how SMACs are negotiated, carried out, or entered into.

Comment: A few commenters opposed our proposal to not apply noticing requirements if CMS executes an immediate contract termination. Commenters noted that noticing requirements could help to avoid beneficiary confusion, and immediate termination of a D-SNP contract could create significant beneficiary disruption, especially if termination occurs before enrollment transitions or communications are complete. Another commenter recommended that CMS include some form of beneficiary notification requirement even if that process must be abridged and aligned with State Medicaid notification requirements in the circumstance of an immediate contract termination. Commenters mentioned that contract terminations should be implemented with appropriate transition protections to preserve beneficiary stability.

Response: We thank the commenters for their responses and appreciate the attention regarding enrollees in a terminating D-SNP contract. We reiterate our previous responses to comments where we noted that our proposed language at Sec. 422.510 does not preclude an eligible D-SNP from seeking mutual termination, per Sec. 422.508, and we prefer working with State Medicaid agencies and D-SNPs on mutual terminations to minimize enrollee disruption, where possible. However, as an MA organization with a terminating SMAC is not required to seek a mutual termination of its MA contract with CMS, we proposed language that would codify CMS's ability to provide an immediate termination of the contract the D-SNP has with CMS. In an instance where an MA organization with a terminating SMAC does not seek mutual termination when the affiliated Medicaid MCO contract and/or SMAC terminates and CMS immediately terminates the MA organization's MA contract, pursuant to 42 CFR 422.510(b)(2)(iii), CMS notifies the MA organization's Medicare enrollees in writing of CMS's decision to terminate the MA organization's contract. This notice occurs no later than 30 days after CMS notifies the plan of its decision to terminate the MA contract. CMS simultaneously informs the Medicare enrollees of alternative options for obtaining Medicare services, including alternative MA organizations in a similar geographic area and original Medicare.

Comment: A couple of commenters suggested that CMS align the effective date of the Medicare contract termination with the SMAC termination date established by the Medicaid agency and consult with the Medicaid agency when such terminations occur.

Response: We thank the commenters for their consideration for the operational aspects of this policy proposal. We reiterate our previous responses to comments where we noted that our proposed language at Sec. 422.510 does not preclude an eligible D-SNP from seeking mutual termination, per Sec. 422.508, where applicable, and we welcome working with State Medicaid agencies and plans on mutual terminations to minimize enrollee disruption where possible. However, an MA organization with a terminating SMAC is not required to seek a mutual termination of its MA contract with CMS, and there are circumstances in which a State may immediately terminate a SMAC, such as where there is beneficiary harm. Thus, we proposed language that would codify CMS's ability to provide an immediate termination of the contract the D-SNP has with CMS, as it is our belief that a delay in D-SNP contract termination could disrupt access to Medicaid benefits for those who are eligible. (90 FR 54978)

Comment: A couple of commenters encouraged CMS to work with States to better structure Medicaid procurement opportunities. Commenters noted that State Medicaid procurement processes are not subject to Federal procurement rules or CMS oversight and can be opaque. Another commenter suggested that for a D-SNP designated as an AIP, where there is an aligned Medicaid MCO or D-SNP that is implemented after a procurement award, there be a run out period to prevent any unintended beneficiary disruption.

Response: We appreciate the opinions expressed by commenters. State Medicaid procurement processes are not subject to Federal procurement rules or CMS oversight, and thus these suggestions are outside of our purview. If a State requested our input on their Medicaid MCO procurement timelines and processes, we would provide any insight we may have at that time.

Comment: We received a few comments that were out of scope. Some commenters expressed concern regarding how the proposed provision would affect MA contract lockout periods for the terminated plan, suggesting that CMS should have the discretion to not impose a lockout period at all.

Response: We thank the commenters for their suggestion. We believe the commenters are referring to regulations, such as those at Sec. 422.502, where CMS may deny an application for a new MA contract or service area expansion based on the applicant's substantial failure to comply with the requirements of the Part C program. The parameters for application denials are outside the scope of the proposed regulation.

After considering the comments we received and for the reasons outlined above and our responses to comments, we are finalizing language at Sec. 422.510(a)(4)(xvii), (b)(2)(i)(D), and (c)(2)(iv) as proposed.

E. Limitation on D-SNP-Only Contracts Submitting Materials Under the Multi-Contract Entity and Multi-Plan Process (Sec. Sec. 422.2261 and 423.2261).

Sections 422.2261(a) and 423.2261(a) require MA organizations and Part D sponsors to submit all marketing materials, all election forms, and certain designated communication materials for CMS review. These regulations state that the HPMS Marketing Module is the primary system of record for the collection, review, and storage of materials that must be submitted for

CMS review. They also specify that materials must be submitted to the HPMS Marketing Module by the MA organization or Part D sponsor or, where materials have been developed by a Third Party Marketing Organization (TPMO) for multiple MA organizations or plans, by a TPMO with prior review of each MA organization on whose behalf the materials were created or will be used. In addition, Sec. Sec. 422.2262(d) and 423.2262(d) describe how MA organizations and Part D sponsors must use a standardized method of identification for oversight and tracking for materials received by beneficiaries including the MA organization's contract or Multi-Contract Entity (MCE) number (such as an “H” number for MA plans or “Y” number for an MCE).

Under Sec. 422.107(e), a State Medicaid agency may require MA organizations offering D-SNPs with exclusively aligned enrollment to do both of the following: (1) apply for, and seek CMS approval to establish and maintain, one or more MA contracts that only include one or more D-SNPs with a service area limited to the State; and (2) use required materials that integrate Medicare and Medicaid content including, at a minimum, the Summary of Benefits, Formulary, and combined Provider and Pharmacy Directory that meets Medicare and Medicaid managed care requirements consistent with applicable regulations in parts 422, 423, and 438 of Title 42 of the CFR. We refer to MA contracts that only include one or more D-SNPs with a service area limited to the State as D-SNP-only contracts. If a State elects to require D-SNP-only contracts under Sec. 422.107(e)(1), per Sec. 422.107(e)(3)(i), CMS grants State Medicaid agency officials access to HPMS for purposes of oversight and information sharing for these D-SNP- only contracts. This State oversight includes access to the HPMS Marketing Module for purposes of reviewing materials submitted by D- SNP-only contracts. These States only have access to review materials submitted under the contract number (H number) in HPMS for D-SNP-only contracts.

For material oversight, per Sec. 438.10(c)(5), States are required to ensure, through their Medicaid managed care contracts, that each managed care organization (MCO), prepaid inpatient health plan (PIHP), prepaid ambulatory health plan (PAHP), and primary care case management (PCCM) entity provides the information to each enrollee consistent with Sec. 438.10(f)-(i), as applicable. In addition, per Sec. 438.104(b), MCO, PIHP, PAHP, PCCM, or PCCM entities cannot distribute marketing materials without first obtaining State approval. The entity's contract with the State must also specify the methods by which the entity ensures that marketing, including plans and materials, is accurate and does not mislead, confuse, or defraud the beneficiaries or the State Medicaid agency.

Since contracts with exclusive alignment of Medicare and Medicaid must meet the material requirements of both CMS and the State, prior to the adoption of Sec. 422.107(e), MA organizations were required to submit materials to the State and CMS separately. However, States requiring D-SNP-only contracts have access to HPMS for reviewing these materials, and they can require the MA organizations offering D-SNP- only contracts to submit materials in the HPMS marketing module for State review. This State access decreases plan burden by allowing the D-SNP to submit the material once in HPMS for concurrent joint review by CMS and the State, as applicable, rather than having to separately submit materials to the State for review and then to CMS. This can also shorten the total review time for the MA organization and give it more time to meet tight timeframes for releasing materials to enrollees.

If an MA organization were to submit a material under an MCE number that applies to multiple contracts, the applicable State Medicaid agency would not be able to either view or review that material in the HPMS Marketing Module. States only have access to information in HPMS for the specific D-SNP-only contracts in their State. Because MCE numbers cover multiple contracts across multiple States, CMS doesn't allow State staff to access materials submitted under an MCE number, even if an MA organization includes materials for their State. MA organizations could potentially submit a substantial number of materials in HPMS under the MCE number, including their D-SNP-only contracts, but the State would not be able to view any of them due to their submission under the MCE number. To address this challenge, CMS has programmed the HPMS marketing module so that D-SNP-only contracts cannot submit materials under an MCE number. In addition, States with D-SNP-only contracts have added language in their SMACs to prohibit submission of materials in the HPMS Marketing Module under the MA organization's MCE number. Instead, States are requiring that MA organizations with D-SNP-only contracts submit materials for review under their contract ID number.

To ensure that D-SNP-only contracts are meeting the material requirements of both Medicare and Medicaid, we proposed to clarify that MA organizations with D-SNP-only contracts cannot submit materials using the MA organization's MCE number for D-SNP-only contracts, nor can TPMOs submit materials on behalf of the MA organization for D-SNP- only contracts using an MCE number. This requirement applies to all plan benefit packages within D-SNP-only contracts under Sec. 422.107(e)(1). Since States have already been requiring this approach through their SMACs and the HPMS Marketing Module is set up to prevent D-SNP-only contracts from submitting materials under an MCE number, we stated that we do not expect this update to add burden for any MA organizations; the current process will not change.

Under our authority to interpret, implement, and carry out the Part C and D programs under sections 1851(h), 1851(j), 1852(c), 1860D- 1(b)(1)(B)(vi), 1860D-4(a), and 1860D-4(l) of the Act, we proposed to add a requirement at Sec. Sec. 422.2261(a)(3) and 423.2261(a)(3) that MA organizations offering D-SNPs with exclusively aligned enrollment subject to Sec. 422.107(e) must submit all materials for the contract in HPMS under the MA organization's contract number. MA organizations and TPMOs may not submit materials for the contract under the organization's MCE number as described in Sec. Sec. 422.2262(d)(2)(i) and 423.2262(d)(2)(i). We received the following comments on our proposal and our responses are as follows:

Comment: Numerous commenters supported our proposal at Sec. Sec. 422.2261(a)(3) and 423.2261(a)(3). They appreciated that it supports joint reviews of materials and integrated care. They stated it would allow States to provide better oversight of D-SNP-only contracts and take actions necessary to ensure enrollees receive quality materials. A commenter noted that the requirement would help ensure that MA organizations can better meet tight deadlines to provide materials to enrollees.

Response: We appreciate the commenters' support for our proposal to require that D-SNPs with exclusively aligned enrollment subject to Sec. 422.107(e) submit all materials for the contract in HPMS under the MA organization's contract number. We believe that the proposal will help clarify the material submission process in HPMS for D-SNP- only contracts and help streamline the State and CMS material review process for these D-SNPs.

Comment: A few commenters suggested that CMS consider ways to encourage states to adopt consistent, streamlined review timelines to improve the timeliness of reviews. They noted inconsistent use of HPMS across States with some States implementing multi-step submission processes through both a State portal and HPMS. These commenters suggested that CMS consider a universal 45-day deeming period across all States and a 5-day file and use approach or a 10-day review period for all required materials. They also recommended increased education to States on how to use HPMS to improve their understanding and ability to review materials in HPMS as well as the ability for States to be exempt from the process if they choose.

Response: We thank the commenters for their perspectives. Only those States with D-SNP-only contracts can utilize the joint review process in HPMS if they choose to do so. States are not required to utilize this process. Each State Medicaid program is different, so the States that do participate in the process can determine which materials they want to review and if they want to review them in 10 days or 45 days, or as file and use which are the same review periods as for other MA materials per Sec. Sec. 422.2261(b) and 423.2261(b). This is similar to the review process used for Medicare-Medicaid Plans under the Financial Alignment Initiative demonstration. Also, for States utilizing the joint review process, we provide education on the use of HPMS marketing module annually and are available to provide technical assistance to States throughout the year. We will continue to provide this training and focus on areas where we find further education is needed.

Comment: A commenter noted that for States that have multiple plan benefit packages (PBPs) for the D-SNP-only contract, materials are submitted to the State for the D-SNP PBP designated as an AIP. These States do not require submission of materials when the PBP is not an AIP. The commenter also stated that HPMS's review is at the PBP level and not at the contract level. The commenter articulated that submitting materials for AIP PBPs and non-AIP PBPs when States do not need to review the non-AIP PBP materials can create an administrative burden for both plans and the State. The commenter noted that it would welcome working with CMS to improve the process going forward.

Response: We appreciate the commenter's perspective on this issue. It is true that MA organizations with D-SNP-only contracts must submit materials under the contract ID number in HPMS for all PBPs within the contract and that States with D-SNP-only contracts to date have chosen not to review the non-AIP PBP materials. However, the plans still must submit materials for every PBP within the contract for State review because there is no technical mechanism within HPMS to have the State only review one PBP within a contract and not the other PBP. As a workaround, States have been approving the non-AIP PBP materials and noting that they did not review the remaining PBP materials since they are for a non-AIP PBP.

While this is an extra step for States, the majority of the material categories for D-SNP-only contract States are submitted at the contract level and not PBP level. For example, for the State of South Carolina, MA organizations with D-SNP-only contracts can submit materials for 12 out of 47 material categories at the PBP level. Materials for the other 35 categories are submitted at the contract ID level. In addition, for any non-AIP PBPs, D-SNPs only have to submit into HPMS those materials for which CMS review is required for MA plans. There are 5 material categories that CMS reviews for MA where plans can submit materials at the PBP level. Two of these material categories are for errata documents that MA plans rarely submit. As a result, we understand that while this process may be an extra step for States, the extent of the PBP level submissions is limited. We appreciate the commenter's offer to work with CMS to improve the process going forward.

Comment: A commenter requested that CMS not require MA plans to file national D-SNP marketing materials that do not include State- specific elements in HPMS under each individual contract number. The commenter stated that this approach would result in multiple submissions of identical materials under different contract numbers and material IDs, significantly increasing the volume of duplicate materials subject to CMS review without corresponding regulatory benefit. The commenter also opined that managing feedback from multiple States while attempting to produce a single unified material would be operationally challenging and burdensome. The commenter noted that even if all States were to agree on a single document version through separate reviews, it remains unclear how plans should reflect multiple material IDs. The commenter recommended that CMS consider adding unique category codes or creating an AIP D-SNP MCE contract number that could be used for national AIP D-SNP materials that do not contain State- specific content. If CMS finalized this regulation as proposed, the commenter suggested that CMS enhance HPMS to allow users to select multiple States from a dropdown menu and bundle submissions for standard templates, rather than requiring individual State submissions.

Response: We appreciate the commenter's perspective on this issue. For D-SNP-only contracts, States can only review those materials that are submitted under the D-SNP-only contracts that are located within their State. While a specific material may not contain State-specific content, we believe that every State has a right to review all materials submitted for the contract if they choose to do so. We understand that this may result in duplicate submissions of certain materials, however, organizations have a contract with both CMS and the State Medicaid agency for these exclusively aligned plans, and every State has different areas of focus for materials. If there are materials reviewed under multiple contracts that have no difference after review, the MA organization can add multiple material ID numbers to the bottom of the material. As a result, we disagree with adding unique category codes to HPMS or creating an AIP D-SNP MCE contract number. We will consider for the future the commenter's recommendation to allow MA organizations to select multiple States from a drop-down menu and bundle submissions for standard templates in HPMS.

Comment: A commenter questioned whether “MA organizations offering D-SNPs with exclusively aligned enrollment subject to Sec. 422.107(e) must submit all materials for the contract in HPMS under the MA organization's contract number” will be the exact language used for the proposed requirements at Sec. Sec. 422.2261(a)(3) and 423.2261(a)(3). The commenter believed the intent to be “subject to Sec. 422.107(e)” was meant to be “subject to Sec. 422.107(e)(1)” as the former largely focuses on the relationship between State Medicaid agencies and CMS, whereas the latter is specific to MA organizations with exclusively aligned enrollment.

Response: We thank the commenter for their question. We will be finalizing the regulation text as proposed as we believe that it is beneficial to use Sec. 422.107(e) as it describes all aspects of D- SNP-only contracts, such as State access to HPMS which allows for joint reviews of materials, whereas Sec. 422.107(e)(1) only includes some of

the steps that States must take for D-SNP-only contracts in the State.

Comment: A few commenters provided comments that were out of scope of this proposed provision. Commenters requested that CMS require all D-SNPs to register under their own contract number and not be grouped together with other D-SNPs or MA plans. The commenter suggested that such a structure would allow for greater transparency for States, as well as better monitoring for compliance and better-quality metric reporting. The commenters asserted that combining D-SNPs with other plans in the same contract number muddles data and accountability.

Response: We thank the commenters for their suggestion. We appreciate these recommendations; however, these comments are outside the scope of this rulemaking. We will consider exploring opportunities for potential future rulemaking to address some of these issues.

After considering the comments we received and additional review, we are finalizing the provisions proposed at Sec. Sec. 422.2261(a)(3) and 423.2261(a)(3) with an update. In the Contract Year 2027 proposed rule, we inadvertently referred to the number for TPMO submissions in HPMS as the MCE number whereas it is a Multi-Plan number. We are correcting this technical error to clarify that MA organizations may not submit materials for the contract under the organization's MCE number and third-party marketing organizations may not submit materials under the Multi-Plan number as described in Sec. Sec. 422.2262(d)(2)(i) and 423.2262(d)(2)(i). This change does not alter the intended scope of the regulatory requirement.

F. Request for Information: C-SNP and I-SNP Growth and Dually Eligible Individuals

In the Contract Year 2027 proposed rule (90 FR 54978 through 54984), we included a request for information regarding growth of chronic condition special needs plans (C-SNPs) and institutional special needs plans (I-SNPs) and dually eligible enrollment in those plans. This section summaries the RFI.

Per the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173), chronic condition special needs plans (C-SNPs), dual eligible special needs plans (D-SNPs), and institutional special needs plans (I-SNPs) are MA plans that are specifically designed to provide targeted care and limit enrollment to special needs individuals. C-SNPs restrict enrollment to special needs individuals with specific severe or disabling chronic conditions as defined at Sec. 422.2. The April 2024 final rule amended the definition of severe or disabling chronic conditions at Sec. 422.2 by outlining the specific co-morbid and medically complex chronic conditions that qualify for C-SNP enrollment (89 FR 30661 through 30666). I-SNPs restrict enrollment to MA eligible individuals who meet the definition of institutionalized and institutionalized- equivalent per Sec. 422.2. The April 2024 final rule added three additional I-SNP subtypes: facility-based institutional special needs plan (FI-SNP), hybrid institutional special needs plan (HI-SNP), and institutional-equivalent special needs plan (IE-SNP). (89 FR 30649 through 30653) D-SNPs are specialized MA plans for individuals who are entitled to medical assistance under a State plan under Title XIX, per Sec. 422.2. 1. Growth in C-SNPs With High Proportion of Dually Eligible Enrollees

The number of C-SNPs offered by MA organizations and the number of dually eligible individuals enrolled in C-SNPs increased from CY 2021 through CY 2025 as outlined at 90 FR 54979. Over the same timeframe, the number of C-SNPs with a high proportion of dually eligible enrollees increased as shown at 90 FR 54979 through 54980. Per Sec. 422.514(d), we defined D-SNP look-alikes as non-SNP MA plans with 60 percent or more dually eligible enrollment. We used this threshold to identify C-SNPs in CY 2021 through CY 2025 with a similarly high level of dually eligible enrollees. At 90 FR 54979 through 54980, we provided more detail on C-SNPs with a high concentration of dually eligible individuals in California, Arizona, Illinois, and New Mexico given these States have the largest number of such C-SNPs during the CY 2021 through CY 2025 timeframe. 2. Growth in I-SNPs With High Proportion of Dually Eligible Enrollees

At 90 FR 54981, we noted that compared to C-SNPs, the number of I- SNPs offered by MA organizations has remained relatively consistent in recent years. Dually eligible individuals represented the vast majority of I-SNP enrollees at approximately 90 percent of total enrollment each year. For a more detailed discussion of dually eligible individuals enrolled in I-SNPs, see 90 FR 54981. 3. Challenges With C-SNPs and I-SNPs With High Proportion of Dually Eligible Enrollees

Dually eligible individuals encounter fragmentation in the health care system as they navigate the Medicare and Medicaid programs. CMS has been working to address these fragmented experiences 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. Our efforts in recent years have increased opportunities for enrollment in D-SNPs that are aligned with Medicaid managed care plans operated through a common parent organization (integrated D- SNPs).

The challenges with C-SNPs and I- SNPs enrolling high proportion of dually eligible individuals are similar to the challenges of D-SNP look-alikes. CMS established contracting limitations on D-SNP look- alikes at Sec. 422.514(d) whereby CMS does not (a) enter into a contract for a new non-SNP MA plan that projects, in its bid submitted under Sec. 422.254, that 60 percent or more of its enrollees are dually eligible or (b) renew a contract with a non-SNP MA plan that has 60 percent or more dually eligible enrollees. We established these contract limitations to address proliferation and growth of D-SNP look- alikes in the final rule titled “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 (hereafter referred to as the June 2020 final rule; 85 FR 33805 through 33806) to ensure full implementation of requirements for D-SNPs, such as SMACs, a minimum integration of Medicare and Medicaid benefits, care coordination through health risk assessments (HRAs), and evidence-based models of care (MOCs). These requirements promote coordination of care. Additionally, the SMAC requirement allows States the flexibility to require greater integration of Medicare and Medicaid benefits from the D-SNPs in their markets. Through their annual SMACs, States are implementing intentional strategies to better coordinate care for dually eligible individuals.

As discussed in the Contract Year 2027 proposed rule at 90 FR 54982

through 54983, C-SNPs could be serving as a workaround to Federal and State integration efforts. Like D-SNPs, C-SNPs and I-SNPs must have approved MOCs and develop HRAs and individualized care plans (ICPs), but C-SNPs and I-SNPs are not subject to State contracting requirements applicable to D-SNPs nor do they reflect the key elements of integrated care: maximized person-centered coordination of Medicare and Medicaid services; mitigation of cost-shifting incentives between the two programs; and a seamless experience for dually eligible individuals. Although research has not yet uniformly shown an advantage for dually eligible individuals enrolling in plans with Medicare and Medicaid integration, preliminary evidence suggests that dually eligible individuals enrolled in integrated plans, on average, experience, reduced emergency department and inpatient hospital admissions, fewer long-term nursing facility stays, greater use of patient care, and slightly better experience and clinical outcomes than those in non- integrated plans.\112\

\112\ Roberts ET, Duggan C, Stein R, Jonnadula S, Johnston KJ, Figueroa JF. Quality, spending, utilization, and outcomes among dual-eligible Medicare-Medicaid beneficiaries in integrated care programs: a systematic review. JAMA Health Forum. July 2024. Available from: https://jamanetwork.com/journals/jama-health-forum/fullarticle/2821202; Feng Z, Wang J, Gadaska A, Knowles M, Haber S, Ingber M, Grouverman, V. Comparing Outcomes for Dual Eligible Beneficiaries in Integrated Care: Final Report, September 2021. Available from: https://aspe.hhs.gov/sites/default/files/documents/9739cab65ad0221a66ebe45463d10d37/dual-eligible-beneficiaries-integrated-care.pdf; and https://www.macpac.gov/wp-content/uploads/2019/07/Evaluations-of-Integrated-Care-Models-for-Dually-Eligible-Beneficiaries-Key-Findings-and-Research-Gaps.pdf; and MACPAC Evaluations of Integrated Care Models for Dually Eligible Beneficiaries: Key Findings and Research Gaps, August 2020. Available from: https://www.macpac.gov/wp-content/uploads/2019/07/Evaluations-of-Integrated-Care-Models-for-Dually-Eligible-Beneficiaries-Key-Findings-and-Research-Gaps.pdf.

C-SNPs and I-SNPs are currently exempt from the D-SNP look-alike contracting limitations. As stated in the June 2020 final rule (85 FR 33813) and April 2024 final rule (89 FR 30722), we excluded SNPs from evaluation against the prohibition on D-SNP look-alikes. Our rationale for the exclusion was to allow for the predominant dually eligible enrollment that characterizes D-SNPs, I-SNPs, and some C-SNPs by virtue of the populations that the statute expressly permits each type of SNP to exclusively enroll. Nonetheless, we stated that we would monitor enrollment in other types of SNPs to assess whether such plans are structured primarily to serve dually eligible enrollees without meeting D- SNP requirements. In their comments on the Contract Year 2025 proposed rule (89 FR 30719), MACPAC suggested that we monitor growth in enrollment of dually eligible beneficiaries in other types of SNPs, including C-SNPs and I- SNPs, and identify any potential effects on integration efforts. The number of D-SNP look-alikes transitioning enrollees to C-SNPs has increased in recent years. That increase could, at least in part, be driven by the exclusion of C-SNPs from the D-SNP look-alike prohibition. 4. Potential Policy Changes for Comment Solicitation

We solicited comments on potential policy changes to support integrated care and improved health outcomes given the significant growth of dually eligible individuals enrolling in C-SNPs and I-SNPs.

First, we solicited comment on establishing a SMAC requirement similar to the existing requirement for D-SNPs. We solicited comments on whether or not we should adopt a SMAC requirement for C-SNPs and/or I-SNPs with high concentrations of dually eligible individuals as well as potential Federal requirements for those SMACs.

Second, we solicited comments on methods to increase care coordination for dually eligible individuals enrolled in C-SNPs and I- SNPs. At 90 FR 54983, we stated that we were considering whether to extend any of these existing D-SNP care coordination requirements to C- SNPs and I-SNPs given the high proportion of dually eligible individuals enrolled in these plans. We solicited comments on whether we should (a) adopt any new care coordination requirements for dually eligible C-SNP and/or I-SNP enrollees; (b) add any MOC requirements for these SNP types; and (c) what those care coordination or MOC requirements should include.

Third, we solicited comment on three approaches to applying the D- SNP look-alike contracting limitations at Sec. 422.514(d) through (g) to C-SNPs. We solicited comments on the potential approaches to apply the D-SNP look-alike contracting limitations as is to C- SNPs and excluding partial-benefit dually eligible individuals from the 60- percent threshold calculation. We welcomed comments on the benefits and challenges of C-SNP enrollees transitioning to non-SNP MA plans and Original Medicare and a standalone Part D plan as well as other suggestions for potential transitions.

Fourth, we requested that stakeholders submit for our consideration any other policy suggestions that could help ensure that there are appropriate protections in place to support high-quality, integrated care for dually eligible enrollees given the increasing proportion of them enrolling in C-SNPs and I-SNPs.

Fifth, we welcomed comments on the policy ideas outlined in this section to help inform potential future regulatory action.

Finally, we noted our interest in how to support improved access to treatment and care coordination for individuals with mental health conditions or substance use disorders as we believe SNPs could be situated to perform a critical role in supporting the improvement of care provided to individuals with serious mental illness (SMI). We invited public comment on the difficulties of creating C-SNPs focused on these conditions, as well as recommended incentives, outcome- based measures, or strategies that would make it easier for MA plans to design and offer these plans. In addition, we welcomed comments on how other SNP types, such as D-SNPs and I-SNPs, are serving this population and what improvements could be made to ensure individuals with SMI are connected to appropriate services. We also invited comments on the advantages and disadvantages of dually eligible individuals with SMI receiving care through enrollment in a C-SNP where we would expect extra emphasis on addressing mental health needs versus through enrollment in a D-SNP that would coordinate Medicare and Medicaid benefits that may also be helpful in addressing mental health needs. Finally, CMS welcomed commenters to share any other considerations or regulatory changes they believe may be necessary to support the availability of high-quality SNPs to serve individuals with SMI.

We received numerous comments in response to this request for information from a broad array of stakeholders, reflecting the strong interest in the issue of C-SNP and I-SNP growth and enrollment of dually eligible individuals in those plans. We appreciate commenters sharing these perspectives. While we will not be responding to the comments submitted in this final rule, we will consider the comments and suggestions for future rulemaking.

Section 1860D-13(b)(6)(B)(i) of the Act provides that each entity that offers prescription drug coverage of the type described in subparagraphs (B) through (H) of section 1860D-13(b)(4) of the Act shall provide for disclosure, to the Secretary and Part D eligible individuals, of whether the coverage is creditable coverage, that is, equals or exceeds the actuarial value of standard prescription drug coverage (as determined under section 1860D-11(c) of the Act), or whether such coverage is changed so it no longer meets such requirement. Section 1860D-13(b)(6)(B)(ii) of the Act requires such entities to disclose if coverage does not meet such requirement, and that the disclosure to Part D eligible individuals shall include information that there are limitations on the periods in a year in which the individual may enroll in Part D coverage, and that any such enrollment is subject to a Part D late enrollment penalty (LEP). In addition, section 1860D-13(b)(4)(H) of the Act provides the Secretary with the flexibility to identify “other coverage” that could be considered creditable coverage. The types of coverage that are subject to the creditable coverage requirements and the procedures to determine and document creditable status of prescription drug coverage were codified at Sec. 423.56 in the final rule entitled “Medicare Program; Medicare Prescription Drug Benefit (Part D final rule)” that appeared in the January 28, 2005, Federal Register (70 FR 4532).\113\

\113\ https://www.federalregister.gov/documents/2005/01/28/05-1321/medicare-program-medicare-prescription-drug-benefit.

Section 1860D-13(b)(4)(C) of the Act includes Group Health Plans (GHPs) as entities that are required to provide creditable coverage disclosures. The statute states that GHPs include health benefits plans under chapter 89 of title 5 (commonly known as the Federal Employees Health Benefits Program) and qualified retiree prescription drug plans as defined at section 1860D-22(a)(2) of the Act. The term, “Group Health Plan” was codified at Sec. 423.882 in the 2005 Part D final rule (70 FR 4577),\114\ and this definition includes account-based medical plans such as health reimbursement arrangements (HRAs) as defined in Internal Revenue Service (IRS) Notice 2002-45, 2002-28 I.R.B. 93, health Flexible Spending Arrangements (FSAs) as defined in Internal Revenue Code (Code) section 106(c)(2), health savings accounts (HSAs) as defined in Code section 223, or an Archer MSA as defined in Code section 220, to the extent they are subject to ERISA as employee welfare benefit plans providing medical care (or would be subject to ERISA but for the exclusion in ERISA section 4(b) (29 U.S.C. 1003(b)) for governmental plans or church plans).

\114\ https://www.federalregister.gov/documents/2005/01/28/05-1321/medicare-program-medicare-prescription-drug-benefit.

Section 1860D-13(b)(6)(B)(i) of the Act requires “entities that offer prescription drug coverage” to provide for these creditable coverage disclosures to the Secretary and Part D eligible individuals, but account-based plans (for example, HRAs, FSAs, HSAs, etc.) do not actually offer prescription drug coverage; rather, they are arrangements created by employers and designed to provide individuals savings on healthcare costs through pre-tax contributions and reimbursements, that are often provided to supplement other coverage, such as another group health plan or individual market coverage. Therefore, the benefit design of account-based plans makes concepts, such as disclosure of creditable coverage, inapplicable to those arrangements.

As an example, HRAs,\115\ which are arrangements that are paid solely by the employer, reimburse employees only for their, their spouse's, and their dependents' medical care expenses \116\ (including premiums), provide reimbursements up to a maximum dollar amount, and carry forward unused balances in the arrangement from one year to the next. Individual Coverage HRAs (ICHRAs), which were more recently recognized by the Labor, Health and Human Services, and Treasury Departments in the June 20, 2019 final rule titled, “Health Reimbursement Arrangements and Other Account-Based Group Health Plans” (84 FR 28888),\117\ are also a type of reimbursement arrangement; however, to receive reimbursements for medical care expenses from an ICHRA, employees and any covered dependents must actually be enrolled in individual health insurance coverage or Medicare Parts A and B, or Part C.

\115\ HRAs were first recognized in 2002 in guidance--Internal Revenue Service (IRS), “Health Reimbursement Arrangements,” Notice 2002-45, at https://www.irs.gov/pub/irs-drop/n-02-45.pdf.

\116\ IRC Sec. 213; IRS, “Medical and Dental Expenses,” Publication 502, January 11, 2022, at https://www.irs.gov/pub/irs-pdf/p502.pdf; and IRS, Health Savings Accounts and Other Tax-Favored Health Plans, IRS Publication 969, February 11, 2021, p. 18, at https://www.irs.gov/pub/irs-pdf/p969.pdf.

\117\ https://www.govinfo.gov/app/details/FR-2019-06-20/2019-12571.

HRAs, including ICHRAs, are group health plans that are not, as section 1860D-13(b)(6)(B)(i) of the Act requires, entities that offer prescription drug coverage. Comparing a reimbursement arrangement, such as an HRA, against the intricacies of a prescription drug plan, including whether the reimbursement provided equates to coverage that would be considered creditable (that is, offers coverage at least as good as the Medicare standard drug benefit), is not an `apples to apples' comparison because account-based plans are fundamentally different from prescription drug plans. While account-based plans generally only provide a financial benefit to employees, for example, tax savings, prescription drug coverage conveys numerous benefits to beneficiaries.

As discussed previously, section 1860D-13(b)(6)(B)(i) of the Act requires that “entities that offer prescription drug coverage” must provide creditable coverage disclosures. Given that account-based entities do not offer such coverage, we proposed to revise Sec. 423.56(b)(3) so that account-based entities are not required to provide the creditable coverage disclosures. Furthermore, requiring account- based plans, such as HRAs, including ICHRAs, to determine if their coverage is creditable, and requiring them to report the creditable status of that coverage, unduly increases administrative burden on these entities by causing them to expend additional resources and expertise that they may not possess. If these entities disclose that they do not offer creditable coverage (because they do not directly offer prescription drug coverage) while the individual's plan that directly offers the prescription drug benefit coverage discloses that it does offer creditable coverage, the recipient of the information could find the dual messaging potentially contradictory and confusing. Ultimately, this confusion disadvantages the Part D Medicare-eligible individual in their ability to make an informed choice about their prescription drug coverage, and ensuring that beneficiaries receive clear information is crucial. As the number of account-based plans has grown in recent years, we have received feedback from organizations who offer these products that they believe the requirement to report creditable coverage does not comport with the account-based model. We proposed to exclude account-based plans from making these disclosures as

these account-based plans do not offer prescription drug coverage and to provide clarity for Medicare-eligible individuals regarding whether their coverage is creditable. The proposal also aligned with the President's January 31, 2025, Executive Order (E.O.), titled Unleashing Prosperity Through Deregulation, as, if finalized, it would eliminate the need to acquire and maintain resources and expertise to comply with federal regulations to provide creditable coverage disclosures.

Therefore, we proposed to modify regulations at Sec. 423.56(b)(3) to codify that account-based plans, such as HRAs and ICHRAs, are excluded from group health plans that are required to make creditable coverage disclosures.

We received comments from health plans, professional organizations, benefit specialist advisors, SHIPs, and a State Department of Insurance on our proposal to exclude account-based medical plans from creditable coverage disclosure requirements. The comments we received on this proposal and our responses follow.

Comment: Most commenters supported our proposal to exclude account- based medical plans from the creditable coverage disclosure requirements. Commenters cited several reasons for their support of this proposal. Commenters stated that these disclosures are not appropriate for account-based arrangements because such plans do not provide comprehensive prescription drug coverage and therefore do not function as substitutes for Part D coverage. Several commenters indicated that the proposal appropriately aligns disclosure requirements with the nature of the coverage offered.

Many commenters further noted that applying creditable coverage disclosure requirements to account-based medical plans creates confusion for beneficiaries and imposes administrative burden without a corresponding consumer benefit. One commenter explained that the purpose of creditable coverage disclosures is to inform beneficiaries about the equivalency of prescription drug coverage, and that extending these requirements to account-based arrangements goes beyond that intent and diminishes the usefulness of the disclosures.

A couple of commenters also stated that codifying the exclusion would promote greater consistency and clarity across stakeholders. A commenter representing beneficiary assistance programs reported that SHIP counselors frequently encounter beneficiary confusion resulting from disclosures associated with account-based plans and must spend significant time clarifying that these arrangements do not replace Part D coverage. The commenter stated that exempting account-based medical plans from the disclosure requirement would reduce unnecessary counseling complexity and improve efficiency. Another commenter noted that beneficiaries would remain protected because group health plans that provide prescription drug coverage, including those that also offer account-based arrangements, would continue to be subject to the creditable coverage disclosure requirements.

Response: We appreciate the commenters' support of this proposal and agree with the points the commenters raise.

Comment: One commenter supported the proposal but recommended that CMS revise Sec. 423.56(b)(3) to clarify that any group health plan offering prescription drug coverage, including plans that also include account-based medical coverage, must comply with the disclosure and notification requirements in paragraphs (c) through (g) of that section.

Response: We appreciate the commenter's suggestion. We agree that group health plans offering prescription drug coverage, including those that also include account-based medical coverage, remain subject to the creditable coverage disclosure and notification requirements under Sec. 423.56(c) through (g). We believe existing regulations sufficiently reflect this requirement and therefore are not making additional regulatory changes at this time.

Comment: A small number of commenters opposed the proposal to exclude account-based medical plans from the creditable coverage disclosure requirements. These commenters stated that disclosures help beneficiaries distinguish between coverage that does and does not satisfy Medicare requirements and expressed concern that exempting account-based plans could reduce beneficiary awareness of whether such coverage meets Medicare creditable coverage standards. One commenter noted that it is not obvious to beneficiaries that account-based arrangements used to pay for prescription drugs do not constitute creditable prescription drug coverage. Another commenter asserted that the administrative burden on account-based plans is minimal, as plan sponsors already know that these arrangements do not meet creditable coverage standards.

Response: We appreciate the commenters' concerns. As discussed above, account-based medical plans do not provide comprehensive prescription drug coverage and therefore do not satisfy Medicare creditable coverage standards. We agree that disclosures play an important role in informing beneficiaries; however, we believe that applying creditable coverage disclosure requirements to arrangements that are not, and cannot be, creditable has contributed to beneficiaries receiving potentially contradictory and confusing information. Beneficiaries will continue to receive creditable coverage disclosures from group health plans that provide prescription drug coverage, including plans that also offer account-based arrangements.

After consideration of the comments received on this provision by a broad range of stakeholders, we are finalizing this policy as proposed without modification.

We provide several avenues for MA plans to provide enrollees with supplemental benefits. In the final rule titled “Medicare Program; Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs for Contract Year 2013 and Other Changes,” which appeared in the Federal Register on April 12, 2012 (hereafter referred to as the April 2012 final rule), we codified Sec. 422.102(e). As we described in the preamble to the April 2012 final rule (77 FR 22075), Sec. 422.102(e) specifies that, subject to our approval, and as specified annually by us, certain D-SNPs that meet integration and performance standards may offer additional Medicare supplemental benefits beyond those we currently allowed other MA plans to offer at the time of publication, where we find that the offering of such benefits could better integrate care for the dually eligible population. Such benefits may include nonskilled nursing services, personal care services, and other long-term care services and supports designed to keep dually eligible beneficiaries out of institutions.

In the Announcement of CY 2019 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter issued on April 2, 2018, we announced its expanded interpretation of the “primarily health related” standard applied to supplemental benefits in light of section 1852(a)(3) of the Act, which requires supplemental benefits to be “health care benefits.” Under the expanded interpretation, for an item or service to be considered as primarily health related, it must 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 healthcare utilization. In the call letter, we expressed the belief that the expanded standard for “primarily health related” provided MA plans with more flexibility in designing and offering supplemental benefits that can enhance beneficiaries' quality of life and improve health outcomes.\118\ CMS codified this standard at Sec. 422.100(c)(2)(ii)(A).

\118\ CMS, Announcement of Calendar Year 2019 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter, page 208. Retrieved from: https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2019.pdf.

Additionally, the Bipartisan Budget Act of 2018 (Pub. L. 115-123) amended section 1852(a) of the Act to expand the types of supplemental benefits that may be offered by MA plans to chronically ill enrollees, called special supplemental benefits for the chronically ill (SSBCI). We codified the parameters for SSBCI at Sec. 422.102(f) in the June 2020 final rule. (85 FR 33800) SSBCI includes supplemental benefits that are not primarily health related and may be offered non-uniformly to eligible chronically ill enrollees. MA plans can offer a “non- primarily health related” item or service to chronically ill enrollees if the SSBCI has a reasonable expectation of improving or maintaining the health or overall function of the chronically ill enrollee.

We noted in the Contract Year 2027 proposed rule that, in recent years, few MA plans have used Sec. 422.102(e) to provide supplemental benefits. A table showing supplemental benefits offered through Sec. 422.102(e) for contract years 2013-2026 can be found at 90 FR 54986. Our analysis of the bid data from 2013 to 2026 shows that the supplemental benefits D-SNPs have offered through Sec. 422.102(e) are meals benefits and assistive devices for home safety. We note that these benefits can currently be covered under the expanded definition of primarily health related supplemental benefits and SSBCI. Specifically, the April 2019 HPMS memo titled “Implementing Supplemental Benefits for Chronically Ill Enrollees” refers to Chapter 4 of the Medicare Managed Care Manual that indicates that meals are a primarily health related supplemental benefit (PBP category B13c) in limited situations: when provided to enrollees for a limited period immediately following surgery, or an inpatient hospitalization, or for a limited period due to a chronic illness. In those situations, a meals supplemental benefit is permissible if the meals are: (1) needed due to an illness; (2) consistent with established medical treatment of the illness; and (3) offered for a short duration. Meals may be offered beyond a limited basis as a non-primarily health related supplemental benefit (PBP category B19b/13i) to chronically ill enrollees. Meals may be home-delivered and/or offered in a congregate setting.\119\

\119\ CMS, HPMS Memorandum, “Implementing Supplemental Benefits for Chronically Ill Enrollees”. Retrieved from: https://www.cms.gov/research-statistics-data-and-systems/computer-data-and-systems/hpms/hpms-memos-archive-weekly-items/syshpms-memo-2019-week4-apr-22-26.

We believe the small number of D-SNPs offering supplemental benefits through Sec. 422.102(e) is due to the availability of other pathways to provide the same supplemental benefits that can be covered under Sec. 422.102(e). Based on this experience, we believed that Sec. 422.102(e) was no longer needed and proposed to remove and reserve Sec. 422.102(e) for future rulemaking. The two D-SNPs offering supplemental benefits through Sec. 422.102(e) in CY 2025 have 27,888 enrollees as of June 2025. For CY 2026, no plan requested to offer supplemental benefits through Sec. 422.102(e).

We explained in the Contract Year 2027 proposed rule that we did not anticipate any adverse consequences to removing Sec. 422.102(e) since D-SNPs could offer the same benefits in their annual bid through primarily health related supplemental benefits or SSBCI. We anticipated that deregulating Sec. 422.102(e) could streamline the bid submission process for D-SNPs and us by simplifying the avenues for offering supplemental benefits.

We solicited comments on our proposal. We requested that commenters consider whether there is any value to us retaining Sec. 422.102(e), such as whether there are any Medicare supplemental benefits that could only be offered under Sec. 422.102(e) and not through primarily health related supplemental benefits or SSBCI. We also recognize that participating D-SNPs will no longer be able to offer benefits through the MA Value-Based Insurance Design (VBID) model beginning in CY 2026 and solicited comments on whether Sec. 422.102(e) provides any advantages in D-SNPs offering supplemental benefits previously offered under VBID.

We received the following comments on this proposal and respond to them below:

Comment: Some commenters outlined support to remove Sec. 422.102(e), referencing low utilization of the Sec. 422.102(e) pathway and the availability of other pathways for D-SNPs to provide supplemental benefits, such as primarily health related supplemental benefits and SSBCI. A few of these commenters stated that removing the Sec. 422.102(e) pathway would reduce regulatory complexity without constraining benefit design. While supporting the proposal, a commenter emphasized that when States do not provide Medicaid benefits for dually eligible individuals, D-SNPs need flexibility to provide additional benefits to enrollees with complex needs and such benefits cannot always be provided through primarily health related supplemental benefits or SSBCI. A commenter suggested that CMS develop a publicly shared document that displays benefits historically offered under Sec. 422.102(e) with other supplemental benefits pathways and provide guidance for D-SNPs to operationalize any transition away from the Sec. 422.102(e) pathway.

Other commenters opposed removing Sec. 422.102(e), noting lack of D-SNP awareness of the Sec. 422.102(e) supplemental benefits pathway and that removing the Sec. 422.102(e) pathway could constrain innovation in State and D-SNP supplemental benefits design to advance more integrated D-SNPs. A commenter stated that the Sec. 422.102(e) pathway may not have been used previously due to the VBID model and could be useful to D-SNPs now that the VBID model is no longer available. Another commenter recommended that CMS issue guidance to plans that reinterprets Sec. 422.102(e) to allow additional supplemental benefits, such as food and grocery allowances, that are responsive to the needs of dually eligible individuals. The commenter also suggested that CMS consider ways to expand Sec. 422.102(e) beyond its applicability to HIDE SNPs and FIDE SNPs. In addition, a commenter raised concerns that removing the Sec. 422.102(e) pathway could negatively impact D-SNP enrollees.

Response: We appreciate the commenters perspectives on our proposal to remove Sec. 422.102(e) as an additional pathway for D-SNPs to offer supplemental benefits. Although a small number of D-SNPs have offered supplemental benefits through Sec. 422.102(e), we are persuaded by comments regarding the lack of awareness of Sec. 422.102(e), the potential for Sec. 422.102(e) to be an alternative to the recently ended VBID program, and the potential for Sec. 422.102(e) to provide

a pathway to develop innovative supplemental benefits for dually eligible individuals. We will retain the Sec. 422.102(e) supplemental benefits pathway and monitor utilization of this pathway in future bids to inform future rulemaking.

After considering the comments we received and for the reasons outlined previously and our responses to comments, we are not finalizing the proposal to remove Sec. 422.102(e) and instead retaining Sec. 422.102(e) as a pathway for D-SNPs to offer supplemental benefits.

C. Rescind Mid-Year Supplemental Benefits Notice (Sec. Sec. 422.111(l) and 422.2267(e)(42))

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 Prescription Drug Benefit Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly (PACE)” final rule appeared in the April 23, 2024 Federal Register (89 FR 30448), hereinafter referred to as the April 2024 final rule, which included a new requirement, beginning January 1, 2026, that MA organizations must notify enrollees mid-year of any unused supplemental benefits available to them (89 FR 30561). The notice, referred to as the Mid-Year Notice, was to list any supplemental benefits not utilized by the enrollee during the first six months of the plan year.

The Mid-Year Notice was intended to address what appeared to be a gap in enrollee awareness and utilization of supplemental benefits for which MA organizations designate rebate dollars. After further review of interested parties' feedback and more current data on supplemental benefit utilization, CMS later determined that the frequency of utilization was higher than previously believed. CMS also developed concerns about the administrative and financial burden, especially on smaller MA organizations, and determined the new requirement was duplicative of already existing requirements. As a result, via the Agency's authority to establish standards consistent with, and to carry out, Part C under section 1856(b)(1) of the Act, CMS proposed in the Contract Year 2027 proposed rule to rescind the Mid-Year Notice of Supplemental Benefits requirement established in Sec. Sec. 422.111(l) and 422.2267(e)(42) (90 FR 54987).

Rescission of this requirement is consistent with E.O. 14192, “Unleashing Prosperity through Deregulation.” E.O. 14192 instructed federal agencies to review all regulations to alleviate unnecessary regulatory burdens placed on the American people. CMS reviewed this regulation in accordance with E.O. 14192 and determined that it was unnecessary and would impose a significant burden on MA organizations that outweighs the intended benefit. As documented in the April 2024 final rule responses to public comments, MA organizations expressed numerous concerns about the burden and complexity of compliance. The requirement necessitated the development, implementation, and maintenance of tracking systems to monitor individual enrollee utilization of each supplemental benefit from January 1st to June 30th of the plan year. It then required MA organizations to compile and send the individualized information to each corresponding enrollee in paper format between June 30th and July 31st of the plan year, providing about a 1-month window to mail information to potentially millions of enrollees. Additionally, MA organizations predicted the substantial task of printing and mailing several pages of individualized documents within a compressed time frame would exceed CMS's original estimate for administrative costs. The impact would be substantially higher for smaller MA organizations and could contribute to competitive disadvantages that result in reduced plan choice for MA enrollees.

Further, with respect to MA organizations of all sizes, the administrative complexity and operational costs associated with meeting the Mid-Year Notice requirement would consume resources that could be better utilized for activities with more direct impact on enrollee health outcomes and satisfaction. Instead, the Mid-Year Notice risked diversion of organizational capacity away from more beneficial work such as patient care coordination or quality improvement activities-- both of which are required under statute.

Another factor considered in the proposal was the unnecessary duplication of information already provided to enrollees through existing statutory disclosure requirements. Section 1852(c)(1) of the Act requires MA organizations to provide detailed descriptions of all plan provisions, including supplemental benefits, in a clear, accurate, and standardized form through the Evidence of Coverage (EOC) document. MA organizations must already furnish this information to enrollees at the time of enrollment and annually thereafter. As specified in regulation at Sec. 422.2267(e)(42), the Mid-Year Notice was to include, for each unused mandatory and optional supplemental benefit, the information that appears for those benefits in the EOC. The Mid- Year Notice would therefore be redundant of information that enrollees already received about their benefits no more than six months earlier.

Finally, the original justification for implementing the Mid-Year Notice requirement is not supported by the most current evidence available. In a recent survey \120\ of 1,846 MA enrollees, 70 percent of respondents reported they had used at least one supplemental benefit in the past year; 19 percent reported they did not use their supplemental benefits because they did not need them. These findings suggest enrollees are generally aware of their supplemental benefits and are using them, although CMS acknowledges that at this time, information on MA enrollee use of supplemental benefits is limited. It should be noted, however, that CMS is working to address this data gap; the Agency introduced the Supplemental Benefit Utilization and Costs section in the Part C Reporting Requirements for contract year (CY) 2024 and made additional changes effective for CY 2025 and subsequent years. This will allow CMS to review and compare a chronological sequence of CY data sets to help the Agency better understand supplemental benefit utilization trends in the Part C program.

\120\ https://www.commonwealthfund.org/publications/surveys/2024/feb/what-do-medicare-beneficiaries-value-about-their-coverage.

Market competition naturally incentivizes MA organizations to ensure enrollees are aware of and use the supplemental benefits that differentiate their plans. MA organizations have demonstrated that they can effectively promote awareness and utilization of supplemental benefits through existing channels. Moreover, a requirement to send additional information to enrollees, promoting benefits they will not necessarily be eligible for, could lead to enrollee confusion. Current care coordination activities, existing communication requirements, and proactive, voluntary outreach programs have proven successful in promoting supplemental benefit utilization. The particular regulatory requirement for a Mid-Year Notice would likely not result in improved communication of

supplemental benefits information and would create undue burden for MA organizations. Further, recent evidence suggests that enrollees are utilizing supplemental benefits when they need them. For the aforementioned reasons, CMS proposed to rescind the Mid-Year Notice requirement at Sec. Sec. 422.111(l) and 422.2267(e)(42).

CMS invited public comment on the proposed removal of this regulatory requirement and received mixed comments. A discussion of the comments received, along with CMS's responses, follows.

Comment: Some commenters expressed concern that MA enrollees could be unaware of the full slate of supplemental benefits available to them, and that enrollees would not be informed of their supplemental benefits as a result of the removal of the Mid-Year Notice requirement.

Response: As discussed in the preamble, the Mid-Year Notice duplicates existing communication requirements such as the EOC. MA organizations are required to send an EOC annually to each individual enrolled in their MA plans. The EOC includes detailed information about the supplemental benefits covered by the plan such as benefit descriptions, copays, coinsurance, and eligibility criteria when applicable. Further, many MA organizations already communicate availability of supplemental benefits through their care coordination services, newsletters, and other enrollee education efforts.

Comment: Some commenters stated that enrollees do not always understand that they must meet particular eligibility requirements to receive certain supplemental benefits, and that a failure to rescind the Mid-Year Notice requirement would result in confusion when enrollees receive information about benefits for which they are not eligible.

Response: CMS agrees that a new, targeted communication method that presents an individualized menu of supplemental benefits options (i.e. the enrollee's unused supplemental benefits) but may not exclude benefits the enrollee is ineligible or not necessarily eligible for, could be confusing and would likely result in frustration for enrollees and increased costs for MA organizations. CMS believes that the EOC already makes clear distinctions between types of supplemental benefits and their corresponding eligibility criteria in a way that is easy to understand.

Comment: Some commenters stated that enrollees choose plans based on supplemental benefits, and MA plans receive rebates to fund those supplemental benefits. Thus, CMS should promote enrollee utilization of supplemental benefits to ensure government funds are responsibly spent.

Response: CMS is committed to ensuring that taxpayer money is spent responsibly, transparently, and appropriately across all CMS programs. Continuous oversight and thoughtful consideration for the use of government funds, including in MA, are an ongoing Agency priority. While, as these commenters stated, enrollees should be encouraged to use their supplemental benefits, CMS does not believe that the duplicative effort of sending a bulk of information to enrollees that they have already received six months earlier will achieve this result.

Comment: Some commenters gave their support for removal of the Mid- Year Notice requirement due to the logistical challenges and administrative and operational costs associated with its implementation and noted that the information sent would be largely duplicative of information sent six months earlier in the EOC. A subset of those commenters further noted that the complexity of these challenges would put smaller MA organizations at a disadvantage.

Response: CMS appreciates the feedback and acknowledges the challenges MA organizations, including small MA organizations, face when new regulatory requirements emerge. CMS also acknowledges the importance of maintaining an environment that gives smaller MA organizations a fair chance to compete, with the ultimate goal being a wide variety of plan choices for enrollees each year. As such, it is important to ensure that every new requirement can offer enough benefit to offset the burden it imposes.

Comment: A commenter stated that in some cases, the Mid-Year Notice would require great effort but produce little value. As an example, the commenter pointed out that some provider-led Institutional Special Needs Plans (I-SNPs) already ensure enrollees maximize their available supplemental benefits, and as a result, the enrollees of those SNPs are unlikely to have improved access to care and health outcomes because they received a Mid-Year Notice.

Response: CMS appreciates the thoughtful response by this commenter and acknowledges the commenter's assessment that if a MA plan such as an I-SNP is already designed to help enrollees maximize their use of supplemental benefits, it is unlikely that any improvement in health outcomes would result from the distribution of a Mid-Year Notice. This example demonstrates that aside from being duplicative of existing communication requirements, the requirement may also be overly broad because of its application to all MA plan-types.

Comment: Some commenters noted the dearth of available data on supplemental benefit usage and stated that CMS should obtain such data and use it for future policy refinements with respect to supplemental benefit communications. For example, a commenter pointed out the hypothetical potential for a discharge team to use electronic tools, suggestive of the interoperability infrastructure of which implementation began during the first Trump administration, to connect a patient with post-discharge support that could help reduce the likelihood of rehospitalization.

Response: Use of interoperability tools by providers for the purpose of connecting patients to supplemental benefits is intriguing, but beyond the scope of this rule. CMS appreciates the thoughtful nature of these comments and will take this input into consideration for future rulemaking.

After careful consideration of the comments received, CMS will move forward with the proposal, without modification, and rescind the Mid- Year Notice of Supplemental Benefits.

Under Sec. 422.112(a)(8), MA organizations are required to ensure that services are provided in a culturally competent manner to all enrollees. In the final rule titled “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” (88 FR 22120) (hereinafter referred to as the April 2023 final rule), CMS retitled the paragraph heading from “Cultural considerations” to “Ensuring Equitable Access to Medicare Advantage (MA) Services” and added more populations to the existing list of groups in the regulation. These changes were implemented in accordance with the previous administration's E.O. 13985: “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government,” (E.O. 13985) issued on January 20, 2021. CMS explained in the preamble that the list of populations was clarifying in nature, non-exhaustive, and was intended to provide additional examples of populations MA organizations should be mindful of in

their plan designs. CMS emphasized that the protections of the provision were already in effect prior to the proposed change and that MA organizations must provide all enrollees, without exception, accommodations to access services (88 FR 22152 and 22153). CMS determined there was no additional regulatory impact to MA organizations in terms of burden, resources for implementation, or collection information as MA organizations were already held to and in compliance with these requirements.

On January 20, 2025, E.O. 14148: “Initial Rescissions of Harmful Executive Orders and Actions” was issued and revoked E.O. 13985. Additionally, on January 31, 2025, E.O. 14192, “Unleashing Prosperity through Deregulation” was issued, which instructed Federal agencies to review regulations in their jurisdiction to alleviate unnecessary regulatory burdens placed on the American people. CMS has reviewed Sec. 422.112(a)(8) in accordance with E.O.s 14148 and 14192 and determined that the revisions made in the April 2023 final rule were unnecessary as they did not change the underlying requirements for MA organizations and the modification of the regulatory text created additional and unnecessary complexity in interpreting the provision. In the Contract Year 2027 proposed rule (90 FR 54988), CMS proposed to amend the regulation at Sec. 422.112(a)(8) to revert to the prior paragraph heading and text which reads, “Cultural considerations. 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.” This change will streamline the regulatory text and avoid confusion about the list of different sub-populations in implementation, while maintaining the protections for access to services for all enrollees.

CMS received the following comments on this proposal, and our responses follow:

Comment: A commenter agreed with the proposal, as they were supportive of the aims of E.O. 14148 and the removal of sex-based terminology.

Response: CMS thanks the commenter for their support for our proposal.

Comment: Multiple commenters were opposed to the proposal and shared concerns about the proposed change to Sec. 422.112(a)(8). Concerns included that the change would impede plans' ability to address social risk factors and other barriers that impact care delivery and management, as well as that the generality of the language would lead to inconsistent implementation which would potentially worsen health disparities. Several commenters noted support for enumerating groups that have experienced poor health care experiences and that it was a specific, inclusive, and helpful guide for plans.

Response: CMS appreciates commenters sharing their concerns. However, CMS disagrees with this position, as plans will still be required to ensure all enrollees, without exception, are provided with accommodations to access services, as they were required to do even before the April 2023 updates to Sec. 422.112(a)(8). Further, this action does not prohibit plans (including special needs plans) from identifying health disparities, addressing barriers that impact care delivery, and developing strategies for different sub-populations to ensure high-quality care if they choose to do so. Plans can continue to develop their own lists of sub-populations of focus, continue quality improvement programs that work to improve health outcomes, and address disparities observed among their enrollees.

Comment: A commenter urged that CMS ensure that the language requiring culturally competent services for those with limited English proficiency or reading skills is implemented robustly, with this including requirements for qualified interpreter services, translated written materials, and other accommodations.

Response: CMS appreciates the commenter sharing this suggestion. CMS believes that plans can determine what strategies, such as translation or interpreter services, work best to ensure culturally competent care for their enrollees. Of note, plans are also held to the Health and Human Services Office for Civil Rights (OCR) notice of availability of language assistance services and auxiliary aids and services requirements (currently at 45 CFR 92.11).

After consideration of the public comments CMS received, and for the reasons outlined here and in the Contract Year 2027 proposed rule, CMS is finalizing as proposed revisions to Sec. 422.112(a)(8).

The final rule titled “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” appeared in the April 12, 2023 Federal Register (88 FR 22120) (hereinafter referred to as the April 2023 final rule). The April 2023 final rule required that Medicare Advantage (MA) plans establish a Utilization Management (UM) Committee to annually review all UM policies and procedures, including for the use of prior authorization, and ensure that these policies are consistent with the coverage requirements, including Original Medicare's current national and local coverage decisions and guidelines.

Subsequently, CMS made and proposed additional changes to the UM Committee requirements, which are detailed in the Contract Year 2027 proposed rule. This includes changes made in April 2024, when CMS issued 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 (89 FR 30448) (hereinafter referred to as the April 2024 final rule).

Specifically, at Sec. 422.137(c)(5) CMS finalized a requirement that beginning in 2025, the UM Committee must include at least one member with “expertise in health equity.” In addition, at Sec. 422.137(d)(6), CMS finalized a requirement that the UM Committee must conduct an annual health equity analysis on the use of prior authorization by examining the impact of prior authorization, at the plan level, on enrollees with one or more specified Social Risk Factors (SRFs). In response to comments, CMS took the position that while changes to the health equity analysis requirement would be helpful to provide a more in-depth analysis, the health equity analysis requirement, as proposed and finalized, would provide a useful baseline of data. CMS also signaled the intent to consider further changes to these requirements in subsequent rulemaking based on comments received.

CMS implemented the additional UM Committee requirements in the April 2024 final rule based on the previous administration's health equity-related initiatives, which have since been revoked by E.O. 14148: “Initial

Rescissions of Harmful Executive Orders and Actions.” \121\

\121\ https://www.federalregister.gov/documents/2025/01/28/2025-01901/initial-rescissions-of-harmful-executive-orders-and-actions.

Moreover, as discussed in the Contract Year 2027 proposed rule, the health equity requirements implemented in the April 2024 final rule increased regulatory burden for MA organizations by requiring the addition of a member of the UM Committee with expertise in health equity, additional data collection, and the public posting of an annual health equity analysis. The increased regulatory burden is inconsistent with E.O. 14192, “Unleashing Prosperity Through Deregulation,” issued on January 31, 2025.\122\

\122\ https://www.federalregister.gov/documents/2025/02/06/2025-02345/unleashing-prosperity-through-deregulation.

Since the issuance of the April 2024 final rule, the CMS position on the health equity analysis requirement has changed. CMS now believes that this analysis is not the best vehicle to obtain baseline data on the use of prior authorization and that there are more effective ways to gain this information, including through robust interoperability efforts. CMS will continue to explore ways to collect data regarding the use of prior authorization in a manner that best represents all MA enrollees. CMS is taking steps to reduce the regulatory burdens imposed by the UM Committee requirements implemented in the April 2024 final rule consistent with the focus on streamlining regulations and reducing administrative burdens for those participating in the Medicare program. In response to interested parties concerns about the limited impact on health equity, the questionable utility of the required data analysis, and the additional administrative burden, deregulating the requirements at Sec. 422.137(c)(5), (d)(6), and (d)(7) aligns with CMS policy goals and E.O.s 14148 and 14192.

Additionally, on June 16, 2025, CMS released a Health Plan Management System (HPMS) memorandum exercising enforcement discretion regarding the requirements under Sec. 422.137(c)(5), (d)(6), and (d)(7) until further notice. As explained in the HPMS memorandum, CMS received numerous questions and requests for guidance regarding the implementation of the requirements and determined that a temporary pause in enforcement was necessary to reevaluate the requirements and consider potential changes.

In the Contract Year 2027 proposed rule, CMS proposed to remove the requirement at Sec. 422.137(c)(5) that the UM Committee include at least one member with expertise in health equity. In addition, CMS proposed to remove Sec. 422.137(d)(6), which requires that the UM Committee conduct an annual health equity analysis of the use of prior authorization. Finally, CMS proposed to remove Sec. 422.137(d)(7), which requires the health equity analysis to be posted on the plan's website in a prominent manner that is publicly accessible.

CMS received the following comments on this section of the Contract Year 2027 proposed rule, and provided responses as follows:

Comment: Many commenters expressed support for CMS' proposal to rescind the requirements for MA organizations' UM Committees at Sec. 422.137(c)(5), (d)(6), and (d)(7). The commenters stated that the analysis was duplicative, offered limited value, and could present a misleading picture of health equity due to inconsistences in data reporting. Commenters also indicated that simplifying and streamlining the requirements would reduce administrative costs and burden on MA organizations. A commenter stated prior authorization denial rates are not necessarily attributable to an enrollee's SRF status. Another commenter expressed concerns that statistics alone would not describe the entirety of MA plans approach to supporting beneficiaries access to care. Finally, a commenter expressed concerns that there would be data inconsistencies in the absence of reporting guidance defining data elements or a standard template.

Response: CMS appreciates the commenters' support and thanks them for their comments.

Comment: Many commenters supported the requirement that MA organizations release an annual health equity analysis of utilization management policies. These commenters stated that the burden associated with producing the analysis would be minimal and that the resulting data would provide important transparency, information, and accountability around the use of UM on different populations.

Numerous commenters further asserted that the analysis would strengthen CMS oversight of the MA program by helping to prevent inappropriate denials, barriers to care, harmful clinical delays, and clinician burnout. They emphasized that the reporting would support efforts to identify and address health disparities and improve access to care for underserved populations.

Several commenters expressed concerns about removing health equity reporting requirements when Medicare's population is increasingly diverse and disparities in access to care are well documented. Commenters also stated that MA organizations' prior authorization practices lead to inappropriate denials, care delays, and administrative burden. These commenters stated that the analysis would provide a deeper understanding of the real-world impacts of prior authorization and help ensure that MA organizations are meeting coverage requirements. A commenter stated that removing the requirement would allow a critical information gap to persist, while another commenter expressed concerns that eliminating the requirement would undermine prior authorization reform efforts.

Response: CMS considered commenters' views regarding transparency, oversight, and the importance of analyzing UM policies in an increasingly diverse Medicare population. As outlined in the Contract Year 2027 proposed rule and this final rule, CMS continues to believe that the burden associated with producing the annual health equity analysis is not minimal and that the analysis would not meaningfully strengthen oversight of UM practices in the MA program.

CMS' decision to rescind the requirements for MA organizations' UM Committees at Sec. 422.137(c)(5), (d)(6), and (d)(7) reflects CMS' assessment that the requirements would have limited effectiveness in advancing health equity, while imposing additional administrative burden associated with collecting and publishing the data. This decision is also consistent with CMS' broader regulatory approach, including the decision not to finalize proposed expansions to the health equity analysis requirements in the April 2025 final rule.

CMS believes there are more efficient and effective ways to obtain information on the impact of UM requirements on MA enrollees, including through ongoing interoperability initiatives and other data collection mechanisms. CMS remains committed to ensuring that MA organizations comply with coverage and UM requirements and will continue to evaluate options for collecting data that more accurately reflect the experiences of all MA enrollees.

Comment: Several commenters urged CMS not to rescind the annual requirement for MA organizations to release an annual health equity analysis without first establishing an alternative data collection mechanism. These commenters recommended that CMS

retain the health equity analysis requirement until service level determination and appeal data are fully operational.\123\ Commenters also recommended that CMS adopt a less burdensome alternative methodology, collect baseline data through interoperability, or expand data reporting to better understand how prior authorization policies affect access to care across beneficiary populations.

\123\ In a December 16, 2025, HPMS memorandum, CMS announced its plans to conduct a voluntary pilot to collect service level data on MA plan initial determinations and appeals in 2026, with the intent to expand the data collection to all MA plans beginning in 2027.

Multiple commenters proposed specific alternative methodologies for monitoring MA organizations' UM policies and practices. Some commenters encouraged CMS to extend reporting requirements to Part D plans to improve understanding of how UM policies affect access to care and help inform beneficiaries' and caregivers' coverage decisions. A commenter further urged CMS to conduct a study examining whether utilization management policies contribute to poorer health outcomes. Another commenter encouraged CMS to require states to develop standardized tools to measure the impact of UM policies on access to Medicaid services for dually eligible individuals.

Response: CMS appreciates commenters' recommendations regarding ways to retain and strengthen the annual health equity analysis. While CMS acknowledges commenters' concerns about eliminating the reporting requirements without an alternative approach, the Agency does not believe that the annual health equity analysis, as finalized in prior rulemaking, is the most effective or efficient mechanism for establishing baseline data on the impacts of UM practices across MA enrollee populations. CMS is therefore rescinding the requirements while continuing to consider other approaches to obtaining more timely, standardized, and actionable data.

CMS also considered commenters' suggested alternative methodologies for monitoring MA organizations' UM policies and practices. CMS believes the proposed alternative analysis methodologies would offer limited practical utility and impose additional administrative burden on MA organizations. CMS is committed to taking steps to reduce the regulatory burdens imposed by the UM Committee requirements, consistent with the focus on streamlining regulations and reducing administrative burden. However, CMS may consider other approaches to monitoring UM policies and practices in future rulemaking.

Comment: Several commenters urged CMS not to remove the requirement that the UM Committee include at least one member with health equity expertise. The commenters stated that the requirement supports MA organizations' ability to monitor the impact of prior authorization on specific patient groups, identify disparities, and address any inequities in access to care.

Response: CMS carefully considered commenters' views regarding the inclusion of a UM Committee member with health equity expertise and the role such expertise may play in monitoring the effects of UM on specific patient populations. In the MA program, access to care is monitored through multiple oversight mechanisms, and MA organizations are already required to maintain policies, procedures, and safeguards to ensure timely access to covered items and services. Therefore, CMS does not believe that a prescriptive UM Committee composition requirement is necessary to monitor the impact of prior authorization on specific patient groups, address inequities in access to care, or ensure access to services for all MA enrollees.

After considering the public comments received, and for the reasons discussed in the Contract Year 2027 proposed rule and in this response to comments, the proposals to rescind the requirements for MA organizations' UM Committees at Sec. 422.137(c)(5), (d)(6), and (d)(7), are being finalized as proposed, consistent with the cited E.O.s., and in response to interested parties' concerns about the requirements' rationale, feasibility, and administrative burden. This aligns with CMS' broader regulatory approach, including the decision not to finalize proposed expansions to the health equity analysis requirements in the April 2025 final rule.

CMS also requested comments on ways to reduce administrative burdens associated with other UM Committee requirements for consideration in future rulemaking. CMS appreciates the comments and suggestions received and will take the feedback into consideration for future policy development.

In accordance with section 1852(e) of the Act, all MA organizations must have an ongoing Quality Improvement (QI) Program for the purpose of improving the quality of care provided to enrollees. QI program requirements appear at 42 CFR 422.152. In April 2023, the “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” appeared in the Federal Register (88 FR 22120), hereinafter referred to as the April 2023 final rule. In the April 2023 final rule, CMS added a requirement at Sec. 422.152(a)(5) that directs MA organizations to incorporate one or more activities that reduce disparities in health and health care as part of their QI program to comply with health equity mandates stemming from E.O. 13985, “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government.”

On January 20, 2025, E.O. 14148, “Initial Recission of Harmful Executive Orders and Actions,” revoked several executive orders, including E.O. 13985. Additionally, on January 31, 2025, E.O. 14192, “Unleashing Prosperity Through Deregulation,” was issued to address the significant burden that complex Federal regulations impose on Americans, and hinder economic growth, innovation, and global competitiveness.

Consistent with E.O.s 14148 and 14192, CMS proposed to eliminate the regulatory requirement for QI programs under Sec. 422.152(a)(5) for the reasons outlined in detail in the Contract Year 2027 proposed rule issued in November 2025 (90 FR 54990).

CMS did not propose to modify the QI Program requirements under Sec. 422.152(a)(1) through (4), which are required to meet the requirements of section 1852(e) of the Act. The statute is clear and no further regulatory language to specify reducing health disparities is necessary to carry out the QI program. Additionally, this final rule aligns with the directives of E.O. 14192, to deregulate and reduce the administrative burden on MA organizations while preserving quality.

MA organizations retain the flexibility to implement quality initiatives that address the needs of all enrollees, including the option to continue their current QI program or otherwise make their own determinations regarding whether and how to target health disparities. This ensures services are delivered with equal dignity and respect to each individual and that MA organizations are not required to direct federal resources towards services limited to specific mandated subsets of enrollees. This finalized deregulation reflects CMS' continued commitment to high-quality health care, while reducing

unnecessary administrative burden associated with the prior regulatory requirements, including those established under earlier directives that prioritized narrow equity-focused initiatives driven by exclusively equity-focused executive orders.

CMS received the following comments on this section of the Contract Year 2027 proposed rule, and responses follow:

Comment: Many commenters expressed concerns that removing requirements in MA quality improvement programs for the inclusion of activities to reduce disparities may exacerbate the prevalence of chronic illness and noted the well-documented correlation between health disparities and chronic illness. Commenters expressed concerns that removing this requirement would widen the health care gaps affecting marginalized and underrepresented populations. Some voiced concerns that if this requirement is revoked, insurers would use discriminatory practices to improve overall quality scores. They also urged CMS to continue naming specific groups that have historically experienced discrimination (such as people with disabilities, LGBTQI individuals, racial and ethnic minorities, rural residents, and those affected by persistent poverty) to provide necessary clarity, accountability, and direction to MA plans to ensure equitable access to care.

Response: CMS appreciates the commenters sharing their concerns. The QI Program requirements under Sec. 422.152(a)(1) through (4) will remain in effect, including the requirement to have a chronic care improvement program (CCIP). Additionally, as discussed in the proposal, MA plans may continue with their current quality improvement initiatives and retain the ability to incorporate activities that address health disparities within their QI programs. CMS remains committed to sustained improvement in patient health outcomes.

Comment: Several commenters urged CMS to either keep the provision at Sec. 422.152(a)(5) or come up with an alternative policy that would ensure quality care and health equity for MA enrollees from underserved communities.

Response: While CMS acknowledges the commenters' suggestion, the remaining QI Program requirements are sufficient to address the concerns regarding enrollee access to quality health care while reducing burden for MA organizations.

Comment: A commenter indicated that in Massachusetts, the requirement at Sec. 422.152(a)(5) has functioned as a backstop against unfair or discriminatory prior authorization practices. They went on to urge CMS to strengthen the link between civil rights compliance and Star Ratings, using the ratings to reform utilization management to support timely, fair access to care.

Response: CMS appreciates the suggestion for reforming utilization management practices through the Star Ratings. However, this comment is outside the scope of this regulation.

Comment: Some commenters wrote in support of rescinding the provision at Sec. 422.152(a)(5), noting that it would reduce administrative burden.

Response: CMS thanks the commenters for their support.

After consideration of the public comments received, and for the reasons set forth in the Contract Year 2027 proposed rule and in the above responses to comments, CMS is finalizing the removal of Sec. 422.152(a)(5) as proposed.

The Bipartisan Budget Act of 2018 (BBA of 2018; Pub. L. 115-123) amended section 1859 of the Act to establish new minimum standards for all D-SNPs related to integration with Medicaid services (section 1859(f)(8)(D)(i) of the Act). The BBA of 2018 also amended section 1859 of the Act to authorize the Secretary to impose an enrollment sanction on an MA organization offering a D-SNP that has failed to meet at least one of the new integration standards in plan years 2021 through 2025 (section 1859(f)(8)(D)(ii) of the Act). In the April 2019 final rule (84 FR 15719 through 15720), we codified this enrollment sanction at Sec. 422.752(d). From plan years 2021 through 2025, we used this sanction authority in numerous instances and found it helpful for States and new D-SNPs since it created a mechanism to suspend enrollment for D-SNPs when contracting with the State Medicaid agency is unexpectedly delayed. However, since the statutory authority for the enrollment sanction expired at the end of plan year 2025, we proposed to remove Sec. 422.752(d) as articulated in the Contract Year 2027 proposed rule (90 FR 54990).

We received the following comments on this proposal and respond to them below:

Comment: A few stakeholders commented on our proposal. A commenter noted that retaining an expired enforcement authority in regulation is unnecessary and potentially confusing and that removing this language would improve regulatory clarity while preserving CMS oversight tools. While not opposed to removing the expired enforcement authority, another commenter recommended that CMS work with Congress to extend the expiring statutory authority. This commenter explained that an intermediate sanction can be less disruptive for enrollees than an intermediate termination and reinstating the statutory authority would allow CMS to engage in enrollment sanctions for non-compliant D-SNPs in the future.

Response: We appreciate these comments in support of our proposal to remove Sec. 422.752(d). We agree that the sanction authority was useful for States and new D-SNPs since it created a mechanism to suspend enrollment for D-SNPs when SMACs were delayed. While we appreciate the interest in extending the enforcement authority in statute, we have been able to work with all applicable States to include, where appropriate, language in the SMACs that provides the same result as the limited enrollment enforcement authority from CMS.

After considering the comments we received and for the reasons outlined in the proposed rule and our responses to comments, we are finalizing the proposed removal of Sec. 422.752(d) without modification.

Division CC, title I, subtitle B, section 118 of the Consolidated Appropriations Act, 2021 (CAA) (Pub. L. 116-260) amended section 1860D- 14 of the Act by redesignating subsection (e) of section 1860D-14 of the Act as subsection (f) and by establishing a new subsection (e) Limited Income Newly Eligible Transition (LI NET) Program. Subsection (e)(1) directs the Secretary to carry out a program to provide transitional coverage for covered Part D drugs for LI NET eligible individuals no later than January 1, 2024. We published 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 22342) in April 2023 establishing the LI NET program as a permanent part of Medicare Part D at 42 CFR part 423 subpart Y, beginning at Sec. 423.2500.

Sections 1860D-14(e)(4) and (5) of the Act require that the program be administered through a contract with a single program administrator and

exempt the LI NET program from certain beneficiary protection requirements for qualified prescription drug coverage under section 1860D-4 of the Act. Further, the Secretary may waive other such requirements of title XVIII of the Act as necessary to carry out the purpose of the program. Under our authority under section 1860D- 14(e)(5)(B) of the Act, we proposed to codify a waiver for the LI NET program with respect to customer call center hours of operation for all regions served by LI NET.

Under Sec. 423.128(d), a Part D sponsor is required to have mechanisms for providing specific information on a timely basis to current and prospective enrollees upon request. Specifically, Sec. 423.128(d)(1)(i)(A) requires that for coverage beginning on and after January 1, 2022, such mechanisms include a toll-free customer call center that is open at least from 8:00 a.m. to 8:00 p.m. in all regions served by the Part D plan. Due to the nature of the LI NET program, maintaining a toll-free customer call center that is open Monday through Friday, except holidays, from 8:00 a.m. to 7:00 p.m. Eastern Time (ET) is sufficient because the customer call volume for LI NET after 7:00 p.m. ET has historically been low due to automatic enrollment of beneficiaries, the transitional nature of LI NET coverage, and LI NET's open formulary. The majority (for example, 90 to 95 percent) of LI NET beneficiaries are enrolled automatically by us and, as such, prospective enrollees rarely require customer call center assistance. Further, the requirement at Sec. 423.128(d)(1)(i)(B) requires that any call center serving pharmacists or pharmacies be open so long as any network pharmacy in that region is open. Accordingly, these calls centers are available to address the majority of inquiries for the LI NET program and ensures that there is no impact on access. This proposal also aligns with the President's January 31, 2025, E.O., titled Unleashing Prosperity Through Deregulation, as we estimate that waiving the requirement for customer call center hours in all regions served by LI NET will save the program approximately $800,000 to $1,000,000 a year.

We proposed to add the customer call center hours of operation for all regions served by the Part D plan in Sec. 423.128(d)(1)(i)(A) to the list of Part D requirements waived for the LI NET program at Sec. 423.2536.

We do not believe that the changes to the regulatory text will adversely impact the LI NET sponsor, individuals' access to prescription drug benefits, the Medicare Trust Fund, or result in a paperwork burden.

The following is a summary of the comments we received and our responses.

Comment: A few commenters expressed support for the proposal to waive requirements related to customer call center extended hours of operation for the LI NET program. They agreed that the removal of this requirement appropriately reflects the unique structure of the LI NET program and avoids duplicative requirements.

Response: We thank the commenters for their support.

Comment: Some commenters expressed concern that shorter call center hours may limit access to medications and prescription reimbursement assistance, especially for those with work, caregiving, or transportation constraints. Shorter hours may also inconvenience those with less flexible schedules. A few of the same commenters stated the importance of maintaining phone service for individuals without smartphones or internet access.

Response: While we acknowledge the concerns raised by the commenters, we do not believe enrollees' access to medications will be affected. As discussed previously, Sec. 423.128(d)(1)(i)(B) requires that any call center serving pharmacists or pharmacies be open so long as any network pharmacy in that region is open. Consequently, LI NET enrollees have access to a call center as long as the enrollee's pharmacy is open. In addition, the number of calls made to the call center after 7:00 p.m. ET has historically been low due to the short- term nature of LI NET enrollment and the relatively open formulary employed by the LI NET program, which indicates that the call center hours of operation are sufficient to accommodate individuals with limited schedules or lacking internet access.

Comment: A commenter noted that the proposed LI NET call center hours waiver does not apply to every plan.

Response: We acknowledge this comment and agree that the waiver only applies to LI NET. All other plans must follow the extended call center hour requirements.

Comment: A commenter acknowledged the significance of telephonic and digital enrollment models in increasing beneficiary access and encouraged uniform safeguards and equivalent scrutiny to ensure beneficiary protection as it pertains to call centers and digital enrollment models.

Response: This comment is out of scope with respect to this proposal to waive requirements related to customer call center extended hours of operation for the LI NET program.

After consideration of the public comments we received, we are finalizing this proposal without modification.

The MA program has grown considerably in the past two decades and now covers over half of all Medicare beneficiaries.\124\ In light of this growth, CMS was interested in exploring opportunities for modernizing and strengthening the program, including with regard to payment, risk adjustment, and quality policy, with the aim of supporting competition and maximizing the value of the program for beneficiaries and taxpayers. Specifically, CMS believes that meaningful opportunities exist for enhancing the risk adjustment system and the quality bonus payment (QBP) program, consistent with findings from multiple studies by the Medicare Payment Advisory Commission (MedPAC) 125 126 and other researchers.127 128 129 CMS was particularly interested in changes that can enhance competition in the MA

program; level the playing field for smaller, regional, and less well- resourced MA plans; and address factors that may place these types of plans at a competitive disadvantage. Enhancements to competition in MA would be expected to yield substantial benefits for beneficiaries, taxpayers, health plans, and the Medicare program as a whole. For example, leveling the playing field in MA can translate into greater innovation in benefit design and care models, including greater use of high-value supplemental benefits, reduced use of low-value benefits and services, and improved health outcomes for beneficiaries.

\124\ Medicare Payment Advisory Commission. (March 2025). “Report to the Congress: Medicare Payment Policy, Chapter 11, The Medicare Advantage Program: Status Report.” https://www.medpac.gov/wp-content/uploads/2025/03/Mar25_Ch11_MedPAC_Report_To_Congress_SEC.pdf.

\125\ Medicare Payment Advisory Commission. (March 2023). “Report to the Congress: Medicare Payment Policy, Chapter 11, The Medicare Advantage Program: Status Report.” https://www.medpac.gov/wp-content/uploads/2023/03/Ch11_Mar23_MedPAC_Report_To_Congress_SEC.pdf.

\126\ Medicare Payment Advisory Commission. (2024). “Report to the Congress: Medicare Payment Policy, Chapter 13, Estimating Medicare Advantage coding intensity and favorable selection,” https://www.medpac.gov/wp-content/uploads/2024/03/Mar24_Ch13_MedPAC_Report_To_Congress_SEC.pdf.

\127\ Kronick, R., & Chua, F. M. (2021). Industry-wide and sponsor-specific estimates of Medicare Advantage coding intensity. Available at SSRN 3959446.

\128\ Markovitz, A. A., Ayanian, J. Z., Sukul, D., & Ryan, A. M. (2021). The Medicare Advantage Quality Bonus Program Has Not Improved Plan Quality: Study examines the impact of the Medicare Advantage quality bonus program. Health Affairs, 40(12), 1918-1925.

\129\ Layton, T. J., & Ryan, A. M. (2015). Higher incentive payments in Medicare advantage's pay[hyphen]for[hyphen]performance program did not improve quality but did increase plan offerings. Health services research, 50(6), 1810-1828.

CMS could pursue changes in MA through two possible channels. The first is through rulemaking or other means authorized under law (for example, the annual announcement of methodological changes to MA payment rates through the Advance Notice and Rate Announcement pursuant to section 1853(b) of the Act), which institute changes that are national in scale. The second channel is by testing a model under section 1115A of the Act through which the CMS Innovation Center can test innovative payment and service delivery models on either a regional or national scale. Section 1115A(c) of the Act authorizes the Secretary to expand the scope and duration of the tested model if such expansion is expected to reduce spending without reducing the quality of care or improve the quality of patient care without increasing spending; the Chief Actuary for CMS certifies the expansion would reduce or not increase program spending, and the Secretary determines that such expansion would not deny or limit the coverage or provision of benefits under the applicable title for applicable individuals. If these requirements are met, the model can be expanded nationally to all relevant stakeholders in a mandatory fashion through rulemaking. Examples of expanded CMS Innovation Center models include the Diabetes Prevention Program,130 131 the Home Health Value-Based Purchasing Model,\132\ and Prior Authorization of Repetitive, Scheduled Non-Emergent Ambulance Transport (RSNAT),\133\ which were found to reduce costs, improve quality, and reduce adverse medical events under Original Medicare. Throughout its history, the CMS Innovation Center has implemented only one MA-specific model, the Value-Based Insurance Design (VBID) model,\134\ which terminates effective December 31, 2025.\135\ A CMS Innovation Center Model can be a channel for testing policy ideas that would benefit from testing, for example, if a policy has uncertain implications. The Innovation Center has the resources and flexibility to identify, develop, rapidly test and encourage voluntary, widespread adoption of innovative care and payment models. A CMS Innovation Center model is also an option for testing innovations that require the statutory authority of the Innovation Center model, for example, statutory waivers.

\130\ Centers for Medicare & Medicaid Services. Medicare Diabetes Prevention Program (MDPP): Expanded Model Fact Sheet. https://www.cms.gov/files/document/mdpp-expansion-fact-sheet.pdf.

\131\ Centers for Medicare & Medicaid Services. (December 2024). Medicare Diabetes Prevention Program Expanded Model. https://www.cms.gov/files/document/mln34893002-medicare-diabetes-prevention-program-expanded-model.pdf.

\132\ Centers for Medicare & Medicaid Services. Home Health Value-Based Purchasing Model. https://www.cms.gov/priorities/innovation/innovation-models/home-health-value-based-purchasing-model.

\133\ Centers for Medicare & Medicaid Services. Prior Authorization of Repetitive, Scheduled Non-Emergent Ambulance Transport. https://www.cms.gov/data-research/monitoring-programs/medicare-fee-service-compliance-programs/prior-authorization-and-pre-claim-review-initiatives/prior-authorization-repetitive-scheduled-non-emergent-ambulance-transport-rsnat.

\134\ Centers for Medicare & Medicaid Services. https://www.cms.gov/priorities/innovation/innovation-models/vbid.

\135\ Centers for Medicare & Medicaid Services. (2024). Medicare Advantage Value-Based Insurance Design (VBID) Model to End after Calendar Year 2025: Excess Costs Associated with the Model Unable to be Addressed by Policy Changes. https://www.cms.gov/blog/medicare-advantage-value-based-insurance-design-vbid-model-end-after-calendar-year-2025-excess-costs.