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

Section 423.505(e) authorizes CMS to evaluate, through audit, inspection, or other means, the appropriateness of services furnished to Medicare enrollees under a Part D contract. Consistent with this authority, CMS conducts Part D prescription drug event (PDE) record review audits under the Center for Program Integrity (CPI) that identify improper PDE records paid under the Medicare Part D benefit, herein referred to as Part D program integrity PDE record review audits, including instances in which the drug, item, or service does not meet the definition of a covered Part D drug under section 1860D- 2(e) of the Act. As part of these audits, CMS identifies PDE records that it believes are potentially improper, and plan sponsors submit supporting documentation to rebut this finding and demonstrate that the drug, item, or service was appropriate for coverage under the Medicare Part D program. If CMS determines based on a review of this documentation that Medicare Part D rules and regulations were not met and therefore the PDE is improper, CMS notifies the Part D plan sponsor to submit PDE deletion or adjustment records for the associated record(s) in accordance with Sec. 423.325(a)(2) and subregulatory guidance. The deleted PDE records result in savings to the Medicare Trust Fund when the PDE record for a given plan year is included in that plan year's global reopening, described at Sec. 423.308 and Sec. 423.346(a)(2).

Currently, Part D plan sponsors have one opportunity to submit documentation demonstrating that a PDE record was appropriate for coverage under the Part D program, which occurs during the audit itself. Because there is currently no process for Part D plan sponsors to further appeal determinations that a PDE record was improper, we proposed to establish a three level appeals process for Part D program integrity PDE record review audits (90 FR 54962). Specifically, we proposed to amend 42 CFR part 423 subpart Z, which currently outlines the Recovery Audit Contractor (RAC) Part D appeals process, to include any Part D program integrity PDE record review audits. We also proposed several conforming revisions to achieve alignment and streamlining of the Part D program integrity PDE record review audit appeals processes. Under this revised appeals process, Part D plan sponsors would receive an audit close out letter including: (1) an explanation of the drug, item, or service under audit; (2) a high-level overview of improper and proper PDE record counts; (3) an attached PDE level record file denoting improper and proper PDE records; (4) requirements for the submission of deletion records or adjustment records for the PDEs determined to be improper; and (5) instructions on how the Part D plan sponsor may appeal the findings. There would be no minimum threshold for an appeal at any level. 2. Appeals Process

In this final rule, we are codifying at 42 CFR part 423 subpart Z changes to the existing RAC appeals process to include any CMS Part D program integrity PDE record review audits. To reflect the proposed expansion of the appeals process, we proposed to revise the regulatory text title of subpart Z from “Recovery Audit Contractor Part D Appeals Process” to “Appeals Process for Part D Program Integrity Prescription Drug Event Record Review Audits”. This change will establish an appeals process for Part D plan sponsors to appeal findings for Part D program integrity audits conducted by CMS that review PDE records for appropriateness.

Currently, 42 CFR part 423 subpart Z sections 423.2600 to 423.2615 describe what may or may not be subject to appeal and the processes for each of the three levels of appeal, which include: (1) request for reconsideration, (2) hearing official review, and (3) review by the Administrator. In alignment with the proposed changes to the scope of subpart Z, we proposed to remove from these regulations any mention of the RACs specifically, as the proposed appeals process would include any Part D program integrity audits that review PDE records for appropriateness (90 FR 54962).

Furthermore, the proposed modifications would serve to establish review timeframes for the different review entities at each level of appeal. The RAC Part D payment audits recovered improper payments from Part D plan sponsors through the monthly capitation payment; and therefore, could recover funds at any time without constraints. As such, the current

regulatory text for the RAC audit appeals did not have a need to require that the independent reviewer make their decision within a certain timeframe. However, current Part D program integrity PDE record review audits require the plan sponsors to submit deletion records to CMS for all PDE records deemed improper during audit, in accordance with Sec. 423.325(a)(2) and prior to the global reopening for any given plan year, to ensure the integrity of the Medicare Trust Fund. As explained in the proposed rule, for these reasons, we believe it is necessary to provide timeframes for decisions to be made at each appeal level (90 FR 54962). We believe that three levels of appeal, with review timeframes, would allow sufficient opportunity for Part D plan sponsors to appeal a determination and ensure that timely and accurate determinations are made consistent with the rules and regulations of the Part D program.

Comment: Several commenters supported the addition of an appeals process for the Part D program integrity PDE record review audits. A commenter requested CMS consider establishing a standard timeframe by which PDE record review audits must be completed, so that plans receive findings or recommendations and delete improper PDE records accordingly.

Response: We proposed specific timeframes for completion of each step of the appeals process (90 FR 54962). CMS thanks the commenter for this feedback. While audit completion timelines are outside the scope of this provision, we will consider this feedback separately. a. Payment Appeals (Sec. 423.2600)

The current payment appeals language at Sec. 423.2600 describes for the Part D plan sponsor what is or is not considered appealable during a RAC payment audit. In alignment with our proposal to broaden the scope of subpart Z to include CMS [Part D program integrity PDE record review audits], we also proposed to amend the language describing what is or is not considered appealable to reflect the scenarios that apply to Part D program integrity PDE record review audits (90 FR 54962). As such, we proposed to modify the existing regulatory language at Sec. 423.2600 to state Medicare Part D plan sponsors may appeal program integrity prescription drug even record review audit determinations. We proposed to add a new paragraph (a) to Sec. 423.2600, which would identify the issues that may be appealed through the audit appeals process. Specifically, under (a) Issues eligible for appeal, we proposed to add paragraph (a)(1) to state CMS's application of Part D policy(ies). Part D policy(ies) refer to any Part D sponsor requirement from CMS outlined in the Code of Federal Regulations (CFR), CMS manuals, or other communications from CMS. Proposed paragraph (a)(2) would specify that Part D sponsors may appeal factual or data errors. Examples of appealable issues at (a)(1) or (a)(2) would include: (1) a determination that a drug, item or service was excluded from coverage under the Medicare Part D program; or (2) a determination that a Medicare Part D payment was a duplicate payment. Errors of this nature would be appealable given there would be documentation for the reviewers to review to ensure that the payment was proper under the Medicare Part D benefit. The independent reviewer would review the documentation to determine and ensure that the payment was proper and in accordance with Medicare Part D policies. Furthermore, the independent reviewer may also determine, based on documentation deleted, whether the error resulted from actions made by CMS.

We proposed to further amend Sec. 423.2600 by adding a new paragraph (b), which would identify issues ineligible for appeal (90 FR 54962). Proposed paragraph (b)(1) would specify that Part D plan sponsors may not appeal the failure to submit documentation in the timeframes specified by CMS during the audit. Failure to submit documentation would not be appealable, given the plan sponsor has the opportunity to provide the documentation to CMS for review within a specified audit timeframe. Historically, during Part D program integrity PDE record review audits, the audit timeframes are extended due to the documentation lacking specific information needed to evaluate the PDE records' appropriateness. This greatly affects the overall length of the audit and causes undue burden on both the plan sponsor and CMS. Therefore, CMS proposed to require that plan sponsors provide documentation in accordance with the proposed provisions the proposed rule that proposed updates at Sec. 423.505, and accordingly, failure to provide this information would result in an improper determination that is not appealable. Providing documentation in accordance with the provisions proposed at Sec. 423.505 will greatly reduce the burden and overall audit timeline for both CMS and Part D plan sponsors, as CMS will not have to request additional information from the plan sponsors. Proposed paragraph (b)(2) would state that Medicare Part D plan sponsors may not appeal the program integrity PDE record review audit methodology. That is, while CMS's application of Part D policy(ies) and factual or data errors may be appealed, the Part D plan sponsor may not appeal the underlying audit methodology, such as the manner in which data was extracted.

Comment: A commenter expressed support for CMS's proposal to introduce a structured appeals process for PDE record review audits, stating the proposal represents a step toward ensuring fairness, transparency, and due process for Part D sponsors. Furthermore, the three-tiered appeal structure and defined timelines will improve predictability and compliance planning. This commenter also believes that the process as proposed has some limitations, including the scope, burden/timelines, adequate evidence standards, technology enablement, and compliance risks.

Response: We appreciate the commenter's support for this provision but disagree with the commenter regarding the limitations of the appeals process. For the three levels of appeals, CMS will not allow additional documentation to be considered during an appeal. It is essential for plans to provide all documentation needed to support coverage under the Medicare Part D benefit at the time of submission. As CMS has previously explained, the issues that are appealable under this process include CMS's application of Part D policy(ies) and factual or data errors because there would be documentation to review to ensure that the payment was proper under the Medicare Part D benefit. CMS has been granting, and will continue to grant, plan sponsors extensions to submit initial documentation when requested. Requests are often made due to plan sponsors' involvement in other concurrent CMS audits or large universe sample size. In addition, the audit methodology is not subject to appeal under our proposed policy.

Regarding the commenter's concerns about the lack of technology enablement or digital submission capabilities and a standardized tracking platform, CMS reminds commenters that a standard system is in place, and CMS utilizes a secure online portal for all steps of aforementioned Part D PDE Record Review Audits.

Comment: A commenter supported efforts to improve audit consistency but was concerned that some of the proposed requirements could create onerous obligations and risk PDE record deletion. Other commenters believed

that the proposals in section IV.D. of the proposed rule to “Strengthen Documentation Standards for Part D Plan Sponsors” would involve collecting information not typically available to plans. An example was the identity of the person who submitted the request at the provider's office, which is not information currently collected or easy to retroactively collect if that information is not submitted to the plan, particularly if it comes from a larger provider office or group. Another commenter expressed concern that if this information is not available and documented, then upon audit the PDE record would be marked improper, and the PDE record determination would also be unable to be appealed by the plan sponsor.

Response: We appreciate this concern and assure the commenters that, under this approach, we will review the case file in its entirety and will not require PDE deletions simply because a specific piece of information that does not impact the determination is missing. CMS has clarified that the documentation requirements included in this rule will account for scenarios in which certain information, such as the identity of the requestor, may not be available or not retrievable. CMS also clarifies that if the plan sponsor believes that the information in the case file documentation is sufficient to ensure payment under the Medicare Part D benefit is appropriate, this scenario would be appealable on the basis of “factual or data errors.” In addition, CMS reminds the commenter that supporting documentation is not appealable in the instance where a plan sponsor fails to submit a full case file within the audit timeframe specified. This is to ensure that plan sponsors provide CMS complete and accurate case files to avoid unnecessary delays in the audit. b. Reconsiderations (Sec. 423.2605)

In existing paragraph (a), we proposed to replace the term “demand letter” with the term “close out letter” for consistency with current terminology in CMS's Part D program integrity PDE record review audits. In existing paragraph (e), we proposed to add a timeframe for when the independent reviewer's decision needs to be decided and communicated to the Part D plan sponsor and CMS. Specifically, we proposed to amend the language from “[t]he independent reviewer informs CMS and the Part D plan sponsor of its decision in writing” to “the independent reviewer decides the reconsideration within 60 calendar days after the timeframe for filing a rebuttal has expired, and sends a written decision to the Part D plan sponsor and CMS, explaining the basis for the decision.” Adding a timeframe for the independent reviewer's decision gives CMS the opportunity to ensure that any upheld improper PDE records can be submitted as a deletion record by the plan sponsor within the global reopening timeframe. c. Hearing Official Review (Sec. 423.2610)

In the existing regulatory text at Sec. 423.2610, CMS outlines the process for a hearing official review. We proposed to revise paragraph (d)(2)(i), to replace “Part D RAC” with “CMS” for consistency with the changes, discussed previously, regarding the audits to which these appeals processes apply. We proposed to revise paragraph (d)(3) to remove the phrase “nor CMS may submit” and replace it with “nor CMS is permitted to submit” to establish stronger verbiage that the submission of new evidence is not permitted by either the plan sponsor or by CMS and will not be considered by the hearing official. In addition, we proposed to revise paragraph (e), to replace “60 days” with “60 calendar days after the timeframe for filing a rebuttal has expired,” to be explicit that 60 days refers to calendar days rather than business days. Furthermore, we proposed to revise paragraph (f), to replace the existing language that states “Sec. 423.2610” with “Sec. 423.2615”, to fix a citation error in the existing regulatory text. The existing text in paragraph (f) refers to the hearing official's decision being binding unless overturned in the third level of appeal by the CMS Administrator. The Administrator level of appeal is found at Sec. 423.2615 not at Sec. 423.2610, and therefore, the citation needs to be corrected. d. Review by the Administrator (Sec. 423.2615)

In the existing regulatory text at Sec. 423.2615, CMS outlines the process for the review by the Administrator. We proposed to revise paragraph (b)(2) to remove the phrase “nor CMS may submit” and replace it with “nor CMS is permitted to submit” to establish stronger verbiage that the submission of new evidence is not permitted by either the plan sponsor or by CMS and will not be considered by the Administrator. In existing paragraph (d), we proposed to replace “45 days” with “30 calendar days.” Furthermore, in existing paragraph (e), we proposed to add a 45-calendar day timeframe for the Administrator to furnish a final decision. Specifically, the regulatory text will be amended to read, “If the CMS Administrator agrees to review the hearing official's decision, he or she determines, after reviewing the hearing record and any arguments submitted by the Part D plan sponsor or CMS in accordance with this section, whether the determination should be upheld, reversed, or modified. The CMS Administrator furnishes a written decision, which is final and binding, to the Part D plan sponsor and CMS within 45 calendar days after the timeframe for filing a rebuttal has expired.” Both reducing the timeframe for the Administrator to decide if they will review the case and adding a timeframe for furnishing a final decision would help ensure that any upheld improper PDE records can be submitted as a deletion record by the plan sponsor within the global reopening timeframe. The timeframes proposed are critical to ensure the appeals process is completed by the PDE submission deadline for the global reopening. Completion within the global reopening timeframe enables CMS to properly oversee the Medicare Part D program by ensuring CMS has accurate, complete, and truthful claims data, in accordance with Sec. 423.505(k)(3), and to protect the integrity of the Medicare Trust Fund.

Comment: A commenter appreciated that the appeals process for PDE record review audits does not create extra burden or require changes to the current process for plan sponsors. The commenter welcomed guidance on the steps and timelines required for each level of appeal. Several other commenters supported the establishment of an appeals process, stating it would enhance transparency and promote greater fairness in the audit process.

Response: We thank commenters for their support of the proposal. Additional information regarding each level of appeal will be provided through program instruction or otherwise.

After consideration of the comments received and for the reasons outlined in the proposed rule and our responses to those comments, we are finalizing our proposal to update the existing appeals process at 42 CFR part 423 subpart Z to include any CMS Part D program integrity PDE record review audits, without modification.

CMS codified its requirements for the timely submission of prescription drug event (PDE) records at 42 CFR 423.325 in the final rule titled “Medicare and Medicaid Programs; Contract Year 2026

Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly,” which appeared in the April 15, 2025, Federal Register (hereinafter referred to as the April 2025 final rule). In that rule, we described the General PDE Submission Timeliness Requirements at Sec. 423.325(a) and the Selected Drugs PDE Submission Timeliness Requirement at Sec. 423.325(b).

Under the General PDE Submission Timeliness Requirements, a Part D sponsor must submit an initial PDE record within 30 calendar days from the date the Part D sponsor receives the claim, submit adjustment or deletion PDE records within 90 calendar days of the discovery or notification of an issue requiring a change to the previously submitted PDE records, and resolve rejected PDE records within 90 calendar days of the rejection. The General PDE Submission Timeliness Requirements apply unless the Selected Drugs PDE Submission Timeliness Requirement is applicable, which requires a Part D sponsor to submit an initial PDE record for a selected drug (as described at section 1192(c) of the Act) within 7 calendar days from the date the Part D sponsor receives the claim.

In this rule, we proposed to modify the General PDE Submission Timeliness Requirements by modifying existing Sec. 423.325(a)(3) related to the submission of PDE records to resolve a rejected PDE record. Under the current rule, Part D sponsors must submit a revised PDE record to resolve a PDE record that CMS rejected through the PDE editing process within 90 calendar days of the receipt of rejected record status from CMS. We recognize that submission of a revised PDE record is not always appropriate. As the regulation is currently written, a Part D sponsor may not be able to comply with the current rule under various scenarios. Therefore, we proposed to set forth new requirements related to the resolution of rejected PDE records. a. Rejected PDE Records

Part D sponsors submit PDE records to CMS through the Drug Data Processing System (DDPS). The DDPS performs checks on the data to help ensure its accuracy, including checks for missing and invalid information, beneficiary eligibility, and calculation checks on costs and payment fields.\64\ These checks can result in the PDE data being accepted or rejected by the DDPS. Consistent with our long-standing guidance \65\ and pursuant to Sec. 423.325(a)(3), Part D sponsors must resolve those rejections within 90 calendar days, that is, resubmit corrected PDE records to CMS within 90 calendar days of receiving the rejection.

\64\ See generally, DDPS Edit Spreadsheet, at https:// www.csscoperations.com/internet/csscw3.nsf/DIDC/ FGSMOX8LWK~Prescription%20Drug%20Program%20(Part%20D)~References.

\65\ HPMS memorandum, Revision to Previous Guidance Titled “Timely Submission of Prescription Drug Event (PDE) Records and Resolution of Rejected PDEs”, October 6, 2011, available at https://www.cms.gov/httpseditcmsgovresearch-statistics-data-andsystemscomputer-data-and-systemshpmshpmsmemos-archive/hpms-memo-qtr1-4.

CMS recognizes there are a range of situations where it might be inappropriate to submit a revised PDE record after receiving a rejection. For example, if a rejected record is no longer associated with a valid claim, it would not be appropriate for the Part D sponsor to submit a corrected PDE record. A valid claim would not exist, for example, if a pharmacy reversed the claim and returned the drug to stock because the beneficiary never obtained the prescription.

Likewise, if the PDE record that was rejected should never have been submitted to CMS in the first instance because the record was contrary to CMS's requirements, it would not be appropriate to resubmit a PDE record that continues to be contrary to CMS's requirements. For example, if a PDE record was rejected because the prescriber listed on the applicable claim is on the HHS-OIG's List of Excluded Individuals/ Entities (LEIE) without an applicable waiver, CMS does not expect that the Part D sponsor would resubmit the PDE record listing an excluded prescriber without an applicable waiver.

As reflected in the scenarios described in this Background, it may not be appropriate to resolve every PDE rejection with submission of a revised PDE record. The submission of a PDE record implies that there was and continues to be a valid claim. Resubmission of a previously rejected PDE record associated with an invalid claim could be harmful to the Part D program. Such data could inadvertently cause problems with the analysis of the rejected data, with no visibility into why such rejected data was never corrected.

In addition, due to operational constraints, it is not possible for the Part D sponsor to “delete” the rejected PDE record to avoid non- compliance with the requirement when these scenarios arise. CMS's DDPS does not allow Part D sponsors to submit PDE deletion records associated with rejected PDE records. 2. Requirements

As explained earlier, CMS does not have insight into all of the reasons why a Part D sponsor might not submit a revised PDE record to resolve rejected PDE records. Ensuring greater transparency regarding the status of rejected PDE records would enhance CMS's oversight of Part D sponsors' compliance with PDE submission timeliness requirements. We proposed to modify the existing regulation at Sec. 423.325(a)(3) to account for the scenarios described in the Background, increase transparency, and construct the requirement to account for circumstances where resubmission of PDE records is not appropriate.

We proposed that Part D sponsors must submit a PDE record within 90 calendar days from receipt of the rejection and within every 90 calendar days thereafter until a revised PDE record is accepted unless the claim associated with the rejected PDE record is reversed or deleted, or the PDE record is otherwise found to have been submitted in error. We believe that submissions at least once every 90 calendar days will allow CMS to know that the rejected PDE record continues to reflect an active claim that the sponsor believes is valid and for which the sponsor is working to resolve the bases for the PDE rejection. The sponsor is not required to submit revised PDE records at least once every 90 calendar days, if the claim associated with the rejected PDE record is reversed or deleted, or the PDE record is otherwise found to have been submitted in error. This additional information will provide CMS with greater insight into the PDE revision process and ensure that a rejected PDE record must be corrected by the plan sponsor unless it is not appropriate to do so.

CMS believes that it is beneficial for program integrity for the agency to have increased visibility into the processing and progression of revisions of rejected PDE records. This includes ensuring that rejected PDE records that are not resubmitted within 90 days, in accordance with Sec. 423.325(a)(3), are limited to claims that are no longer active and where resubmission is inappropriate (because, for example, the pharmacy has since reversed the claim).

We note that since 2011, the vast majority of the PDE records that are rejected are resolved by sponsors within the 90-day timeframe, and in more recent years, nearly all the PDE rejections are resolved within the 90-day timeframe. Therefore, CMS expects

no additional costs or savings from the proposed change and is not scoring these requirements in the Regulatory Impact Analysis section. There are no new reporting requirements.\66\ We do not anticipate additional paperwork burden. Therefore, no increase is included in the Collection of Information section.

\66\ See OMB 0938-0982, CMS-10174, expiration April 30, 2027 (available at https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=202403-0938-002).

In the proposed rule, we welcomed feedback on these proposed changes.

Comment: A few commenters expressed their support for CMS's proposal to revise the general PDE submission timeliness requirements specified in Sec. 423.325(a)(3).

Response: We thank the commenters for their support of our proposal.

Comment: Some commenters believed that CMS's proposal was burdensome. One commenter was concerned about potential downstream impacts on contracted pharmacy audit partners and pharmacies, as the proposed requirements would necessitate changes to current research processes related to rejected PDE records.

Response: As stated in our proposed rule and this final rule, since 2011, the vast majority of the PDE records that are rejected are resolved by sponsors within the current 90-calendar-day timeframe. In recent years, nearly all PDE rejections are resolved within this period. The current regulation already requires sponsors to submit a revised PDE record to resolve a rejected PDE within 90 calendar days of the rejection. To the extent rejected PDE records result in claims adjustments to address and resolve these PDE rejections, sponsors are already collaborating with their pharmacy partners, and therefore, we do not believe that our provision will necessitate changes to the current research processes related to PDE records. Therefore, we disagree with the commenters that our proposed rule is burdensome.

Comment: A few commenters stated that the proposal would not provide CMS with additional insight into the underlying status of the rejected PDE records and believed that it would be beneficial for CMS to have a definitive claim status. Commenters recommended alternatives to gain visibility into the status of a claim associated with a rejected PDE record. Some commenters encouraged CMS to consider adopting mechanisms to promote information sharing about the status of a claim associated with a rejected PDE record within the existing PDE record review process, under which CMS flags PDE records and requests additional information from sponsors. Other commenters recommended that CMS create new functionality in the PDE to allow the submitter to inform CMS that the previously rejected PDE is for a claim that has been reversed or has been deemed invalid by the sponsor. One commenter recommended the creation of a new deletion code value (or another field or new value for a field) for the sponsor to specifically inform CMS the claim has been reversed or has been deemed invalid. A commenter noted that such a mechanism could have benefits beyond the intent of the proposal.

Response: We appreciate the recommendations for alternative approaches and acknowledge that these suggestions may provide CMS with more definitive information regarding the status of the claim associated with a rejected PDE record. However, our proposal achieves our goals. As we stated in both the proposed rule and in this final rule, we recognize that submission of a revised PDE record in accordance with the current rule is not always appropriate, and a sponsor may not be able to comply under various scenarios. The new requirements we proposed account for these scenarios, increase transparency, and address circumstances where resubmission of PDE records is not appropriate.

We considered the recommendations from commenters regarding alternatives to promote visibility into the status of a claim associated with a rejected PDE record that they believe would provide a clearer understanding of the status of the claim associated with the rejected PDE record. After careful thought, we concluded that the proposed alternatives--such as additional analysis, outreach to sponsors, and responses from sponsors, or modifications to the PDE file layout or the creation of new functionality in the PDE--would impose a greater burden on CMS and Part D sponsors compared to our proposal.

While we acknowledge that an alternative approach might yield more comprehensive information with benefits extending beyond the intent of this proposal, such considerations are beyond the scope of our proposed rule.

Comment: A few commenters noted that certain PDE rejections cannot be resolved by sponsors because they do not have the ability to resolve the reject. These commenters pointed to plan-to-plan (P2P) PDE rejection edits, for example PDE Edit 706.\67\ Commenters also stated that certain beneficiary enrollment and eligibility PDE rejection edits cannot be resolved by the sponsor and that the sponsor may be waiting for a response from CMS on a pending eligibility case prior to resolution of a PDE rejection.

\67\ PDE Edit 706--PDE rejects when the Submitting Contract differs from Contract of Record and does not fall within a valid P2P period (Beneficiary is not enrolled in the Submitting Contract for the given DOS. PDE falls outside of the P2P period facilitated by CMS (greater of enrollment effective date with new Contract of Record + 30 days, or CMS process date + 30 days)). See DDPS Edit Spreadsheet, at https://www.csscoperations.com/internet/csscw3.nsf/ DIDC/ FGSMOX8LWK~Prescription%20Drug%20Program%20(Part%20D)~References.

The commenters suggested that when a PDE rejects due to edits that the sponsor cannot resolve, CMS should assume no further action is needed by the sponsor. The sponsor should not be required to continue resubmissions of these PDE records and should be exempt from any compliance action. Additionally, commenters recommended that when PDE rejections occur due to enrollment or eligibility issues, CMS should assume no further action is needed by the sponsor, as there is no way to resolve the error. The sponsor should not be required to continue resubmissions of these PDE records unless enrollment or eligibility changes such that the sponsor would expect the resubmitted PDE record to be accepted by CMS.

Response: We acknowledge that in some cases, our proposed rule will result in a sponsor repeatedly submitting PDE records that will not be accepted by CMS. Based on comments, we explored potential exclusions and exceptions of certain PDE rejection edits from our rule. In doing so, we considered our goal of transparency into claims status and the volume of PDE records impacted. Given that nearly all PDE rejections are resolved within 90 calendar days, our proposed rule will result in only a small percentage of PDE records being repeatedly submitted without resolution until DDPS closes \68\

for the contract year of the PDE at issue. In addition, it is possible that a claim associated with a PDE record that continues to be rejected by CMS is later reversed by the pharmacy. Under that scenario, and consistent with the proposed rule, a sponsor would cease submission of the PDE records, indicating to CMS that the claim was reversed or deleted, or the PDE record that was rejected was otherwise found to have been submitted in error by the sponsor. As proposed, our rule gives us transparency into the status of claims associated with rejected PDE records and allows us to know whether sponsors are compliant with our PDE submission requirements. Therefore, we decline to exempt or exclude certain PDE rejection edits from our requirements.

\68\ CMS systems remain open to PDE data (adjustments, deletions, and new submissions) until the end of the 6-year overpayment look-back period. Defined in 42 CFR 423.360(f), the overpayment look-back period encompasses the 6 most recently completed payment years. This period is tied to the “applicable reconciliation,” which marks the annual deadline for submitting data for a Part D payment reconciliation, according to 42 CFR 423.360(a). Upon reaching the deadline for a Part D payment reconciliation (i.e., around June 30), the year being reconciled is included in the look-back period, and the earliest year leaves the look-back period. Consequently, from July 1 onward, sponsors are no longer able to submit PDE data for the year that has exited the look-back period. See, for example, the HPMS memorandum titled “Closing the Drug Data Processing System (DDPS) for benefit year 2018”, dated April 11, 2025 (available at https://www.cms.gov/about-cms/information-systems/hpms/hpms-memos-archive-weekly/hpms-memos-wk-2-april-7-11).

Comment: A few commenters noted that CMS's proposal does not address situations where additional CMS guidance or clarifications are needed or when there is a known issue with PDE processing. In these cases, sponsors cannot resolve the errors until CMS takes action to resolve the issue. Commenters recommended that in such scenarios, CMS should allow sponsors to temporarily stop resubmitting the related PDE records until CMS issues additional guidance or corrections are made to DDPS. Furthermore, commenters suggested that CMS should provide a grace period, giving sponsors enough time to implement any necessary changes related to CMS guidance, clarifications, or DDPS changes. One commenter recommended a minimum grace period of 180 days. During this grace period, commenters suggested that the related PDE records should be exempt from any timeliness requirements.

Response: PDE processing and editing can be complicated, and at times, CMS must correct system issues or release new or clarifying guidance for a valid PDE record to be accepted. Under these circumstances, it is still important for us to know if the rejected PDE record is associated with a paid claim or if the claim is reversed or deleted or the PDE that was rejected by CMS is otherwise found to have been submitted in error. In addition, compliance with our proposed rule allows us to understand the scope of the issue.

We acknowledge that there would be various considerations given the nature and scope of an issue preventing acceptance of a valid PDE record. The resolution may or may not reasonably require a “grace period” for PDE submissions as suggested by the commenters. Each situation requiring us to take action to resolve a PDE editing issue will be individually assessed based on its unique circumstances. When necessary, we will provide guidance to clarify the requirements for the sponsors.

Comment: Some commenters requested guidance related to the proposed rule. A commenter sought guidance from CMS on when resubmission to correct a rejected PDE record is required. Another commenter requested that CMS clarify its expectations related to rejected PDE records that are actively under research or rework. A commenter also requested technical support and system testing for PACE organizations to ensure that the requirements could be met without disrupting participant care or operations.

Response: As stated in this final rule, there are no exceptions or exemptions to our proposed rule. It is applicable to all rejected PDE records, including those that are actively under research or rework.

We do not believe that CMS system testing is necessary for PACE organizations to comply with the requirements. Under the current regulations at Sec. 423.325(a)(3), sponsors must submit a revised PDE record to resolve a CMS rejected record within 90 calendar days of the rejection. The proposed amendment to that rule will not result in disruptions to participant care or the operations of the PACE organization.

Comment: A few commenters noted that the proposed rule did not address rejected PDE records sent to the Medicare Transaction Facilitator (MTF), which CMS uses to facilitate manufacturer effectuation of negotiated maximum fair prices (MFPs) under Part E of Title XI of the Act (sections 1191 through 1198 of the Act) through the exchange of data and, if applicable, the pass through of MFP refund payments between manufacturers and dispensing entities. One commenter highlighted that it would be beneficial for the MTF to receive information indicating a claim associated with a PDE record that was previously rejected is reversed, so that if an MFP refund has been paid to a pharmacy, it can be recouped by the manufacturer. Commenters encouraged CMS to provide information about such rejected PDE records to the MTF.

Response: We appreciate the feedback on our proposal and how it relates to the operations of the MTF for the purposes of the Medicare Drug Price Negotiation Program. While we value these insights, the operations of the MTF under the Medicare Drug Price Negotiation Program are beyond the scope of this regulation.

Comment: A commenter referenced CMS's memorandum dated July 3, 2013, PDE Guidance for Post Point-of-Sale Claim Adjustments.\69\ The commenter stated that the proposal does not appear to clearly align with this guidance.

\69\ HPMS memorandum, PDE Guidance for Post Point-of-Sale Claim Adjustments, July 3, 2013.

Response: Our July 3, 2013, PDE guidance for Post Point-of-Sale Claim Adjustments provided sponsors with information on determining the appropriate course of action for post point-of-sale (POS) adjustments to rectify errors under specific scenarios. The guidance explains how to adjust or delete PDE records that were previously accepted. Our proposal amends Sec. 423.325(a)(3) related to rejected PDE records. The proposal does not amend the PDE submission timeliness requirements for adjustments or deletions of accepted PDE records addressed in Sec. 423.325(a)(2). Although we believe that our proposed regulation text is clear, we have slightly modified the proposed regulation text to make clear that the amendment to Sec. 423.325(a)(3) is limited to rejected PDE records for paid claim transactions. The revised Sec. 423.325(a)(3) requires a sponsor to submit a PDE record for a paid claim transaction associated with a PDE record that was previously rejected by CMS at least once every 90 calendar days from receipt of a rejection until the PDE record is accepted unless the claim associated with the rejected PDE record is reversed or deleted, or the PDE record that was rejected is otherwise found to have been submitted in error.

After consideration of the public comments we received, we are finalizing the proposal to modify Sec. 423.325(a)(3) with slight modifications to make clear that the requirements are related only to rejected PDE records.

K. Eligibility for Supplemental Benefits for the Chronically Ill (SSBCI) and Technical Changes to the Definition of Chronically Ill Enrollee (Sec. 422.102)

The Balanced Budget Act (BBA) of 2018 (Pub. L. 115-123) provided new authorities concerning supplemental benefits that may be offered to chronically ill enrollees in Medicare Advantage (MA) plans. CMS addressed these new supplemental benefits, now known as Special Supplemental Benefits for the Chronically Ill (SSBCI), extensively in the Medicare Program; Contract Year 2021 Policy and

Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, and Medicare Cost Plan Program (hereinafter referred to as the June 2020 final rule) (85 FR 33800 through 33805).

Supplemental benefits, including SSBCI, are generally funded using MA plan rebate dollars. MA rebate dollars may be used for mandatory, but not optional, supplemental benefits offered by the plan (Sec. 422.266(b)(1)).\70\ When submitting an annual bid to participate in the MA program, an MA organization includes in its bid a Plan Benefit Package (PBP) and Bid Pricing Tool (BPT) for each of its plans, where the MA organization provides information to CMS on the premiums, cost sharing, and supplemental benefits (including SSBCI) it proposes to offer. Since the statutory amendment authorizing SSBCI and subsequent guidance in a Health Plan Management System (HPMS) memorandum dated April 24, 2019,\71\ the number of MA plans that offer SSBCI--and the number and scope of SSBCI offered--has significantly increased.

\70\ Rebates can also be used to buy down Part B and D premiums under Sec. 422.266(b)(2) and (b)(3).

\71\ https://www.cms.gov/medicare/health-plans/healthplansgeninfo/downloads/supplemental_benefits_chronically_ill_hpms_042419.pdf.

Section 422.102(f)(4)(i) and (ii) requires that the MA plans have written policies for making SSBCI enrollment determinations, document that each enrollee eligible for SSBCI is a chronically ill enrollee, and provide this documentation to CMS upon request. As CMS described in Medicare Program; Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Program for Contract Year 2024-Remaining Provisions and Contract Year 2025 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly (PACE) (hereinafter referred to as the April 2024 final rule) (89 FR 30551), to offer an item or service as an SSBCI to an enrollee, an MA plan must make at least two separate determinations, with respect to that enrollee, in order to satisfy the statutory and regulatory requirements for these benefits.

First, the MA plan must determine that an enrollee is eligible for SSBCI by meeting the statutory definition of “chronically ill enrollee.” Section 1852(a)(3)(D)(iii) of the Act defines “chronically ill enrollee” as an individual enrolled in the MA plan who meets all of the following: (I) has one or more comorbid and medically complex chronic conditions that is life-threatening or significantly limits the overall health or function of the enrollee; (II) has a high risk of hospitalization or other adverse health outcomes; and (III) requires intensive care coordination. Per Sec. 422.102(f)(1)(i)(B), CMS may publish a non-exhaustive list of conditions that are medically complex chronic conditions that are life-threatening or significantly limit the overall health or function of an individual. This list of chronic conditions is the same as the list for which MA organizations may offer chronic condition special needs plans (C-SNPs), which can be found in the definition of “severe or disabling chronic condition” within Sec. 422.2. CMS does not further define “high risk of hospitalization” or “intensive care coordination.” As noted in the June 2020 Final Rule, plans have flexibility in determining what these phrases mean in a way that will best serve their enrollees. However, CMS noted some examples of methods through which plans may assess hospitalization risk or need for care coordination, such as conducting a health risk assessment, performing a retrospective claims review for an enrollee, or by other means the plan deems necessary. Second, the MA plan must determine that the SSBCI has a reasonable expectation of improving or maintaining the health or overall function of the enrollee. Section 422.102(f)(4)(iii)(A) requires that MA plans have and apply written policies based on objective criteria for determining a chronically ill enrollee's eligibility to receive a particular SSBCI. Section 422.102(f)(4)(v) further requires that MA plans maintain without modification, as it relates to an SSBCI, evidentiary standards for a specific enrollee to be determined eligible for a particular SSBCI, or the specific objective criteria used by a plan as part of SSBCI eligibility determinations for the full coverage year.

In the June 2020 final rule, CMS stated the expectation that plans communicate information to enrollees about the scope of SSBCI that the MA plan covers and who is eligible for those benefits in a clear manner (85 FR 33803). CMS made further changes in the April 2024 final rule, where CMS modified the disclaimer requirements at Sec. 422.2267(e)(34) to require plans to include clear information about SSBCI eligibility criteria in marketing and communications materials that mention SSBCI, including by listing the chronic conditions an enrollee must have in order to be eligible for particular SSBCI. These actions and the changes to the regulation finalized here demonstrate the importance of transparency as it applies to SSBCI eligibility.

Currently, as permitted by Sec. 422.504(f)(2), CMS may review SSBCI eligibility criteria by requesting it from plans. This is done on a case-by-case basis. Since there is no public posting of a plan's criteria for determining how enrollees qualify for SSBCI, this lack of transparency limits potential enrollees' ability to review and determine what SSBCI are available to them. CMS received numerous comments in response to the Medicare Program; Contract Year 2025 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly; Health Information Technology Standards and Implementation Specifications proposed rule (herein after referred to as the “November 2023 proposed rule”) requesting that plans post their objective eligibility criteria for SSBCI on a public-facing website to increase transparency for potential enrollees. In response to these comments, CMS noted that CMS would consider taking this action in future rulemaking (89 FR 30558).\72\ CMS believes having MA plan SSBCI eligibility criteria publicly available will improve transparency, promote good governance of the Medicare Trust Fund, and allow enrollees' participation in their care and awareness of their eligibility for benefits.

\72\ https://www.federalregister.gov/d/2024-07105/p-1069.

Therefore, in the Medicare and Medicaid Programs; Contract Year 2026 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly proposed rule (hereinafter referred to as the Contract Year 2026 proposed rule) (89 FR 99340), CMS proposed that plans must publish the objective eligibility criteria on their public-facing website. Specifically, CMS proposed that MA plans must post on their public-facing website their objective criteria for determining that an enrollee is a chronically ill enrollee within the statutory and regulatory definition and is eligible to receive SSBCI offered by the plan. CMS reminded MA plans of their digital accessibility obligations as recipients of Federal assistance under section 504 of the Rehabilitation Act. CMS proposed to

codify this requirement in the regulation text at Sec. 422.102(f)(4)(iii)(C).

Next, in the Contract Year 2026 proposed rule, CMS proposed several technical changes that align with the statute to clarify SSBCI eligibility requirements and ensure that plans and providers have a clear understanding about which enrollees qualify for SSBCI. When reviewing SSBCI eligibility criteria, CMS discovered that several plans offering SSBCI benefits do not determine eligibility in an objective manner, as required at Sec. 422.102(f)(4)(iii)(A).\73\ For example, allowing an enrollee to self-attest that they are eligible for SSBCI without additional criteria or any verification from the plan of this eligibility status would not meet CMS requirements. Additionally, CMS has observed that some plans determine what SSBCI to cover and pay for without consultation with a doctor or other medical professional to determine the clinical appropriateness of the items and services offered under the SSBCI benefit. CMS has also identified instances where plans, when determining eligibility, are not properly evaluating enrollees using all three components of the definition for “chronically ill enrollee” as defined in section 1852(a)(3)(D)(iii) of the Act. CMS has identified that the current regulation text (Sec. 422.102(f)(1)(i)(A)) may need further clarification for plans. It was never the Agency's intention to imply that the presence of a chronic illness or chronic condition alone is sufficient to satisfy all three of the statutory criteria to qualify as a chronically ill enrollee. Therefore, CMS proposed to clarify that having a medically complex chronic condition or comorbidity by itself is insufficient to satisfy the requirements in Sec. 422.102(f)(1)(i)(A)(1), (f)(1)(i)(A)(2), and (f)(1)(i)(A)(3) with a technical edit. Specifically, CMS proposed to amend Sec. 422.102(f)(1)(i)(A) and (f)(1)(i)(A)(1) through (3) to specify that “a chronically ill enrollee is an individual enrolled in the MA plan who meets all of the following:

\73\ Prior to the effective date of the April 2024 final rule, this requirement was codified at 42 CFR. 422.102(f)(3)(iii). The April 2024 final rule slightly reorganized Sec. 422.102(f) as part of amendments to adopt new requirements.

Has one or more comorbid and medically complex chronic conditions that is life threatening or significantly limits the overall health or function of the enrollee.

Has a high risk of hospitalization or other adverse health outcomes.

Requires intensive care coordination.

This is consistent with the statute, which defines a “chronically ill enrollee” at section 1852(a)(3)(D)(iii) of the Act as an enrollee who: (1) has one or more comorbid and medically complex chronic conditions that is life threatening or significantly limits the overall health or function of the enrollee; (2) has a high risk of hospitalization or other adverse health outcomes; and (3) requires intensive care coordination. This clarification will allow the definition of a chronically ill enrollee at Sec. 422.102(f)(1)(i)(A)(1) through (3) to mirror the statutory language at section 1852(a)(3)(D)(iii) of the Act as intended in the 2020 final rule.

Next, CMS proposed that plans must demonstrate that an enrollee has met all three of the criteria set forth in Sec. 422.102(f)(1)(i)(A) through the use of an objective process (for example, either a health risk assessment, a claims review, or other similar means). This proposed requirement would help to ensure that the MA plan responsibilities at Sec. 422.102(f)(4)(1)(i)(A) are fully realized while retaining the flexibility plans have in choosing between methods that determine whether enrollees have met all three criteria. For example, a plan could establish that to be eligible for certain SSBCI, an enrollee must have a confirmed diagnosis of diabetes by their primary care physician, and must also have been admitted to the hospital in the last 90 days. Under this example, the diagnosis of a chronic illness is sufficient to satisfy the first criterion (as proposed), that the enrollee, “has one or more comorbid and medically complex chronic conditions that is life threatening or significantly limits the overall health or function of the enrollee \74\.” However, the plan must also determine that the enrollee has met the second and third criteria: (2) has a high risk of hospitalization or other adverse health outcomes; and (3) requires intensive care coordination. The plan may determine that an enrollee meets the second requirement by being hospitalized in the last 90 days. The plan may reason that enrollees who have been hospitalized in the last 90 days are at high risk of readmission and so meet the second statutory requirement of having a high risk of hospitalization. The plan may further decide that the enrollee would require intensive care coordination to prevent further hospitalization and thus would satisfy the third regulatory requirement. In this hypothetical scenario, the plan has determined through an objective process that the chronically ill enrollee meets all three requirements at Sec. 422.102(f)(1)(i)(A).

\74\ As previously noted, the list of chronic conditions that qualify as comorbid and medically complex chronic conditions that are life threatening or significantly limit the overall health or function of an enrollee for purposes of SSBCI eligibility can be found within the definition of “severe or disabling chronic condition” in CMS's regulations at Sec. 422.2.

As described previously, it has become evident through CMS's routine monitoring that MA plans have not consistently applied the statutory requirements to determine eligibility for SSBCI. To address this, CMS also proposed to add regulation text to Sec. 422.102(f)(1)(i)(C). This additional regulation text reiterates that: (1) having one or more comorbidities and medically complex chronic conditions alone is not sufficient to demonstrate that an enrollee meets all three criteria set forth in paragraph (f)(1)(i)(A) and (2) MA plans must (through health risk assessments, review of claims data, or other similar means) demonstrate that enrollees meet all three criteria set forth in paragraph (f)(1)(i)(A). This technical correction would codify existing policy regarding SSBCI eligibility and would not impose any new collection of information requirements.

Finally, CMS proposed to restructure paragraph (f)(4)(iii) to clarify the requirements by adding, “Have objective criteria for SSBCI. Specifically, the plan must” and then listing the requirements in paragraphs (f)(4)(iii)(A) through (C).

CMS believes these updates, will provide greater transparency and consistency to the eligibility determination process for potential enrollees and will enhance enrollees' ability to understand what benefits would likely be available to them and thus their ability to make informed decisions about their enrollment. CMS reminds MA organizations that Sec. 422.102(f)(4)(v) requires MA plans to maintain their evidentiary standards or objective criteria for enrollee eligibility for the entire coverage year.

CMS received the following comments on this proposal and responses follow.

Comment: Several commenters were supportive of the proposal to require reporting of SSBCI eligibility criteria on a plan's public- facing website.

Response: CMS thanks commenters for their support of this proposal.

Comment: Several commenters mentioned concerns that CMS proposed to restrict a member's ability to self-attest to eligibility for SSBCI.

Response: CMS did not propose a new prohibition on the ability of members to self-attest to SSBCI eligibility; rather, as

stated in the Contract Year 2026 proposed rule, enrollees never had such ability and the use of self-attestation is out of compliance with current requirements. CMS has pursued compliance actions against plans that used self-attestation as a method to confirm SSBCI eligibility. Section 422.102(f)(4)(iii)(A) states that plans must have objective criteria for making SSBCI eligibility determinations, and self- attestation is not objective.

Comment: Several commenters were concerned that claims review or other verification of eligibility may delay coverage of certain SSBCI. Some of the commenters also requested a grace or deeming period wherein plans may provide SSBCI coverage while the plan verifies eligibility.

Response: CMS thanks commenters for this feedback and understands the concerns about the potential for delays in coverage. However, as outlined in the preamble, it is, and has always been, the MA plan's responsibility to verify that an enrollee meets the eligibility criteria for SSBCI prior to administering the benefit. Moreover, CMS believes the inherent risk of waste and potential for abuse in administering benefits to ineligible enrollees when providing benefits before determining eligibility outweighs the possibility of delayed coverage. If plans are already performing the intensive care coordination that is required for the enrollee to be eligible for SSBCI, any delay due to verification of eligibility should be minimal.

Finally, CMS does not consider a grace or deeming period to be appropriate because in the event an ineligible enrollee is permitted to access SSBCI during the grace period, this would create a situation where MA plans are out of compliance with their statutory obligation and increase the chance of plans inadvertently providing payment for non-covered items.

Comment: A commenter requested that CMS clarify that MA plans have the flexibility to determine that enrollees have met the three-part “chronically ill” definition for SSBCI if they have an approved chronic condition code and a documented food/nutrition, housing/living environment, and/or transportation need. Additionally, several commenters conflated the two determinations MA plans are required to make when evaluating SSBCI eligibility.

Response: CMS appreciates these comments. As outlined in the preamble, CMS reiterates that MA plans are required to make two determinations when evaluating SSBCI eligibility. The first determination is that an enrollee is chronically ill-as per the statutory definition in section 1852(a)(3)(D)(iii) of the Act. To make this determination plans must verify that enrollees have met the three- pronged definition for a chronically ill enrollee.

The second determination, per section 1852(a)(3)(D)(ii)(I), is that each particular SSBCI “have a reasonable expectation of improving or maintaining the health or overall function of the chronically ill enrollee.” Food/nutrition, housing, and transportation needs are all considerations that should be taken into account in this second determination when a plan decides which specific benefits may maintain or improve the overall health or function of the enrollee. Once a plan has confirmed that an enrollee is chronically ill per the statute, the plan may then refer to their objective eligibility criteria for each specific SSBCI.

The following example outlines how a plan may make this determination: The enrollee is diabetic and has been hospitalized in the past 90 days. The plan determines that the enrollee is at high risk of readmission and requires intensive care coordination to prevent further hospitalization, and therefore meets the statutory definition of “chronically ill.” The enrollee is then observed during an in-home health risk assessment (HRA) using a walker to get around their two- story home. The plan's criteria for “structural home modification” is that the enrollee requires assistance navigating the home (for example, a cane, walker, etc.) and that the home has stairs. In this case, the plan may reasonably recommend a “structural home modification” benefit to install a chair lift to assist that enrollee in navigating the home more easily. This example shows how the plan uses objective criteria (that the enrollee requires assistance to walk and live in a home with stairs). The plan may also conclude that the chair lift has a reasonable expectation of improving or maintaining the health or overall function of the enrollee as the use of the chair lift may prevent the enrollee from falls, or from injuries that may cause health complications. This example demonstrates how a plan can meet CMS's requirements of making two separate determinations in order to adequately comply with 42 CFR 422.102(f)(4)(i) and 422.102(f)(4)(iii)(A).

CMS has already made allowances for plans to consider social determinants of health (SDOH) when identifying enrollees whose health or condition could be improved or maintained with SSBCI. This is set forth in the regulations at 42 CFR 422.102(f)(2)(iii). CMS notes however that plans may not use SDOH as the sole basis for determining SSBCI eligibility.

Finally, CMS clarifies that the proposed requirement is such that MA plans must publicly post their objective criteria for both steps of the SSBCI process. Specifically, MA plans must publicly post their criteria for determining that someone has met the definition of a chronically ill enrollee and their specific SSBCI benefit eligibility criteria. To clarify this, CMS is finalizing the proposal with a modification to refer to 42 CFR 422.102(f)(4)(iii)(A).

Comment: A commenter requested that certain chronic conditions such as end-stage renal disease (ESRD), diabetes and chronic obstructive pulmonary disease (COPD) should automatically qualify enrollees for SSBCI due to their high hospitalization risks.

Response: While CMS agrees that many ESRD, diabetes and COPD patients would likely meet the three-pronged definition of a chronically ill enrollee and potentially be eligible for several SSBCI items and services, CMS is not finalizing any automatic eligibility based on chronic condition diagnosis at this time. CMS notes that some patients with these conditions, or others on the chronic condition list set forth at Sec. 422.2, may be able to manage their conditions well, and not be at high risk of hospitalization or other adverse health outcomes or require intensive care coordination. Such enrollees would not meet the chronically ill enrollee definition. It would therefore not be prudent to automatically confirm chronically ill status or SSBCI eligibility based on a singular chronic condition.

CMS acknowledges that many patients with the noted chronic conditions may meet the eligibility standards based on an HRA, which SNPs are required to complete within 90 days, before or after enrollment in a plan. Since many enrollees with these conditions are enrolled in C-SNPs, CMS notes that plans may use these HRAs to determine: (1) chronically ill enrollee status and (2) particular SSBCI items and services that would meet the reasonable expectation standard. However, CMS reiterates its commitment to allowing plans to have the flexibility to determine the form and manner of confirming “chronically ill” status and SSBCI eligibility criteria. CMS noted in the Contract Year 2026 proposed rule that HRAs and claims reviews were merely two examples by which a plan may confirm these.

Comment: A commenter requested that CMS exempt C-SNPs from SSBCI eligibility criteria publication.

Response: CMS appreciates this suggestion, however CMS is not finalizing any exemptions to the public posting requirement at this time. It is the Agency's intention to increase the transparency of SSBCI benefits for enrollees. By exempting C-SNPs from the proposed requirement, CMS would exclude a vulnerable population from receiving this important information regarding SSBCI benefits. While many potential C-SNP enrollees may meet the chronically ill statutory definition, the lack of transparency on the eligibility requirements could be a deterrent to them during the enrollment period. For example, a C-SNP enrollee could choose a different plan with benefits less suited to them. The result of such a choice could have negative outcomes for all parties.

Comment: Some commenters noted concerns with being required to post proprietary SSBCI eligibility criteria on the plan's website.

Response: CMS understands that plans may have concerns about competitive advantage with new requirements to publish this information on a public-facing website. CMS notes however that listing eligibility criteria may provide for additional open competition in the marketplace, further incentivizing MA plans to offer supplemental benefits that are valued by enrollees in a clear and consistent manner. CMS has therefore determined that the potential benefit to enrollees far outweigh concerns about posting SSBCI eligibility information.

Comment: A commenter requested that CMS rely on the subset of chronic diseases identified by the Agency itself that allow for the current provision of SSBCI and enrollment in C-SNPs to determine eligibility. They urged CMS not to finalize limitations on SSBCI eligibility by requiring plans to impose an “objective process” to ensure beneficiaries meet three criteria to receive SSBCI.

Response: CMS appreciates this comment and attempts to clarify here. The requirement for plans to have and apply objective criteria for determining a chronically ill enrollee's eligibility to receive a particular SSBCI is already a regulatory requirement and has been since the inception of SSBCI in the MA program (85 FR 9013).

The commenter suggests that enrollees with chronic conditions identified by CMS meet the chronically ill enrollee definition and qualify for SSBCI solely on the basis of having one of those conditions. As CMS noted in a previous response, this is not the case and plans are required to have further criteria to make such determinations. CMS reminds commenters that this proposal was a technical update to emphasize the existing statutory and regulatory requirements, and CMS has held this standard since the inception of SSBCI.

Comment: Some commenters recommended that CMS consider providing detailed directions on what information must be included on the plan's public-facing website to ensure consistency between plans and help beneficiaries more easily compare their choices.

Response: CMS appreciates this concern and may consider providing additional guidance if, in practice, there is evidence that inconsistency among MA plan websites cause beneficiary confusion.

Comment: A commenter requested that CMS provide a comprehensive list of acceptable methodologies that would meet the definition of “objective process” for purposes of determining SSBCI eligibility. This commenter urged CMS to include the review and identification factors that influence disease progression. They suggested that these factors include, but not be limited to, race, ethnicity, socioeconomic status, comorbidities, and recent acute care utilization.

Similarly, another commenter asked that plans be allowed to use low-income status (LIS) and dual-eligibility as part of the objective criteria to support that a member is at risk for hospitalizations or adverse health outcomes and thereby requires care management.

Response: CMS appreciates this recommendation. Per section 1852(a)(3)(D)(iii)(III) of the Act, for purposes of SSBCI, a chronically ill enrollee must “require[ ] intensive care coordination.” CMS reiterates that in the June 2020 Final Rule, CMS did not define “intensive care coordination” to allow plans flexibility in determining what the phrase meant to best serve their specific enrollee population. However, CMS noted some examples of methods through which plans may determine an enrollee required intensive care coordination, such as conducting an HRA, performing a retrospective claims review for an enrollee, or by other means the plan deems necessary. CMS reaffirms its position stated in the June 2020 final rule, that objective criteria which utilize the above mechanisms for meeting the three-pronged definition are present in the medical community and may be readily accessible to the plan.

CMS reminds commenters that an enrollee's high risk of hospitalization, does not necessarily affirmatively establish that the enrollee will also require intensive care coordination, as these are separate factors to evaluate in determining whether an enrollee meets the statutory definition of “chronically ill” for purposes of SSBCI.

CMS notes that the commenters listed several factors that may be useful in meeting CMS' requirements. It is at the plans' discretion to determine their objective criteria for determining whether an enrollee meets the definition of “chronically ill” for purposes of SSBCI, based on their specific enrollee population and any other relevant considerations that may be unique to the plan. CMS does not wish to limit the flexibility of MA organizations to determine which objective criteria are best for a particular plan, or their enrollees.

Comment: Another commenter believed that CMS' proposed provision regarding posting criteria for determining chronically ill enrollee status on a public-facing website would increase administrative burden on plans and provide little to no value to enrollees.

Response: CMS acknowledges that this requirement will place administrative burden on plans to implement and discusses the burden in the Collection of Information section of this final rule. CMS proposed to make SSBCI criteria publicly available in response to numerous comments received during previous rulemaking. Commenters expressed the need for such transparency in order for potential enrollees to make informed choices when choosing an MA plan to join and to have a better understanding of their current care options while enrolled. Such transparency will have an overall positive impact on enrollee experience and choice as it fosters enrollee empowerment and competition in the MA market.

Comment: Some commenters requested that CMS not require hospitalization in the past 90 days to meet the second and third criteria that chronically ill enrollees have a “high risk of hospitalization or other adverse health outcomes” and “require intensive care coordination” respectively. Specifically, a commenter mentioned that I-SNP enrollees are inherently at high risk due to their clinical and care needs and recommended that CMS consider adjusting the eligibility criteria for this population to better reflect the goals of preventative care in long-term care settings.

Response: CMS appreciates this feedback. CMS clarifies that the discussion pertaining to hospitalization in the past 90 days in the Contract Year

2026 proposed rule and in this section of the final rule is meant to serve only as an example of objective criteria an MA plan might apply in determining chronically ill enrollee status. CMS did not propose and will not be finalizing a requirement that MA enrollees must have been hospitalized in the past 90 days in order to be eligible to receive SSBCI.

CMS also appreciates the commenter drawing attention to I-SNP enrollees specifically. CMS agrees that many I-SNP enrollees would likely meet the chronically ill enrollee definition. CMS therefore notes, if plans were to use a qualifying chronic condition diagnosis in conjunction with enrollee utilizing institutional level of care (LOC) to satisfy the 3-pronged criteria for chronically ill enrollee, this would meet CMS requirements and expectations, as the need for an institutional LOC could indicate a high risk of hospitalization or other adverse health outcomes and a need for intensive care coordination.

Comment: A commenter recommended that if finalized, the implementation of the public posting of chronically ill enrollee criteria be delayed at least one year to allow adequate time to inform beneficiaries while minimizing any potential disruptions to care.

Response: CMS appreciates these concerns regarding the timing of these requirements. CMS notes that MA organizations will have until January 2027 to implement these requirements. Additionally, MA plans should already be utilizing objective criteria for both determining that an enrollee meets the definition of a chronically ill enrollee and that a specific SSBCI has a reasonable expectation of improving or maintaining the enrollee's overall health or function. Therefore, requiring MA organizations to post this information on their plan's website should present minimal challenges regarding timeliness and should not require a full year to finalize.

Comment: Another commenter requested that CMS allow plans to proactively approve members for SSBCI benefits prior to their effective date with a plan. This approach would help ensure vulnerable members have access to the support they need as soon as possible, which is essential for improving their health outcomes. They also recommended that plans be allowed to use multiple chronic conditions (MCC) files as a method of SSBCI eligibility verification.

Response: CMS appreciates this commenter's feedback and notes that this proactive approval process would be allowable. For example, many plans choose to complete HRAs before the beginning of the coverage year. The information obtained from the HRA can then be used to help confirm the chronically ill status of an enrollee prior to the plan's effective date. CMS agrees that plans should utilize data streams that provide the most utility in accordance with the resources available to them.

Comment: Another commenter requested additional clarification of the requirements for objective criteria given that some HRAs are self- attested.

Response: CMS appreciates this comment and the opportunity to clarify. Self-attested HRAs include questions about an enrollee's habits, environment, or other pertinent information. The enrollee is answering questions which are specific in nature, and do not rely on the enrollee's judgement to self-diagnose or make SSBCI eligibility determinations about themselves. An MA organization may use an enrollee's HRA responses in determining, based on objective criteria, the enrollee's eligibility for SSBCI. If, by contrast, an enrollee was to certify their own eligibility for SSBCI by checking a box, for example, without first receiving an independent determination by the MA organization that objective criteria for eligibility are met, this would not be compliant with CMS' rules. It is the responsibility of the MA organization (not enrollees) to understand and abide by CMS requirements.

An MA organization cannot delegate its responsibility to make objective eligibility determinations to the enrollee, given that the enrollee may have a strong financial incentive to certify themselves eligible for SSBCI and may not fully understand the applicable criteria. Consider an example where the plan provides money for gas as “transportation for non-medical benefits” SSBCI which is administered through a debit card or “flex card” and the enrollee is asked to check a box if they are “eligible to receive a gas card.” Allowing an enrollee to self-attest or self-certify to SSBCI eligibility in this scenario is inconsistent with the MA organizations' responsibility for ensuring objective SSBCI eligibility determinations. This scenario is distinguishable from self-attested responses to questions on an HRA, which can then be used by the MA organization to determine, based on objective criteria, whether the enrollee is eligible for SSBCI. As a result, self-attestation of eligibility for SSBCI is not permissible, but MA organizations may use self-attested HRA responses in determining eligibility for SSBCI.

Comment: A commenter recommended that CMS not finalize its proposed requirement for plans to publicly post their SSBCI eligibility criteria as they believed it would be duplicative of information provided in the Evidence of Coverage (EOC) and is also required in any marketing of the SSBCI benefits as finalized in the April 2024 final rule.

Response: CMS appreciates this comment and agrees that best practices in providing EOC materials and other plan documents would include this information. CMS stated in the June 2020 final rule that it is expected that plans communicate to enrollees information in a clear manner about the scope of SSBCI that the MA plan covers and who is eligible for those benefits (85 FR 33803). The EOC requirements in Sec. 422.111(b)(2) require the inclusion of information about the benefits offered under a plan, including applicable conditions and limitations. In the April 2024 final rule, CMS modified the disclaimer requirements at Sec. 422.2267(e)(34) to require plans to include clear information about SSBCI eligibility criteria in marketing and communications materials that mention SSBCI, including by listing the chronic conditions an enrollee must have in order to be eligible for the SSBCI. However, this regulation does not explicitly state that plans must list their SSBCI eligibility criteria apart from specific chronic conditions that might qualify for SSBCI. Some MA organizations have neglected to include such additional eligibility criteria in their plan's EOC and other documents. For plans that already list the information elsewhere, there will be a lower associated burden. Plans that do not provide this information anywhere in enrollee-facing documentation will be providing an additional level of transparency into their operations that may improve patient experience.

CMS is finalizing the proposal with the following modifications: First, for the reasons discussed in this section, Sec. 422.102(f)(4)(iii)(C) will be finalized as follows, “For each SSBCI, list all the written policies and objective criteria on which the policies are based, as noted in paragraph (f)(4)(i) and (f)(4)(iii)(A) of this section, on their public-facing website.” Second, CMS is finalizing non-substantive technical changes at 42 CFR 422.102(f)(4)(iii)(A)-(C) for structure and clarity.

Finally, CMS notes that while this provision was originally proposed in the Contract Year 2026 proposed rule, it is being finalized in the Contract Year 2027 final rule. Therefore, this provision will be applicable January 1, 2027.

L. Administration of Supplemental Benefits Coverage Through Debit Cards Sec. Sec. 422.102, 422.111, and 422.2263

The following provisions were proposed in the Medicare and Medicaid Programs; Contract Year 2026 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly proposed rule (hereinafter referred to as the Contract Year 2026 proposed rule) (89 FR 99340). This section discusses what was proposed and the modifications being made in this final rule. 1. Background

Section 1852(a)(3)(A) of the Act gives Medicare Advantage (MA) organizations the ability to offer supplemental benefits to plan enrollees, subject to the Secretary's approval. CMS has adopted rules-- primarily in Sec. Sec. 422.100(c)(2) and 422.102--to regulate how those supplemental benefits, such as vision, dental, gym membership, and others, must be offered. For example, in the Medicare Program, Establishment of the Medicare Advantage Program Final Rule,\75\ which appeared in the Federal Register on January 28, 2005, CMS established at Sec. 422.102(a)(4) that an MA organization could offer as a mandatory supplemental benefit a reduction in cost sharing below the actuarial value specified in section 1854(e)(4)(B) of the Act (70 FR 4617). Later, in the Medicare and Medicaid Programs; Contract Year 2022 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicaid Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly Final Rule \76\ (January 19, 2021; 86 FR 5913) (hereinafter referred to as the January 2021 final rule), CMS further clarified the scope of supplemental benefits that reduce cost sharing by adding rules at Sec. 422.102(a)(5) and (a)(6)(i) and (ii) to clarify the different circumstances under which an MA plan may reduce cost sharing for covered items and services as a mandatory supplemental benefit and the mechanisms by which an MA plan may make such reductions in cost sharing available to enrollees. Mandatory supplemental benefits are benefits that are included in the plan and are generally available to all enrollees with no additional premiums. As described in Sec. 422.102(b), optional supplemental benefits are purchased at the discretion of the enrollee and are available to all plan enrollees who choose to pay an additional premium in order to receive those benefits.

\75\ https://www.federalregister.gov/documents/2005/12/23/05-24446/medicare-program-establishment-of-the-medicare-advantage-program.

\76\ https://www.govinfo.gov/content/pkg/FR-2021-01-19/pdf/2021-00538.pdf.

In the January 2021 final rule, CMS explained that MA plans may choose to structure mandatory supplemental benefits in a few ways (86 FR 5913). For example, an MA plan may offer, as a mandatory supplemental benefit, the use of a debit card to administer reduced cost sharing for plan-covered services or to provide coverage of 100 percent of the cost of plan-covered items or services. This may include reduced cost sharing for dental and vision services (when offered as a mandatory supplemental benefit--not as an optional benefit) where a claim for additional payment is submitted to the plan, and/or coverage by the plan (through use of the card) of all or part of the cost of OTC items, fitness-related benefits, food and produce, transportation, and utilities support. With respect to a mandatory supplemental benefit in the form of reduced cost sharing, a beneficiary may receive a debit card to use to pay for any applicable cost sharing when receiving a basic benefit or mandatory supplemental benefit, including Special Supplemental Benefits for the Chronically Ill (SSBCI). For example, if the plan provides a transportation service as a covered benefit and provides a debit card to be used to reduce cost sharing for those defined transportation services, the beneficiary could use the debit card to pay for those services. However, MA organizations that choose to use a debit card to administer mandatory supplemental benefits must do so in a manner that ensures the debit card can only be used towards plan-covered items and services. To the extent these items and services are mandatory supplemental benefits, they must also meet all the regulatory supplemental benefit standards at Sec. Sec. 422.100(c)(2) and 422.102(a) through (f). CMS reminds readers that reduced cost sharing is not permitted as an optional supplemental benefit (that is a supplemental benefit that a beneficiary would select in exchange for additional premiums) (see 86 FR 5913). Thus, this mechanism of using debit cards is not permitted to administer optional supplemental benefits (that is, an optional dental or vision service package).

The use of debit cards is permitted for administering both mandatory supplemental benefits for all MA enrollees and mandatory supplemental benefits available as SSBCI as defined at Sec. 422.102(f). CMS also explained in the January 2021 final rule that debit cards may only be used to administer coverage of items and services that are identified in the MA plan's bid and marketing and communication materials as covered benefits (86 FR 5913). Consistent with guidance in Chapter 4 of the Medicare Managed Care Manual (MCM), Sec. 40.3, CMS stated that debit cards used for plan-covered benefits must be exclusively linked to only the covered items and drugs specified by the MA organization and that MA organizations are not permitted to offer use of a debit card to enrollees for purchasing items or services that are not plan-covered (86 FR 5913). In addition, the use of the debit card to pay cost sharing or pay for covered items and services must be tied to the period of coverage, that is the specific plan year or part of a plan year during which the enrollee is enrolled with and covered by the MA plan. (MA organizations may include a maximum dollar limit on a per-month basis, per-year basis, or other periodicity within the plan year tied to the benefit maximum.) The debit card itself is not a supplemental benefit; rather, it is a tool used to administer coverage to an enrollee for identified plan-covered items and services at a reduced cost. Plan-covered items and services that are paid for by a debit card must meet the requirements and standards for mandatory supplemental benefits or be basic benefits in the case of reduced cost sharing for a Part A or B covered benefit, as specified in the January 2021 final rule (86 FR 5913).

Since the January 2021 final rule, many MA organizations have disclosed the use of debit cards to administer a benefit in their annual bid notes. In reviewing annual bids, CMS has observed that MA organizations appear to regularly use debit cards to administer several mandatory supplemental benefits, including reductions in cost sharing for dental and vision services and/or payment for OTC items, fitness- related benefits, food and produce, transportation, and utilities support. In recent years, based on questions from stakeholders, including beneficiaries, CMS has also become aware that there is some confusion around the use of debit cards. For example, many stakeholders have submitted questions requesting CMS clarify what these cards are and how they can be used. CMS has also received complaints from enrollees who tell us that they are confused when trying to use their debit card. Often these individuals do not receive guidance on

which plan covered supplemental benefits can be purchased with their debit card or where and how they can use them. Additionally, stakeholders have raised concerns that there are not enough guardrails on how these cards are used and how purchases are tracked, especially at large box stores that carry non-covered items and services (for example, Costco or Walmart) that would be inappropriate for the MA plan to cover as supplemental benefits. For example, there are concerns that the enrollee may use the plan debit card to purchase items and services that are not covered or that do not meet the requirements for MA supplemental benefits.

To provide further clarity to both MA organizations and beneficiaries on the parameters around the appropriate use of plan debit cards, in the Contract Year 2026 proposed rule, CMS proposed requirements on the proper administration of supplemental benefits. Based on CMS's authority under section 1856(b)(1) of the Act to establish standards for MA organizations, along with the authority in section 1857(e)(1) of the Act to adopt additional terms and conditions for MA contracts that are not inconsistent with the Part C statute and that are necessary and appropriate for the MA program, CMS proposed to codify in regulation text the requirements and limitations discussed in the preamble of the January 2021 final rule and later in the May 6, 2024 HPMS memo titled, “Final Contract Year (CY) 2025 Standards for Part C Benefits, Bid Review and Evaluation” regarding the administration of supplemental benefits, including the use of debit cards. CMS believes codifying these standards will also ensure that MA requirements regarding supplemental benefits are applied uniformly across the MA industry and for all supplemental benefits: both standard (that is, primarily health-related) supplemental benefits and non- primarily health-related SSBCI. CMS also proposed to expand on these requirements by adopting additional disclosure and access guardrails to increase transparency, protect access to plan-covered services for MA enrollees, and ensure that MA plans cover (that is, provide, furnish, and/or pay for) only those items and services that are permissible MA benefits.

Specifically, CMS proposed to add a new paragraph (g) at Sec. 422.102 to codify existing guidelines for administering supplemental benefits, including the use of debit cards to administer plan-covered benefits, and add new guardrails to ensure that beneficiaries are fully aware of covered supplemental benefits and how to access those benefits.

CMS regulations at Sec. 422.100(c)(2) define a mandatory or optional supplemental health care benefit (with the exception SSBCI as defined at Sec. 422.102(f)) as an item or service: (1) not covered by original Medicare; (2) that is primarily health-related; and (3) for which the plan must incur a non-zero direct medical cost. The 2022 Final Rule further clarified at Sec. 422.100(c)(2)(ii)(A) that to be considered primarily health-related, a supplemental benefit must be to diagnose, prevent, or treat an illness or injury; compensate for physical impairments; act to ameliorate the functional/psychological impact of injuries or health conditions; or reduce avoidable emergency and health care utilization. Additionally, CMS has codified numerous requirements that MA organizations must comply with when delivering supplemental benefits at Sec. 422.102(a) through (e). More recently, CMS codified standards for SSBCI benefits at Sec. 422.102(f), which include the requirements that SSBCI may only be offered to chronically ill enrollees as defined by section 1852(a)(3)(D) of the Act, must incur a non-zero non-administrative cost, and must have a reasonable expectation of improving or maintaining the health or overall function of the enrollee. SSBCI may include benefits that are not primarily health-related per Sec. 422.100(c)(2)(ii)(A) but must have a reasonable expectation of improving or maintaining the health or overall function of the chronically ill enrollee. Additionally, per section 1852(a)(3)(D)(ii)(II) of the Act, CMS has authority to waive the uniformity requirements that usually apply for all MA benefits so that SSBCI can be offered non-uniformly.

CMS proposed in the Contract Year 2026 proposed rule that MA organizations must have processes for delivering all MA plan-covered supplemental benefits to enrollees that ensure compliance with Sec. Sec. 422.100(c)(2) and 422.102(a) through (f) and appropriate access to suppliers and providers in accordance with Sec. 422.112(a) as applicable. Per Sec. 422.112(a), MA coordinated care plans may specify the networks of providers from whom enrollees may obtain services if the MA organization ensures that all covered services, including supplemental services contracted for by (or on behalf of) the Medicare enrollee, are available and accessible under the plan. The MA organization may therefore contract with providers or vendors to furnish covered services, including supplemental benefits administered via a debit card or otherwise. For example, a plan may contract with a particular vendor to provide their food and produce benefit. In this scenario, that specific vendor is the network provider for furnishing the food and produce benefit. CMS noted that section 1854(a)(6)(B)(iii) of the Act, commonly known as the “non-interference clause,” prohibits CMS from requiring any MA organization to contract with a particular provider to furnish covered items and services. Therefore, CMS does not specify which vendors MA organizations contract with to furnish covered items and services. (Note, however, that Sec. 422.204(b)(3) requires that providers that furnish covered Part A and B benefits must meet the applicable requirements of Title XVIII of the Act and that certain types of institutional providers must have participation agreements with Medicare.)

CMS also noted that all coordinated care plans are required to cover benefits, including supplemental benefits, at in-network cost sharing when an in-network provider or benefit is unavailable or inadequate to meet an enrollee's medical needs in accordance with the standards set forth in rules and regulations.\77\ This is required for all benefits, regardless of how they are administered.

\77\ Sec. 422.112 (a)(1)(iii); Chapter 4, section 30.2 of the Medicare Managed Care Manual; 88 FR 22200.

If an in-network provider is unavailable or inadequate to administer covered plan benefits, whether Parts A and B or supplemental benefits, the MA organization should have a plan or process in place to ensure that the requirements under Sec. 422.112(a)(1)(iii) are met. However, given inconsistencies in how supplemental benefits are provided, CMS believes it is necessary to clarify this requirement in regulatory text. Therefore, in the Contract Year 2026 proposed rule, CMS proposed and sought comment on new Sec. 422.102(g)(1) that would require MA organizations to have processes for delivering all MA organization covered supplemental benefits to enrollees that ensure compliance with Sec. Sec. 422.100(c)(2) and 422.102(a) through (f) and appropriate access to all covered services in accordance with Sec. 422.112(a). 3. New Guardrails for Plan Debit Cards

In the Contract Year 2026 proposed rule, CMS proposed to include a clarification in Sec. 422.102(g)(1) requiring

that MA organizations have processes for delivering all MA organization covered supplemental benefits to enrollees that ensure compliance with Sec. Sec. 422.100(c)(2) and 422.102(a) through (f) and appropriate access to all covered services per Sec. 422.112(a). Thus, CMS believes it is necessary to specify that this requirement would apply to all plan-covered supplemental benefits, including supplemental benefits administered through debit cards. Under this proposal, plans must have a process in place to maintain enrollee access to these benefits. When plans offer debit cards to assist with the cost sharing for covered benefits or otherwise administer supplemental benefits, the MA organization must ensure that the access requirements at Sec. 422.112(a) are met. This means regardless of the mode of delivery (for example, debit card or other means), MA organizations must ensure that all covered services, including supplemental benefits, and SSBCI for eligible enrollees, contracted for by (or on behalf of) enrollees, are available and accessible under the plan.

In addition, CMS requires that plan-covered benefits be disclosed in the plan's evidence of coverage (EOC). Section 422.111 requires that MA organizations disclose all benefits offered under an MA plan, including applicable conditions and limitations, and any other conditions associated with receipt or use of benefits. These requirements are applicable to all benefits, including those administered via debit card. CMS also noted that MA organizations are required to send an Explanation of Benefits (EOB) to an enrollee that captures all claims activity that occurs during a reporting period (monthly or quarterly cycle). The EOB must include claims information for all Part C claims processed during the reporting period, including all claims for Part A and Part B covered items and services, mandatory supplemental benefits, optional supplemental benefits, and SSBCI.\78\ The EOB must disclose for each claim a descriptor, billing code and amount billed, total cost approved for reimbursement, share of the total cost paid by the plan, and share of the total cost for which the enrollee is liable. Additionally, the EOB must include certain year-to- date information such as the amount an enrollee has incurred toward the Maximum Out-of-Pocket (MOOP) limit.\79\ These EOB requirements include supplemental benefits that MA plans elect to cover through a debit card.

\78\ https://www.ecfr.gov/current/title-42/part-422/section-422.111#p-422.111(k).

\79\ https://www.ecfr.gov/current/title-42/part-422/section-422.111#p-422.111(k).

However, given stakeholder and enrollee feedback, CMS believes additional clarity and more specific guardrails regarding the use of debit cards are necessary to ensure that enrollees are adequately aware of the benefits that are available to them from their plan through a debit card and how to access them.

In the January 2021 final rule, CMS stated that consistent with current guidance in section 40.3 of Chapter 4 of the Medicare MCM, debit cards may only be used for plan-covered benefits under the condition that the card is exclusively linked to the covered items. CMS also suggested in the January 2021 final rule (86 FR 5913) that MA organizations may accomplish this by providing a debit card that is linked to an appropriate merchant and item/service codes so that the enrollee may pay the cost sharing at the point of service. CMS believes such a link is necessary to ensure that the debit card is used for the permissible purpose--to reduce the enrollee's cost sharing for a covered item or service or to pay for an item or service that is covered by the MA plan at up to 100 percent of the cost. Therefore, CMS proposed at Sec. 422.102(g)(2)(i) the following requirements that MA organizations must meet if they choose to administer reductions in cost sharing or provide coverage of 100 percent of the cost of a mandatory supplemental benefit. CMS proposed at Sec. 422.102(g)(2)(i) that when administering a mandatory supplemental benefit through plan debit cards, an MA organization must provide debit cards that are electronically linked to plan covered benefits through a real-time identification mechanism to verify eligibility of plan covered benefits at the point of sale. This means that a plan-issued debit card must be electronically linked to the covered benefit through a real-time mechanism that ensures the enrollee is only able to receive covered items or services that they are eligible to receive at the point of sale. The debit card must include some sort of mechanism that ensures the enrollee may only use the card to purchase the covered item or service. For example, an MA organization could provide a debit card linked to covered benefits through the use of item/service codes so that the enrollee is only able to pay the cost sharing for those select items at the point of sale. In this scenario, the MA organization would have to ensure that the enrollee is only able to purchase items or services they are specifically eligible to receive. This is necessary to ensure that enrollees only receive benefits they are eligible to receive and that MA organizations do not inadvertently furnish non- covered benefits. The debit card is intended only to facilitate or administer certain covered benefits and may not be used to pay for non- covered items or services. CMS did not propose to prescribe exactly how plans effectuate the proposed requirements at Sec. 422.102(g)(2)(i) because CMS believes flexibility for plans to innovate around these processes will be beneficial to the industry. However, if an MA organization provides a debit card that is not electronically linked to covered items and services and does not include checks to ensure that the enrollee may only receive covered benefits they are eligible to receive, the MA organization would be in violation of these requirements.

Next, CMS proposed at Sec. 422.102(g)(2)(ii) to require MA organizations that use debit cards to administer a supplemental benefit to provide instructions for debit card use and customer service support to enrollees to answer questions or help with issues related to the administration of the card. For example, if an MA organization provides a food and produce benefit that may be accessed via a debit card, the plan must provide eligible enrollees with instructions on how to use the debit card and provide customer support service to beneficiaries who have questions about how to use the debit card. This support service must include instructions to beneficiaries on the process to access these benefits if not accessible by debit card, in accordance with Sec. 422.112(a). CMS believes this is necessary to ensure that enrollees are fully aware of their benefits and how to properly access those benefits, particularly those living in rural areas with limited access to broadband/internet for communication. Finally, all benefits must be limited to the specific plan year. Therefore, the Contract Year 2026 proposed rule proposed to state at Sec. 422.102(g)(2)(iv) that MA organizations must ensure the use of a debit card to administer a covered benefit is limited to the specific plan year.

In the January 2021 final rule, CMS amended Sec. 422.102(a)(6) to state that an MA organization may offer reduced cost sharing as a mandatory supplemental benefit through the use of reimbursement, through a debit card or other means. In order to further support the proposed requirements at Sec. 422.102(g)(1), in the Contract Year 2026 proposed rule, CMS also proposed to revise Sec. 422.102(a)(6) by removing “or

other means” and adding “manual” before reimbursement to ensure that reductions in cost sharing as a supplemental benefit are clearly limited to either manual reimbursement or to a debit card governed by the proposed rules under Sec. 422.102(g) for covered items and services. CMS explained that “other means” could be interpreted to allow an unrestricted card or other vague mechanisms, which would conflict with CMS requirements that a debit card be exclusively linked to covered benefits and limited to the plan year or the requirements being proposed at Sec. 422.102(g)(1)(i).

While CMS proposed to remove “or other means,” CMS also solicited comment on what other means, outside of manual reimbursement or a debit card, would be unintentionally removed as options to plans should this proposed revision be finalized. CMS solicited comment on how these other means or mechanisms may still guarantee compliance with existing requirements at Sec. 422.102(a)(6) and the requirements proposed at Sec. Sec. 422.102(g) and 422.111(b)(6) (discussed in section III.H.2 of the Contract Year 2026 proposed rule). For example, it was not CMS's intent that the proposed changes at Sec. 422.102(a)(6) would prohibit an organization from using a stored value card,\80\ provided the use of these cards by MA plans complies with the requirements at Sec. 422.102(g). Therefore, CMS solicited comment on whether the use of stored value cards meets the requirements at Sec. 422.102(g). Specifically, CMS solicited comment on whether the mechanisms available and used with stored valued cards are sufficient so that the purchases made through such cards can be electronically linked to plan covered items through a real-time identification mechanism that verifies the eligibility of plan covered benefits at the point of sale, and can restrict the time period allowed for the use of the stored value card to the plan year only. CMS also solicited comment on whether stored value cards should be explicitly added to Sec. 422.102(a)(6) and Sec. 422.102(g) as an acceptable means of administering reductions in cost sharing and the coverage of supplemental benefits.

\80\ https://www.fiscal.treasury.gov/stored-value-card/.

While an MA organization may utilize a debit card to administer a benefit, this does not exempt the plan from ensuring access and network adequacy is preserved for the benefit if there is an issue with the vendor or a technical issue with the debit card. As discussed earlier, the regulations at Sec. 422.112(a)(1)(iii) specify that coordinated care plans must arrange for, and cover any, medically necessary (clinically appropriate for non-primarily health-related SSBCI) covered benefit outside of the plan provider network, but at in-network cost sharing, when an in-network provider or benefit is unavailable or inadequate to meet an enrollee's medical needs. Additionally, long- standing guidance under section 40.3.1 of Chapter 4 of the Medicare MCM states, “Every MA plan, independent of the payment method it chooses, must also allow--under circumstances which it describes (for example, when the debit card network is not operating correctly)--for manual reimbursement for the purchase of OTC items based on submitted receipts.” CMS included this language in the Medicare MCM Chapter 4 to ensure enrollee access by requiring plans to have an alternative method (for example, reimbursement based on submitted receipts) for enrollees to receive their OTC benefits if there was an issue with the contracted vendor or an operational issue with the debit card. CMS believed that it was important to propose a similar policy here to maintain enrollee access for all benefits administered through a debit card, not just OTC benefits.

Therefore, CMS proposed at Sec. 422.102(g)(2)(iii) that a plan must have an alternative process that allows for reimbursement of eligible expenses for plan covered benefits. CMS believed this proposal would allow enrollees to maintain access to covered benefits that are administered through the offering of a debit card should the real-time identification mechanism fail or otherwise be unavailable. This would allow enrollees to be reimbursed for the purchase of eligible plan covered benefits if they are unable to use their plan debit cards. CMS believed that requiring plans to allow this alternative will ensure that the enrollee has access to the benefit if there is an issue with the vendor, a technical issue with the debit card, or any other situation in which the use of a debit card is unfeasible for the enrollee. This may include non-technical issues, such as when an enrollee is having trouble understanding how to use the debit card or is otherwise running into non-technical obstacles to its use. This alternative reimbursement process could also apply if there are failures with the electronic processing system used by the provider. This includes situations where a permitted transaction is erroneously declined. In other words, in the case that the debit card is not operating correctly or as intended, there is an issue with the vendor, or any other situation in which the use of a debit card is unfeasible for the enrollee, the MA plan must allow enrollees to be reimbursed for the purchase of the covered benefit based on submitted receipts. This also includes situations in which a contracted vendor is not easily accessible due to an enrollee's transportation constraints. This requirement would protect enrollee access to benefits that they are entitled to receive regardless of issues that may arise from a plan's chosen mode of delivery (for example, plan debit card).

CMS proposed that this alternative process must be in place for both in-network and out-of-network access to the benefit where necessary (for example, in the event that in-network providers and/or vendors are unavailable or inadequate to meet the enrollee's needs). In this scenario, the plan is still responsible for ensuring out-of- network access at in network cost sharing. Under this requirement, MA organizations would be expected to adequately disclose the process by which reimbursement may be made to enrollees and to ensure that the process is accessible to all enrollees. CMS also encouraged MA organizations to be mindful of enrollees in rural areas, especially those who have limited access to broadband or internet communication, when implementing this requirement and when disclosing information about how to effectuate a reimbursement to plan enrollees.

CMS also noted that MA plans that are PPOs are required to provide reimbursement for all covered services, regardless of whether the items are provided within the network of providers under Sec. 422.4(a)(1)(v). Regarding reimbursement, Sec. 422.4(a)(1)(v)(B) requires PPOs to provide for “reimbursement for all covered benefits regardless of whether the benefits are provided within the network of providers.” This applies to all supplemental benefits, including those administered through a debit card (it was noted that in this scenario, an enrollee may be subject to increased cost sharing). For example, an MA organization may contract with a particular grocery store to furnish their food and produce benefit. However, in a PPO, enrollees may purchase eligible food and produce at another non-contracted grocer (out-of-network provider) and be reimbursed for those covered items. CMS expects MA PPOs to have processes to verify out-of-network reimbursement is only made

for plan-covered services and to indicate to enrollees the process by which reimbursement can be made. As noted above, that process should be mindful of enrollees in rural or remote areas with limited access to providers and internet-based communication methods.

Finally, CMS reminded MA plans that the regulations at Sec. 422.112(b)(3) provide for coordinated care MA plans to include community-based services in their plans for coordination and continuity of care for enrollees. In addition, Sec. 422.112(b)(3) specifically states that MA coordinated care plans are required to “coordinate MA benefits with community and social services generally available in the area served by the MA plan.” MA plans may contract with community- based organizations to provide supplemental benefits that are compliant with the statutory and regulatory requirements. The Agency strongly encouraged, for example, an MA plan that elects to offer a food and produce supplemental benefit to do so via a community-based organization that is able to process the benefit through a debit card. CMS understands that in some areas there may be a limited number of community-based providers, including small businesses. However, plans were strongly encouraged to partner with community-based providers or other local, smaller businesses when offering supplemental benefits, particularly regarding food and produce benefits that may be offered to chronically ill enrollees under SSBCI regulations at Sec. 422.102(f). Encouraging plans to contract with community-based providers will improve enrollee access to benefits. With covered benefits available in their communities, enrollees will be able to more readily and easily obtain and use covered benefits and thus have the potential to improve their overall health. 5. Additional Disclosure Guardrails

To increase transparency for beneficiaries accessing plan-covered benefits, CMS also proposed to add additional disclosure requirements specific to supplemental benefits under Sec. 422.111. Section 422.111(b) currently requires MA organizations to disclose mandatory and optional supplemental benefits and the premium for those benefits. Additionally, CMS proposed to amend Sec. 422.111(b)(6) to state that MA organizations must disclose any mandatory supplemental benefits (including reductions in cost sharing) or optional supplemental benefits, the premium for optional supplemental benefits, and any applicable conditions and limitations associated with receipt or use of supplemental benefits. CMS also proposed to clarify that this disclosure must include eligible OTC items and, where supplemental benefits are administered through a debit card, must specify which benefits may be accessed using the debit card. CMS believes that such disclosure is necessary to ensure transparency considering the growth of the scope of supplemental benefits and authorized administrative flexibilities, such as the use of plan-furnished debit cards to administer certain supplemental benefits. This will help ensure that plan enrollees are sufficiently aware of what covered benefits may be accessed through any debit card they receive from their plan.

Lastly, regarding OTC items, longstanding CMS guidance (section 40.1 of Chapter 4 of the Medicare MCM) defines OTC items as health related items and medications that are available without a prescription, and Sec. 422.102(c)(2) provides that permissible supplemental benefits are items and services that are not covered by Medicare Part A, Part B or Part D. Per Sec. 422.100(c)(2), plans may never offer as a supplemental benefit something that is covered under Part B or Part D for the plan's enrollees, including an OTC item or medication. Additionally, while the 2022 Final Rule did include OTC items as an example of permissible primarily health-related supplemental benefits (86 FR 5971), it did not include a non-exhaustive list of acceptable and non-acceptable items. CMS has also received feedback that a non-exhaustive list could provide further clarity for MA organizations. Therefore, CMS included a non-exhaustive list of acceptable and non-acceptable items here. Examples of permitted primarily health-related OTC items that have been reviewed and approved by CMS during the bid review process include, but are not limited to: amplified phones, analgesics, antacids, anti-bacterial grooming products (when recommended by a provider), antihistamines, anti- inflammatories, antiseptics, blood pressure cuffs, callous/wart remover, custom made compression garments (if furnished under circumstances when it would not be covered by the Part B benefit), contact lens solution and cases, over the counter contraceptives (such as condoms and over the counter, non-prescription birth control pills), cotton swabs, COVID-19 tests (over the counter), decongestants, dressing and eating aids, extension grabbers or reaching aids, facial cleaners (including acne wash), feminine hygiene products (such as douche, lubricants, pads, tampons, wipes), fiber supplements, first aid supplies, energy protein bars and power drinks, nutritional drinks/ shakes, hand sanitizer, hearing aid batteries, hearing amplifiers, herbal supplements, hip kits, dietary supplements (such as CoQ10, garlic, gingko biloba, melatonin, and saw palmetto), incontinence supplies (such as adult diapers and under pads), insulin refrigeration units, and lip soothers/balms (non-medicated), low vision aids, magnifying glasses, medicine dispensers, mouth/oral care products (such as toothbrush/paste, floss, mouthwash, denture adhesives/cleaners), naloxone (if furnished under circumstances when it would not be covered by Medicare Part B or Part D), night lights, nicotine replacement therapy (NRT), pain relief products (such as Epsom salt and ice packs), pill bottle openers, pill/tablet boxes, cutters, and crushers, pulse oximeters, probiotics, nonprescription reading glasses, shoe insoles/ inserts/arch supports, skin moisturizers for dry skin, skin protectant (such as diaper rash ointment, moleskin, mosquito repellent and petroleum jelly), witch hazel, sleep aids, soap (doctor recommended antibacterial/antimicrobial), sunscreen, supportive items (such as compression hosiery, rib belts and elastic knee support), toilet lights, vitamins and minerals, nonprescription weight loss items, weight scales, and disposable face masks (to protect against respiratory illnesses). Although this is not considered to be an exhaustive list of acceptable OTC items, CMS solicited comment on whether there are additional items that stakeholders believe should be included on this list.

CMS has also reviewed items that have been determined not to be permissible MA supplemental benefits because they do not meet the requirement that the item or service be primarily health-related. Such OTC items that cannot be covered as MA supplemental benefits include air conditioners, baby items, bad breath remedies (gum and breath mints), bagging fees, body scrubs, cleaning products (Clorox and Lysol), clocks, dehumidifiers, deodorant, grooming/shaving supplies, hair care (shampoo, conditioner, dye, bleach, hair removal and hair growth products), humidifiers, jar openers, paper products (tissue, toilet paper and paper towels), perfume, pest control, skin moisturizers used for anti-aging, teeth whiteners, water bottles, and personal coolers. It was noted that items such as air conditioners, cleaning products, dehumidifiers, humidifiers, grooming supplies to assist with hygiene, paper

products (tissue, toilet paper and paper towels), and pest control may be permissible as a non-primarily health-related SSBCI provided the item has a reasonable expectation of improving or maintaining the health or overall function of the enrollee and meets the standards at Sec. 422.102(f). For example, research indicates that air conditioners may improve the breathing of patients with COPD and asthma.\81\ CMS solicited comment on these listed items.

\81\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5291496/.

CMS reiterated that the list of permissible primarily health- related OTC items set forth in the Contract Year 2026 proposed rule was non-exhaustive. CMS also included a non-exhaustive list of items that are not primarily health-related but could be offered as a non- primarily health-related SSBCI, provided the requirements under Sec. 422.102(f) are met. CMS reviews bids each year to ensure that proposed supplemental benefits meet the applicable regulatory and statutory standards.\82\ For example, MA organizations may propose to offer OTC items not on this list and CMS may come across items in the future, not listed here, that CMS believes do not meet the definition of a supplemental benefit per Sec. 422.100(c)(2) or are not primarily health-related per Sec. 422.100(c)(2)(ii). However, the Agency believes including these lists in this preamble discussion will help MA organizations consistently apply the requirements at Sec. Sec. 422.100(c)(2) and 422.100(c)(2)(ii) and assist MA organizations when planning and preparing their annual bid packages.

\82\ MA organizations that are looking to cover new or novel benefits are strongly encouraged to raise those to CMS well in advance of bid submission to allow ample time for the MA organization to provide, and CMS to review, information explaining how the applicable statutory and regulatory standards are met for the proposed benefits without the time pressures of the bid review process.