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

Federal RegisterDec 10, 2024

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 417, 422, 423, and 460

[CMS-4208-P]

RIN 0938-AV40

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

AGENCY:

Centers for Medicare & Medicaid Services (CMS), Department of Health and Human Services (HHS).

ACTION:

Proposed rule.

SUMMARY:

This proposed rule would revise the Medicare Advantage (Part C), Medicare Prescription Drug Benefit (Part D), Medicaid, Medicare cost plan, and Programs of All-Inclusive Care for the Elderly (PACE) regulations to implement changes related to Star Ratings, marketing and communications, agent/broker compensation, health equity, drug coverage, dual eligible special needs plans (D-SNPs), utilization management, network adequacy, and other programmatic areas, including the Medicare Drug Price Negotiation Program. This proposed rule also includes proposals to codify existing subregulatory guidance in the Part C and Part D programs.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. Eastern Time on January 27, 2025.

ADDRESSES:

In commenting, please refer to file code CMS-4208-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed):

Electronically.

You may submit electronic comments on this regulation to

http://www.regulations.gov.

Follow the “Submit a comment” instructions.

By regular mail.

You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-4208-P, P.O. Box 8013, Baltimore, MD 21244-8013.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

By express or overnight mail.

You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-4208-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

For information on viewing public comments, see the beginning of the

SUPPLEMENTARY INFORMATION

section.

FOR FURTHER INFORMATION CONTACT:

Matthania Volmy, (667) 290-8662—General Questions.

Naseem Tarmohamed, (410) 786-0814—Part C and Cost Plan Issues.

Matthania Volmy, (667) 290-8662—Part D Issues.

Kristy Nishimoto, (206) 615-2367—Beneficiary Enrollment and Appeal Issues.

Alissa Stoneking, (410) 786-1120—Parts C and D Payment Issues.

Hunter Coohill, (720) 853-2804—Enforcement Issues.

Lauren Brandow, (410) 786-9765—PACE Issues.

Sara Klotz, (410) 786-1984—D-SNP Issues.

PartCandDStarRatings@cms.hhs.gov

—Parts C and D Star Ratings Issues.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments:

All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received:

http://www.regulations.gov.

Follow the search instructions on that website to view public comments. CMS will not post on

Regulations.gov

public comments that make threats to individuals or institutions or suggest that the commenter will take actions to harm an individual. CMS continues to encourage individuals not to submit duplicative comments. We will post acceptable comments from multiple unique commenters even if the content is identical or nearly identical to other comments.

Plain Language Summary:

In accordance with 5 U.S.C. 553(b)(4), a plain language summary of this proposed rule may be found at

https://www.regulations.gov/.

I. Executive Summary

A. Purpose

The primary purpose of this proposed rule is to amend the regulations for the Medicare Advantage (Part C) program, Medicare Prescription Drug Benefit (Part D) program, Medicaid program, Medicare cost plan program, and Programs of All-Inclusive Care for the Elderly (PACE). This proposed rule includes a number of new policies that would improve these programs for contract year 2026 as well as codify existing Part C and Part D subregulatory guidance.

We note that, as with previous rules, the new marketing and communications policies in this rule are proposed to be applicable for all contract year 2026 marketing and communications, beginning October 1, 2025. However, to operationalize the proposed Format Provider Directories for Medicare Plan Finder provision at § 422.111(m), we anticipate that 2025 plan year directory data will need to be made available online for testing purposes in the summer of 2025, and 2026 plan year data would need to be available online on October 1, 2026. Therefore, we propose an applicability date of July 1, 2025, for this provision.

B. Summary of the Key Provisions

1. Vaccine Cost Sharing Changes

This proposal would implement section 11401 of the Inflation Reduction Act of 2022 (IRA), which amends section 1860D-2 of the Act to require that, effective for plan years beginning on or after January 1, 2023, the Medicare Part D deductible shall not apply to, and there is no cost-sharing for, an adult vaccine recommended by the Advisory Committee on Immunization Practices (ACIP) covered under Part D.

2. Insulin Cost Sharing Changes

This proposal would implement section 11406 of the IRA, which amends section 1860D-2 of the Act to require that, effective for plan years beginning on or after January 1, 2023, the Medicare Part D deductible shall not apply to covered insulin products, and the Part D cost-sharing amount for a one-month supply of each covered insulin product must not exceed the statutorily defined “applicable copayment amount” for all enrollees. The applicable copayment amount for 2023, 2024, and 2025 is $35. For 2026 and each subsequent year, in accordance with the statute, we are proposing that, with respect to a covered insulin product covered under a prescription drug plan (PDP) or a Medicare Advantage prescription drug

(MA-PD) plan prior to an enrollee reaching the annual out-of-pocket threshold, the “covered insulin product applicable cost-sharing amount” is the lesser of—

• $35;

• An amount equal to 25 percent of the maximum fair price established for the covered insulin product in accordance with Part E of subchapter XI; or

• An amount equal to 25 percent of the negotiated price, as defined in § 423.100, of the covered insulin product under the PDP or MA-PD plan.

3. Medicare Prescription Payment Plan

We propose regulatory changes to codify agency guidance implementing section 11202 of the IRA, which establishes the Medicare Prescription Payment Plan and requires each PDP sponsor offering a prescription drug plan and each MA organization offering an MA-PD plan to provide to any enrollee of such plan, including an enrollee who is subsidy eligible, the option to elect with respect to a plan year to pay cost-sharing under the plan in monthly amounts that are capped. Specifically, we propose to add new § 423.137, add several new Part D required materials and content at § 423.2267, add Medicare Prescription Payment Plan information to the list of required content for Part D sponsor websites at § 423.2265, and add the Medicare Prescription Payment Plan to the list of Part D requirements waived for the Limited Income Newly Eligible Transition (LI NET) program at § 423.2536.

4. Part D Coverage of Anti-Obesity Medications (§ 423.100) and Application to the Medicaid Program

The statutory definition of a covered Part D drug at section 1860D-2(e)(2) of the Social Security Act (the Act) excludes certain drugs and uses—specifically, those that may be excluded by Medicaid under section 1927(d)(2) of the Act. This includes, at section 1927(d)(2)(A) of the Act, “agents when used for anorexia, weight loss, or weight gain.” Historically, drugs used for weight loss have been excluded from the definition of covered Part D drug, regardless of their use for treatment of individuals with obesity, and have been an optional drug benefit for Medicaid programs. Increases in the prevalence of obesity in the United States and changes in the prevailing medical consensus towards recognizing obesity as a disease since the beginning of the Part D program in 2006 have compelled CMS to re-evaluate Part D coverage of anti-obesity medications (AOMs) for Medicare Part D enrollees with obesity where the drug's prescribed use is not for a medically accepted indication (MAI) that is currently covered under Part D. We are proposing to reinterpret the statutory exclusion of agents when used for weight loss to allow Part D coverage of AOMs when used to treat obesity by reducing excess body weight or maintaining weight reduction long-term for individuals with obesity who do not have another condition for which the prescribed use is an MAI that is covered under the current Part D policy. The proposed reinterpretation would also apply to the Medicaid program. Thus, AOMs could not be excluded from Medicaid coverage under this interpretation when used for weight loss or chronic weight management for the treatment of obesity. Coverage of AOMs and drugs that contain the same active ingredient as AOMs that meet the definition of a covered outpatient drug are already subject to section 1927 requirements when used for an indication, other than weight loss, that is an MAI, and Medicaid must cover those products when they are medically necessary. Under our proposed reinterpretation, AOMs approved for weight loss and chronic weight management that are used for weight loss in individuals who do not have obesity or another condition that is an MAI for the AOM would remain excluded from the definition of covered Part D drug and would remain optional benefit for Medicaid programs.

5. Promoting Informed Choice—Format Provider Directories for Medicare Plan Finder

We are proposing to require MA provider directory data, as required under § 422.111(b)(3)(i) be submitted for use to populate Medicare Plan Finder (MPF). In addition, we are proposing to require MA organizations to attest that this information is accurate and consistent with data submitted to comply with CMS's MA network adequacy requirements at § 422.116(a)(1)(i) when it is submitted to CMS for the purpose of incorporating into MPF. The proposed regulatory changes would further promote informed beneficiary choice and transparency found in online resources, empowering people with Medicare to make informed choices about their coverage. In addition, the proposal will help ensure that provider directory information, including the provider's cultural and linguistic capabilities, which are currently required for MA provider directories, and are especially important to underserved communities, will be more readily available when considering an MA plan.

6. Promoting Informed Choice—Expand Agent and Broker Requirements Regarding Medicare Savings Programs, Extra Help, and Medigap

To ensure beneficiaries are well informed about and have an accurate picture of their MA and Part D enrollment options, we are also proposing to add the following topics to the existing list of requirements that agents and brokers must discuss with their customers: the availability of low-income supports including the Part D Low-Income Subsidy (also known as “Extra Help”) and Medicare Savings Programs; for beneficiaries enrolling into MA when first eligible for Medicare or dropping a Medigap plan to enroll in an MA plan for the first time, general information on Medigap Federal guaranteed issue (GI) rights, the practical implications of switching from Medicare Advantage to Traditional Medicare, and, when applicable, provide information on state laws regarding Medigap GI rights for those states where the agent or broker is licensed and appointed to sell; and requiring that agents pause to address remaining questions the beneficiary may have related to enrollment in a plan prior to moving forward with an enrollment. As Medicare enrollees consider their coverage options, it is essential that agents and brokers provide adequate information to ensure beneficiaries can make fully informed choices, both to support enrollees and promote a functioning, competitive marketplace.

7. Promoting Informed Choice—Enhancing Review of Marketing and Communications

We are proposing to broaden the marketing definition in §§ 422.2260 and 423.2260, in order to expand CMS oversight of Medicare Advantage and Part D communications materials and activities and strengthen beneficiary protections against misleading and confusing advertising tactics. Currently, communications materials and activities only fall within the regulatory definition of marketing if they meet certain content and intent standards. To satisfy the content portion of the current regulatory definition of marketing, communications materials and activities must include or address content regarding: (1) the plan's benefits, benefits structure, premiums or cost sharing; (2) measuring or ranking standards (for example, Star Ratings or plan comparisons); or (3), for MA plans only, rewards and incentives as defined

under § 422.134(a). In order to broaden the definition of marketing, CMS is proposing to eliminate this content standard and rely solely on an intent standard to determine whether communications material and activities are considered marketing. Broadening the definition of marketing would expand the scope of materials that must be prospectively submitted to CMS for review, which would allow CMS to better ensure that MA organizations, Part D sponsors, and their downstream entities are not providing misleading, inaccurate, or confusing information to current or potential enrollees, or engaging in activities that could misrepresent the MA organization or Part D sponsor, in accordance with §§ 422.2262 and 423.2262. We are also proposing conforming edits to the definition of “Advertisement (Ad)” in §§ 422.2260 and 423.2260 to align with the proposed updates to the definition of marketing.

8. Promoting Transparency for Pharmacies and Protecting Beneficiaries From Disruptions

We are proposing to require Part D sponsors (or first tier, downstream, or related entities (FDRs), such as pharmacy benefit managers (PBMs), on the sponsors' behalf) to notify network pharmacies which plans the pharmacies will be in-network for in a given plan year by October 1 of the year prior to that plan year and to require sponsors to provide pharmacies a list of these plans to network pharmacies on request after October 1. We are also proposing to require contracts with pharmacies for participation in Part D networks that allow the Part D sponsor or FDR to terminate the contract without cause to also allow pharmacies to terminate the contracts without cause after providing the same notice that the contract requires the sponsor or FDR to provide the pharmacy. We believe these policies will address concerns raised by pharmacies about their ability to provide accurate information to beneficiaries and will help protect beneficiaries from disruptions in care that occur when network pharmacies stop providing services before formally terminating their contracts.

9. Administration of Supplemental Benefits Coverage Through Debit Cards

This provision would codify existing requirements and new protections for supplemental benefits that are administered using debit cards by MA organizations. Specifically, we are proposing to: (1) describe when, how, and in what manner debit cards can be used by an MA organization and enrollee; (2) introduce additional disclosure requirements to increase transparency, including additional disclosure rules around supplemental benefits and plan debit cards (3) further protect access to plan-covered services for MA enrollees by requiring MA organizations to allow an enrollee to receive covered benefits through an alternative process if there is an issue with a plan debit card, (4) ensure debit cards are electronically linked to plan covered items and services through a real-time identification mechanism, and 5) clarify what types of over the counter (OTC) products are acceptable. Finally, we are proposing to prohibit MA organizations from marketing the dollar value of a supplemental benefit or the method by which a supplemental benefit is administered, such as use of a debit card by the enrollee to provide the plan's payment to the provider for the covered item or service.

10. Improving Access—Enhancing Rules on Internal Coverage Criteria

In the final rule titled “Medicare Program; Contract Year 2024 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, and Medicare Cost Plan Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly,” which appeared in the April 12, 2023,

Federal Register

(88 FR 22120) (hereinafter referred to as the “April 2023 final rule”), we codified regulations that clarified the obligations and responsibilities for MA organizations in covering basic benefits and established guardrails for MA organizations to develop and use coverage criteria in a way that aligns with Traditional Medicare. These rules were applicable to coverage for MA organizations beginning January 1, 2024. Through CMS account manager engagement with MA organizations, incoming inquiries from industry stakeholders, and our ongoing 2024 program audits, we have learned a great deal about common misunderstandings related to these new rules. In order to further clarify these rules, we are proposing to build upon and enhance the regulations from the April 2023 final rule, specifically those related to the use of internal coverage criteria, by defining the meaning of “internal coverage criteria,” establishing policy guardrails to ensure access to benefits, and adding more specific rules about publicly posting internal coverage criteria content on MA organization websites.

11. Ensuring Equitable Access to Behavioral Health Benefits Through Section 1876 Cost Plan and MA Cost Sharing Limits (§§ 417.454 and 422.100)

Addressing the nation's behavioral health crisis and ensuring equitable access to behavioral health services are key priorities for CMS.

Beneficiaries with severe mental illness experienced substantial disruptions in care during the COVID-19 pandemic and these disruptions were greater among disadvantaged populations (including historically underserved racial and ethnic groups and low-income populations).

As a result, CMS is pursuing policies to address barriers individuals may face in accessing mental health and substance use disorder care. This includes using the authority under sections 1852(a)(1)(B)(iv), 1856(b)(1), 1857(e)(1), 1876(c)(2)(A), and 1876(i)(3)(D) of the Act to add to the list of Part A and Part B benefits (items and services) for which Medicare Advantage (MA) and Section 1876 Cost Plans' (Cost Plans) in-network cost sharing may not exceed the cost-sharing levels in Traditional Medicare.

CMS's behavioral health strategy is available at:

https://www.cms.gov/cms-behavioral-health-strategy.

Busch AB, Huskamp HA, Raja P, Rose S, Mehrotra A. Disruptions in Care for Medicare Beneficiaries with Severe Mental Illness During the COVID-19 Pandemic. JAMA Netw Open. 2022 Jan 4;5(1):e2145677. doi: 10.1001/jamanetworkopen.2021.45677. PMID: 35089352; PMCID: PMC8800078. Retrieved from:

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8800078/.

We propose to require MA and Cost Plans' in-network cost sharing for categories of mental health and substance use disorder services (collectively called “behavioral health services”) be no greater than that in Traditional Medicare beginning January 1, 2026.

We are proposing behavioral health cost-sharing standards for MA and Cost Plans that strike a balance between: (1) improving the affordability of these services for enrollees in a timely manner; and (2) minimizing disruption to enrollees' access to care and coverage options. We also propose several changes to the cost-sharing regulations for MA and Cost Plans at §§ 417.454 and 422.100. Additionally, we solicit comment on: (1) whether CMS should apply these proposed changes to the behavioral health cost-sharing standards beginning in contract year 2026 or 2027; (2) whether there should be a transition period from the existing contract year 2025 behavioral health cost-sharing standards in current regulations for select service categories (such as, the standards at § 422.100(f)(6)(i), (iii), or

(iv) for MA plans), to the proposed cost-sharing standard; and (3) how long any transition should be. We also solicit comment regarding this behavioral health cost-sharing proposal's potential impact on how MA plans would satisfy existing requirements that cost sharing be actuarially equivalent to Traditional Medicare cost sharing at § 422.100(j)(1) and (2).

12. Improving Experiences for Dually Eligible Enrollees

Dually eligible individuals face fragmentation in many parts of the health care system, including their experiences as enrollees of Medicare and Medicaid managed care plans. One way in which we seek to address such fragmentation is though policies that integrate care for dually eligible individuals. “Integrated care” refers to delivery system and financing approaches that (1) maximize person-centered coordination of Medicare and Medicaid services; (2) mitigate cost-shifting incentives between the two programs; and (3) create a seamless experience for dually eligible individuals. We are proposing to establish new Federal requirements for D-SNPs that are applicable integrated plans to: (1) have integrated member identification (ID) cards that serve as the ID cards for both the Medicare and Medicaid plans in which an enrollee is enrolled; and (2) conduct an integrated health risk assessment (HRA) for Medicare and Medicaid, rather than separate HRAs for each program. We are also proposing to codify timeframes for special needs plans to conduct HRAs and individualized care plans (ICPs) and prioritize the involvement of the enrollee or the enrollee's representative, as applicable, in the development of the ICPs.

13. Medical Loss Ratio (MLR)

To improve medical loss ratio (MLR) reporting and oversight and to better align MA and Part D MLR requirements with commercial MLR and Medicaid MLR requirements, we are proposing to make certain changes to the regulations that govern MLR requirements for MA and Part D. Specifically, we are proposing to establish clinical and quality improvement standards for provider incentives and bonus arrangements included in the MA MLR numerator in order to help align such bonus payments with care outcomes and avoid excess premium transfer to providers. We also propose to prohibit administrative costs from being included in quality improvement activities in both the MA and Part D MLR numerator. Additionally, we propose to adopt additional requirements for the allocation of expenses in the MLR. We also propose to establish new audit and appeals processes for MLR compliance. In addition, we propose to amend the Medicare MLR regulations authorizing the release of Part C and Part D MLR data. We propose to codify the rules we established in the CY 2025 Part D Redesign Program Instructions for the treatment for MLR purposes of Medicare Prescription Payment Plan unsettled balances for 2026 and subsequent years. We also propose to explicitly provide that the Medicare MLR reporting include detailed information regarding provider payment arrangements. In addition to the proposed changes, we are issuing a request for information on potential policies that CMS could adopt regarding how the MA and Part D MLRs are calculated in order to enable policymakers to address concerns surrounding vertical integration in MA and Part D.

14. Medicare Transaction Facilitator Requirements for Network Pharmacy Agreements

We propose to amend § 423.505 by adding paragraph (q) to require that Part D sponsors' network contracts with pharmacies require such pharmacies to be enrolled in the Medicare Drug Price Negotiation Program's (“Negotiation Program”) Medicare Transaction Facilitator Data Module (“MTF DM”). We believe the requirement among Part D sponsors' network pharmacies to be enrolled in the MTF DM that would be added to Part D sponsors' network contracts with pharmacies, if finalized, would facilitate continued beneficiary access to selected drugs that are covered Part D drugs, promote access to negotiated maximum fair prices under the Negotiation Program for both beneficiaries and dispensing entities, and help ensure accurate Part D claims information and payment.

15. Enhancing Health Equity Analyses: Annual Health Equity Analysis of Utilization Management Policies and Procedures

We propose at § 422.137(d)(6)(iii)(A) through (H) to revise the required metrics for the annual health equity analysis of the use of prior authorization to require the metrics be reported by each item or service, rather than aggregated for all items and services.

In the April 2024 final rule, CMS added health equity related requirements to § 422.137, including a requirement at § 422.137(d)(6) that the Utilization Management committee must conduct an annual health equity analysis of the use of prior authorization. The analysis must examine the impact of prior authorization at the plan level, on enrollees with one or more of the specified social risk factors (SRF). The analysis must use the outlined metrics, aggregated for all items and services, calculated for enrollees with the specified SRFS, and for enrollees without the specified SRFs, from the prior contract year, to conduct the analysis.

During the public comment period, CMS received a significant number of comments on the requirement that the metrics for the health equity analysis be aggregated for all items and services (89 FR 30569). Commenters recommended that CMS require a further level of granularity to ensure that potential disparities could be identified. Specifically, commenters suggested that CMS require disaggregation by item and service to ensure that CMS can identify specific services that may be disproportionately denied. We are proposing to revise the required metrics for the annual health equity analysis of the use of prior authorization to require the metrics be reported by each item or service, rather than aggregated for all items and services.

16. Ensuring Equitable Access to Medicare Advantage Services—Guardrails for Artificial Intelligence (AI)

On October 30, 2023, the Biden-Harris Administration released an Executive Order, “Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence,” directing agencies to ensure that artificial intelligence tools do not impede the advancement of equity and civil rights, and that the use of AI within health care organizations does not deny equal opportunity and justice for the American people.

Given the growing use of AI within the healthcare sector, such as, but not limited to, AI-based patient care decision support tools, vision transformer-based AI methods for lung cancer imaging applications, and AI and machine learning based decision support systems in mental health care settings, we believe it is necessary to ensure that the use of AI does not result in inequitable treatment, bias, or both, within the healthcare system, and instead is used to promote equitable access to care and culturally competent care for all enrollees. As such, we propose to revise

§ 422.112(a)(8) to ensure services are provided equitably irrespective of delivery method or origin, whether from human or automated systems. We also clarify that in the event that an MA plan uses AI or automated systems, it must comply with section 1852(b) of the Act and § 422.110(a) and other applicable regulations and requirements and provide equitable access to services and not discriminate on the basis of any factor that is related to the enrollee's health status.

https://www.federalregister.gov/documents/2023/11/01/2023-24283/safe-secure-and-trustworthy-development-and-use-of-artificial-intelligence.

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

CMS has become aware that some entities that provide covered benefits may not be included in an MA organization's provider directory. These concerns relate to safety and a lack of transparency regarding supplemental benefit service providers and their access to an enrollee's home, as well as ensuring individuals know which providers are deeply rooted within the communities they serve. This is particularly of concern when the enrollee may not have information about who may have access to their home, personally identifiable information (PII), or protected health information (PHI). As such, to strengthen beneficiary protections and transparency, we propose to: (1) codify definitions of community-based organizations (CBOs), in-home or at-home supplemental benefit providers and direct furnishing entities; (2) require plans to identify, within the provider directory, which providers and direct furnishing entities meet the proposed definition of a CBO; (3) require plans to identify in-home or at-home supplemental benefit providers and direct furnishing entities, including those that provide a hybrid of services (both in-home or at-home, and in-office services), either through a subset list within the provider directory or through a separate list comprising in-home or at-home supplemental benefit providers and direct furnishing entities; and (4) clarify existing policy by stating that all direct furnishing entities must be included within the provider directory.

C. Conclusion

Finally, we are clarifying and emphasizing our intent that if any provision of this rule, once finalized, is held to be invalid or unenforceable by its terms, or as applied to any person or circumstance, or stayed pending further agency action, it shall be severable from this rule and not affect the remainder thereof or the application of the provision to other persons not similarly situated or to other, dissimilar circumstances. Through this rule, we propose provisions that are intended to and will operate independently of each other, even if each serves the same general purpose or policy goal. Where a provision is necessarily dependent on another, the context generally makes that clear (such as by a cross-reference to apply the same standards or requirements).

D. Summary of Costs and Benefits

BILLING CODE 4120-01-P

EP10DE24.000

EP10DE24.001

EP10DE24.002

EP10DE24.003

EP10DE24.004

BILLING CODE 4120-01-C

II. Implementation of IRA Provisions for the Medicare Prescription Drug Benefit Program

A. Coverage of Adult Vaccines Recommended by the Advisory Committee on Immunization Practices Under Medicare Part D (§§ 423.100 and 423.120)

1. Background

Section 11401 of the Inflation Reduction Act (IRA) amended section 1860D-2 of the Act by adding new paragraph (8) to subsection (b) and new paragraph (5) to subsection (c) and making other conforming amendments to require that, effective for plan years beginning on or after January 1, 2023, the Medicare Part D deductible shall not apply to, and there is no cost-sharing for, an adult vaccine recommended by the Advisory Committee on Immunization Practices (ACIP) covered under Part D.

Section 11401(e) of the IRA directed the Secretary to implement section 11401 of the IRA for 2023, 2024, and 2025 by program instruction or other forms of program guidance. In accordance with the law, CMS issued memoranda via the Health Plan Management System (HPMS) that outlined requirements for Part D sponsors regarding the implementation of section 11401.

On September 26, 2022, CMS released an HPMS memorandum titled “Contract Year 2023 Program Guidance Related to Inflation Reduction Act Changes to Part D Coverage of Vaccines and Insulin.”

In this memorandum, we provided guidance that for any new ACIP-recommended adult vaccine that becomes available during a plan year, Part D sponsors must apply the $0 cost-sharing requirements in section 1860D-2(b)(8) of the Act to applicable claims with dates of service after ACIP's issued recommendation.

https://www.cms.gov/files/document/irainsulinvaccinesmemo09262022.pdf.

On April 4, 2023, CMS issued an HPMS memorandum titled “Final Contract Year (CY) 2024 Part D Bidding Instructions” in which we explained that, in order for a vaccine to be considered ACIP-recommended for adult use, it must be both adopted by the Director of the Centers for Disease Control and Prevention (CDC) and published in the CDC's Morbidity and Mortality Weekly Report (MMWR).

https://www.cms.gov/files/document/final-cy-2024-part-d-bidding-instructions.pdf.

On July 24, 2023, CMS issued a revision to the April 4, 2023 memorandum in which we clarified that the effective date of the $0 cost-sharing requirement for an ACIP-recommended adult vaccine must be aligned with the date on which the CDC Director adopts the respective ACIP vaccine recommendation, as posted on the CDC's website at

https://www.cdc.gov/vaccines/acip/recommendations.html,

not the date on which the recommendation is published in the MMWR.

https://www.cms.gov/files/document/acip-recommended-vaccines-july-2023.pdf.

In this rule, we propose to codify the requirements related to $0 cost-sharing for adult vaccines recommended by ACIP under Part D for 2026 and each subsequent plan year.

2. Definition of ACIP-Recommended Adult Vaccine

Section 1860D-2(b)(8)(B) of the Act specifies that for purposes of section 1860D-2(b)(8) of the Act, the term “adult vaccine recommended by the Advisory Committee on Immunization Practices” means a covered Part D drug that is a vaccine licensed by the U.S. Food and Drug Administration (FDA) under section 351 of the Public Health Service Act (PHSA) for use by adult populations and administered in accordance with recommendations of the CDC's ACIP as adopted by the CDC Director. We propose to refer to these vaccines as “ACIP-recommended adult vaccines” and to codify this definition at § 423.100. CMS is not proposing to specify a particular age for a vaccine to be considered “adult” for the purposes of determining if a Part D vaccine is subject to $0 cost sharing under section 11401 of the IRA. We defer to how the CDC and ACIP categorize such a recommendation. Part D sponsors must use the information provided by the CDC and ACIP to determine if the vaccine is recommended for, and being administered to, an adult.

Consistent with the September 26, 2022 HPMS memorandum, we propose to define an “ACIP-recommended adult vaccine” as a vaccine licensed by the FDA for use in adults and administered in accordance with ACIP recommendations. In some cases, the vaccine may be included on the ACIP “Adult Immunization Schedule”

and, in other cases, the vaccine may be recommended under a separate ACIP recommendation that is not part of the Adult Immunization Schedule. In alignment with the September 26, 2022 HPMS memorandum, we interpret the term “recommendation” to refer to a recommendation under any one of ACIP's categories of recommendations, including routine, catch-up, risk-based, and shared clinical decision-making immunization recommendations. As described by ACIP, the different categories of recommendations can be distinguished based on the default decision to vaccinate. Routine, catch-up, and risk-based immunization recommendations include a default decision to vaccinate an individual based on their age or other indication, unless contraindicated. For shared clinical decision-making recommendations, the decision of whether or not to vaccinate is determined based on the “best available evidence of who may benefit from vaccination; the individual's characteristics, values, and preferences; the health care provider's clinical discretion; and the characteristics of the vaccine being considered.”

https://www.cdc.gov/vaccines/schedules/hcp/imz/adult.html.

https://www.cdc.gov/vaccines/acip/acip-scdm-faqs.html.

Some vaccines that are not on the ACIP Adult Immunization Schedule for routine immunization are included on the ACIP Vaccine Recommendations and Guidelines web page.

This web page describes ACIP recommendations for vaccines that are used in limited populations and under limited circumstances. For example, ACIP recommends certain vaccinations for travelers prior to travelling to certain countries. Therefore, consistent with the September 26, 2022 HPMS memorandum, as long as the vaccine is an FDA-licensed vaccine for use by adults that is recommended by ACIP for use by adults, such vaccine would meet our proposed definition of an ACIP-recommended adult vaccine, when provided in accordance with ACIP recommendations.

https://www.cdc.gov/vaccines/hcp/acip-recs/index.html.

As described in the September 26, 2022 HPMS memorandum, a Part D vaccine would not meet our proposed definition of an ACIP-recommended adult vaccine and, therefore, would not be subject to the requirements implemented in this proposed rule, if the vaccine is: (1) not licensed by the FDA under section 351 of the PHSA for use by adults; (2) not recommended by ACIP for use by adults; (3) administered to an individual who is not an adult, even if such use in the non-adult is supported by ACIP recommendations (for example, recommendations in the ACIP child and adolescent immunization schedule); or (4) not administered in accordance with ACIP recommendations.

In summary, we propose to add at § 423.100 a definition of “ACIP-recommended adult vaccine” that means a covered Part D drug, as defined at § 423.100, that is a vaccine licensed by the FDA under section 351 of the Public Health Service Act for use by adult populations and administered in accordance with recommendations of ACIP of the CDC as adopted by the CDC Director.

3. No Deductible or Cost-Sharing for ACIP-Recommended Adult Vaccines

Section 1860D-2(b)(8)(A) of the Act specifies that the deductible shall not apply and there shall be no coinsurance or other cost-sharing with respect to ACIP-recommended adult vaccines. Generally, Part D vaccines that have ACIP-recommended uses in the adult population and are administered to an adult must be provided with no enrollee cost-sharing. As described in the September 26, 2022 HPMS memorandum, this means that enrollees must not be subject to cost sharing on the ingredient cost of the vaccine submitted on the prescription drug event (PDE) record, or any associated sales tax, dispensing fee, or vaccine administration fee, regardless of the vaccine's formulary tier placement or the benefit phase that the enrollee is in.

We are also proposing at § 423.120(g)(3) that enrollees who submit direct member reimbursement (DMR) requests for ACIP-recommended adult vaccines accessed at either out-of-network pharmacies or providers (in accordance with § 423.124(a) and (c)), or at in-network pharmacies or providers, that a Part D sponsor determines are coverable under their benefit must not be subject to cost sharing. While Part D sponsors generally may charge the enrollee for the difference between the cash price and plan allowance for DMRs for covered Part D drugs accessed from both out-of-network and in-network pharmacies, neither § 423.124(b) nor Chapter 14 of the Prescription Drug Benefit Manual directly addresses covered Part D drugs that have statutorily limited cost sharing.

Because there can be no cost sharing for ACIP-recommended adult vaccines accessed at either out-of-network pharmacies or providers (in accordance with § 423.124(a) and (c)), or at in-network pharmacies or providers, that a Part D sponsor determines are coverable under their benefit, the Part D sponsor must reimburse the enrollee for the full cash price paid to the pharmacy or provider for an ACIP-recommended adult vaccine.

Section 423.124(b) currently states that a Part D sponsor that provides its Part D enrollees with coverage other than defined standard coverage may require its Part D enrollees accessing covered Part D drugs at out-of-network pharmacies to assume financial responsibility for any differential between the out-of-network pharmacy's (or provider's) usual and customary price and the Part D sponsor's plan allowance. Section 50.4.3 of Chapter 14 of the Medicare Prescription Drug Benefit Manual (

https://www.cms.gov/medicare/prescription-drug-coverage/prescriptiondrugcovcontra/downloads/chapter-14-coordination-of-benefits-v09-17-2018.pdf

) provides detailed guidance on how Part D sponsors must process DMR requests that are submitted by enrollees who paid cash at an out-of-network (or an in-network) pharmacy (or provider) and where the pharmacy (or provider) did not submit the claim to the Part D plan.

The total gross covered drug cost (TGCDC) is usually reported differently on PDEs depending on whether the drug was accessed at an out-of-network or in-

network pharmacy or provider. Specifically, Part D sponsors report the cash price that the enrollee paid to the pharmacy or provider as the TGCDC for out-of-network DMRs but only report the negotiated price as the TGCDC for in-network DMRs. However, we are clarifying here that with respect to ACIP-recommended adult vaccines, as an exception to the Chapter 14 guidance, the sponsor should report the cash price paid to the pharmacy or provider as the TGCDC on the PDE for both out-of-network and in-network DMRs. Regardless, there is no true out-of-pocket (TrOOP) cost accumulation for these claims because the beneficiary has no cost sharing for ACIP-recommended adult vaccines under the basic Part D benefit.

Under our proposed policy at § 423.120(g), and as described in the September 26, 2022 HPMS memorandum, new Part D vaccines that become available during the plan year and meet the definition of an ACIP-recommended adult vaccine are subject to the cost-sharing requirements of section 1860D-2(b)(8)(A) of the Act. Consistent with the definition of a covered Part D drug at § 423.100, the statutory cost-sharing requirements apply regardless of whether a Part D sponsor adds the vaccine to the formulary midyear, or the enrollee obtains the vaccine via a formulary exception. In addition, we propose at § 423.120(g)(2) that if ACIP issues a new or revised recommendation for a vaccine, related to its use in adults during the plan year, Part D sponsors must apply the cost-sharing requirements of this proposed rule, as applicable, to any ACIP-recommended adult vaccine claims with dates of service after the proposed “Effective date of the ACIP recommendation” discussed later in this proposed rule.

Consistent with the April 4, 2023, HPMS memorandum, Part D sponsors may place ACIP-recommended adult vaccines on any tier, including a vaccine tier, and apply utilization management strategies (for example, prior authorization), insofar as such tier placement or utilization management strategy is consistent with the requirements of CMS's formulary review and approval process under § 423.120(b).

As described in section 30.2.7 of Chapter 6 of the Medicare Prescription Drug Benefit Manual, Part D sponsors may only use utilization management strategies to assess the necessity of vaccines that are less commonly administered in the Medicare population, facilitate the use of vaccines in line with ACIP recommendations, and evaluate potential reimbursement of vaccines that could be covered under Part B.

For example, utilization management strategies may be used to ensure an enrollee meets the age or clinical requirements recommended by ACIP for a particular vaccine, such as the respiratory syncytial virus (RSV) vaccine which is currently recommended by ACIP for adults aged 75 years of age and older and adults aged 60-74 who are at increased risk for severe RSV disease. However, regardless of an ACIP-recommended adult vaccine's tier placement or applicable utilization management strategies, the statutory zero cost-sharing limits required under this proposed rule would still apply.

https://www.cms.gov/medicare/prescription-drug-coverage/prescriptiondrugcovcontra/downloads/part-d-benefits-manual-chapter-6.pdf

In summary, we propose to codify at § 423.120(g)(1) the requirement that Part D sponsors must not apply the deductible or charge cost sharing on ACIP-recommended adult vaccines. We also propose to codify at § 423.120(g)(2) that once a new or revised recommendation is posted on the CDC website, Part D sponsors must provide coverage consistent with § 423.120(g)(1) for dates of service on or after the “Effective date of the ACIP recommendation” as discussed later in this proposed rule. Finally, we propose to codify at § 423.120(g)(3) that these cost-sharing requirements apply for ACIP-recommended adult vaccines obtained from either in-network or out-of-network pharmacies or providers (in accordance with § 423.124(a) and (c)).

4. Effective Date of ACIP Recommendations

In the July 24, 2023, HPMS memorandum, we stated that Part D sponsors must provide $0 cost sharing for an ACIP-recommended adult vaccine as of the date the CDC Director adopts the ACIP's recommendation, and it is posted on the CDC's website. Accordingly, we propose to add at § 423.100 a definition of “Effective date of the ACIP recommendation” that means the date specified on the CDC website noting the date the CDC Director adopted the ACIP recommendation.

In the July 24, 2023 HPMS memorandum, we also stated that in the event that the CDC Director's adoption of an ACIP recommendation for an adult vaccine is posted on the CDC's website but an adoption date is not specified, the effective date of the ACIP recommendation is the day after the last day of the ACIP meeting at which the recommendation was approved. However, we are not including this requirement in our proposed definition of “Effective date of the ACIP recommendation” at § 423.100 as it is highly unlikely that an ACIP recommendation will be posted without the date on which it was adopted by the CDC Director. In the event that a recommendation is posted without an effective date, CMS will consult with the CDC to obtain the date the recommendation was adopted by the CDC Director and provide guidance.

The ACIP holds three regular meetings annually, generally in February, June, and October, in addition to emergency sessions, for the purpose of reviewing scientific data and voting on vaccine recommendations. We note that the proposed “Effective date of the ACIP recommendation” and the date on which it is published on the CDC's website may not always be the same date (if, for example, the website posting occurs after the date specified as the date the CDC Director adopted the recommendation). Nevertheless, the proposed “Effective date of the ACIP recommendation” determines when the cost-sharing requirements apply. Consequently, if an enrollee paid cost sharing for an ACIP-recommended adult vaccine after the “Effective date of the ACIP recommendation” (for example, the enrollee received the vaccine after the “Effective date of the ACIP recommendation,” but prior to the recommendation being posted on the CDC website), once the recommendation has been posted to the CDC website, the Part D sponsor will need to reimburse the enrollee for any cost sharing they paid for the vaccine.

In instances where ACIP expands a previous recommendation, narrows a previous recommendation, or removes a previous recommendation, the “Effective date of the ACIP recommendation” is the date the CDC Director adopted the changed recommendation once the recommendation is posted on the CDC's website. We note that a change to an ACIP recommendation alone does not affect a vaccine's status as a Part D drug. Specifically, a Part D drug is defined at § 423.100, in relevant part, as including a vaccine, if used for a medically accepted indication, as defined in section 1860D-2(e)(4) of the Act. Since an ACIP recommendation does not affect what is considered a medically accepted indication, as defined under section 1860D-2(e)(4) of the Act, for a particular vaccine, an ACIP recommendation alone does not affect a vaccine's status as a Part D drug. However, if the FDA labeling changes to

align with a narrowed ACIP recommendation, this may change what is considered a medically accepted indication and may change what indications are coverable under Part D for a particular vaccine. In other words, if an ACIP recommendation is narrowed or removed, the vaccine may still be coverable under Part D, but an enrollee may be subject to cost-sharing for the vaccine if it is not administered in accordance with the revised ACIP recommendation.

When an ACIP recommendation for a particular vaccine is narrowed (for example, additional restrictions are added or the vaccine is recommended for a more limited patient population), Part D sponsors may implement prior authorization (PA) to determine whether the vaccine is being administered in accordance with ACIP recommendations and whether the enrollee should be subject to cost-sharing. For example, if an ACIP recommendation is amended to raise the age for which a vaccine is recommended to be administered, Part D sponsors may implement PA to ensure a beneficiary meets this new age requirement. However, Part D sponsors are not required to implement PA for vaccines to determine if a vaccine is being used for an ACIP-recommended use and is therefore subject to $0 cost-sharing.

When an ACIP recommendation is narrowed and a Part D sponsor does not currently have a PA in place for that vaccine, the plan must submit a negative formulary change request to add a PA requirement for that vaccine that aligns with the newly narrowed recommendation, consistent with § 423.120(e)(1). As specified in § 423.120(e)(3)(i), negative change requests for maintenance changes are considered to be approved after 30 days unless the Part D sponsor is notified otherwise. Once the request is approved, Part D sponsors may implement the PA requirement and, if the plan determines that the vaccine is not being used for an ACIP—recommended use, may charge the enrollee the applicable cost-sharing. Part D sponsors are permitted, but not required, to make retroactive determinations for claims that were processed with $0 cost-sharing after the “Effective date of the ACIP recommendation” and before the date on which the PA requirement went into effect.

If ACIP withdraws a recommendation for a previously recommended vaccine such that the vaccine no longer meets the definition of an ACIP-recommended adult vaccine, Part D sponsors are not required to submit a negative change request and may immediately apply cost sharing for the vaccine for dates of service after the “Effective date of the ACIP recommendation.”

Because the cost-sharing limits for vaccines outlined in this proposal have been in place since 2023 through program instruction authority and we have annually reviewed cost sharing in plan benefit package submissions, we believe the impacts of our proposed codification of these requirements should have minimal impact on Part D sponsors and beneficiaries.

B. Appropriate Cost-Sharing for Covered Insulin Products Under Medicare Part D (§§ 423.100 and 423.120)

1. Background

Section 11406 of the Inflation Reduction Act (IRA) amended section 1860D-2 of the the Act by adding new paragraph (9) to subsection (b) and new paragraph (6) to subsection (c) and making other conforming amendments to require that, effective for plan years beginning on or after January 1, 2023, the Medicare Part D deductible shall not apply to covered insulin products, and the Part D cost-sharing amount for a 1-month supply of each covered insulin product must not exceed the statutorily defined “applicable copayment amount” for all enrollees. For 2023, 2024, and 2025, the applicable copayment amount is $35. For 2026 and each subsequent year, the applicable copayment amount is the lesser of: (1) $35, (2) an amount equal to 25 percent of the maximum fair price (MFP) established for the covered insulin product in accordance with part E of subchapter XI of the Act, or (3) an amount equal to 25 percent of the negotiated price of the covered insulin product under the PDP or MA-PD plan.

Section 11406(d) of the IRA directed the Secretary to implement section 11406 of the IRA for 2023, 2024, and 2025 by program instruction or other forms of program guidance. In accordance with the law, CMS issued several memoranda related to cost-sharing for covered insulin products via the Health Plan Management System (HPMS) that outlined expectations for Part D sponsors regarding the implementation of section 11406. On September 26, 2022, CMS released an HPMS memorandum titled “Contract Year 2023 Program Guidance Related to Inflation Reduction Act Changes to Part D Coverage of Vaccines and Insulin,” in which we provided program instructions for the implementation of the requirements in section 11406.

On April 4, 2023, we released additional guidance in the “Final Contract Year (CY) 2024 Part D Bidding Instructions” in which we provided instructions for Part D sponsors as they prepared to submit bids for CY 2024.

Lastly, on April 1, 2024, we released “Final CY 2025 Part D Redesign Program Instructions.”

https://www.cms.gov/files/document/irainsulinvaccinesmemo09262022.pdf.

https://www.cms.gov/files/document/final-cy-2024-part-d-bidding-instructions.pdf.

https://www.cms.gov/files/document/final-cy-2025-part-d-redesign-program-instructions.pdf.

In this rule, we propose to codify the requirements related to appropriate cost-sharing for covered insulin products under Part D for 2026 and each subsequent plan year.

2. Definition of Covered Insulin Product

Section 1860D-2(b)(9)(C) of the Act defines a covered insulin product as “an insulin product that is a covered Part D drug covered under a PDP or MA-PD plan and that is approved under section 505 of the Federal Food, Drug, and Cosmetic Act (FFDCA) or licensed under section 351 of the Public Health Service Act (PHSA) and marketed pursuant to such approval or licensure, including any covered insulin product that has been deemed to be licensed under section 351 of the PHSA pursuant to section 7002(e)(4) of the Biologics Price Competition and Innovation Act of 2009 and marketed pursuant to such section.”

We are proposing to codify the statutory definition of “covered insulin product” at § 423.100 and, in alignment with the guidance in CMS's September 26, 2022 HPMS memorandum, we clarify that a covered insulin product includes drug products that are a combination of more than one type of insulin. We are also proposing, consistent with the September 26, 2022 HPMS memorandum, that the definition of a covered insulin product include drug products that are a combination of both insulin and a non-insulin drug or biological product. Our proposed definition of covered insulin product would not, however, include medical supplies associated with the injection of an insulin product, unless such medical supplies are a device constituent part of a combination product (as defined in 21 CFR 3.2(e)) containing insulin and such combination product is licensed under section 351 of the PHSA.

While our proposed definition of “covered insulin product” includes drug products that are a combination of more than one type of insulin or both insulin and non-insulin drug or biological products, the definition would be limited to those drug products

that are FDA-licensed products. Consequently, because a compounded drug product, as described in § 423.120(d), is not FDA-licensed, it would not meet the definition of “covered insulin product”. As such, a compounded drug product would not be subject to the requirements for a “covered insulin product” under our proposed definition at § 423.100.

Section 1860D-2(b)(9)(C) of the Act specifies that a “covered insulin product” is an insulin product that is a covered Part D drug covered under a PDP or MA-PD plan. Section 423.100 defines a covered Part D drug to be a Part D drug that is included on a Part D sponsor's formulary, treated as being included in a Part D plan's formulary as a result of a coverage determination or appeal, and obtained at a network pharmacy or an out-of-network pharmacy in accordance with § 423.124(a) and (c). Accordingly, we specify in our proposed definition at § 423.100 that a “covered insulin product” is a covered Part D drug as defined in § 423.100.

Additionally, we propose at § 423.100 that a “covered insulin product” is licensed under section 351 of the Public Health Service Act and marketed pursuant to such licensure. We clarify that this proposed definition, in accordance with the statute, includes any covered insulin product that had an approved marketing application that was deemed to be a license for the insulin product (that is, an approved biologics license application) under section 351 of the PHSA pursuant to section 7002(e)(4) of the Biologics Price Competition and Innovation Act of 2009 and marketed pursuant to such license. We also note that outside of these situations where the insulin had an approved marketing application under section 505 of the Federal Food, Drug, and Cosmetic Act, that was deemed to be a license for the insulin product (that is, an approved biologics license application) under section 351 of the Public Health Service Act pursuant to section 7002(e)(4) of the Biologics Price Competition and Innovation Act of 2009, there is no need to reference section 505 of the Federal Food, Drug, and Cosmetic Act since a biological product can no longer be approved under section 505 and must be licensed in a biologics license application under section 351 of the Public Health Service Act. As such, a reference to section 505 is not included in our proposed definition of a “covered insulin product”.

3. Definition of Applicable Cost-Sharing Amount for Covered Insulin Products

Section 1860D-2(b)(9)(D) of the Act defines “applicable copayment amount” with respect to a covered insulin product under a PDP or an MA-PD plan dispensed during plan year 2026, and each subsequent plan year, as the lesser of—

• $35;

• An amount equal to 25 percent of the maximum fair price established for the covered insulin product in accordance with Part E of subchapter XI, or;

• An amount equal to 25 percent of the negotiated price of the covered insulin product under the PDP or MA-PD plan.

We interpret the section 1860D-2(b)(9)(D) reference to “applicable copayment amount” as an amount that could be either a fixed copayment or a coinsurance percentage. Therefore, we propose to define this “applicable copayment amount” as an “applicable cost-sharing amount” at § 423.100. In addition, to ensure that the reference to “applicable cost-sharing amount” is specific to the cost-sharing for covered insulin products described under proposed § 423.120(h), and discussed later in this proposed rule, we propose to define the term “covered insulin product applicable cost-sharing amount.”

Specifically, we propose to add at § 423.100 a definition of “covered insulin product applicable cost-sharing amount” that means, with respect to a covered insulin product covered under a PDP or an MA-PD plan prior to an enrollee reaching the annual out-of-pocket threshold during plan year 2026 and each subsequent plan year, the lesser of—

• $35;

• An amount equal to 25 percent of the maximum fair price established for the covered insulin product in accordance with Part E of subchapter XI, or;

• An amount equal to 25 percent of the negotiated price, as defined in § 423.100, of the covered insulin product under the PDP or MA-PD plan.

For example, the August 15, 2024 publication “Medicare Drug Price Negotiation Program: Negotiated Prices for Initial Price Applicability Year 2026” establishes the maximum fair price for the covered insulin product Fiasp; Fiasp FlexTouch; Fiasp PenFill; NovoLog; NovoLog FlexPen; NovoLog PenFill as $119 for a 30-day supply in CY 2026.

An amount equal to 25 percent of the maximum fair price for this product is $29.75, which is lower than the cost-sharing amount of $35. Therefore, the covered insulin product applicable cost-sharing amount for Fiasp; Fiasp FlexTouch; Fiasp PenFill; NovoLog; NovoLog FlexPen; NovoLog PenFill would be the lesser of: (1) $29.75; or (2) an amount equal to 25 percent of the negotiated price, as defined in § 423.100, of the covered insulin product under the PDP or MA-PD plan.

https://www.cms.gov/files/document/fact-sheet-negotiated-prices-initial-price-applicability-year-2026.pdf.

4. Cost Sharing for Covered Insulin Products

Section 1860D-2(b)(9)(A) of the Act specifies that for plan year 2023 and subsequent plan years, the deductible, as described in section 1860D-2(b)(1) of the Act, shall not apply with respect to any covered insulin product. Section 1860D-2(b)(9)(B)(ii) of the Act further specifies that for 2025 and subsequent plan years, the coverage provides benefits for any covered insulin product, prior to an individual reaching the out-of-pocket threshold, with cost-sharing for a month's supply that does not exceed the applicable copayment amount. We are proposing to codify these requirements at § 423.120(h)(1) and (2).

In alignment with the guidance in our September 26, 2022 HPMS memorandum, we propose to interpret the section 1860D-2(b)(9) cost-sharing requirements to apply separately to each prescription fill that is dispensed. For a prescription fill dispensed in an amount up to a 1-month supply, $35 (or a lower amount specified by the sponsor) is considered a copayment for purposes of determining the “covered insulin product applicable cost-sharing amount.” Under our proposal, and consistent with our current policy in the September 26, 2022 HPMS memorandum, Part D sponsors would not be required to prorate the $35 copayment if less than a 1-month supply is dispensed. We believe this proposed policy is supported by section 1860D-2(b)(9)(D) of the Act, which does not explicitly require prorating the applicable copayment amount for less than a 1-month supply. It also aligns with current regulations because insulin is not a solid oral dosage form subject to daily cost-sharing requirements at § 423.153(b)(4). Under our proposal, if the “covered insulin product applicable cost-sharing amount” is a coinsurance, the coinsurance percentage would be

applied to the negotiated price regardless of the days' supply dispensed.

With respect to extended-day supplies (that is, greater than a 1-month supply) of covered insulin products, we are proposing that cost sharing must not exceed the cumulative “covered insulin product applicable cost-sharing amount” that would apply if the same days' supply was dispensed in the fewest number of 1-month supply increments necessary. For example, if a covered insulin product is dispensed for greater than a 1-month supply, but less than a two-month supply, the lesser of $70 or 25 percent of MFP or negotiated price, whichever applies, would remain the maximum cost-sharing amount. Similarly, the lesser of $105 or 25 percent of the MFP or negotiated price, whichever applies, would apply for a covered insulin product that is dispensed for greater than a two-month supply up to a three-month supply. If the “covered insulin product applicable cost-sharing amount” is a coinsurance, the coinsurance percentage would be applied to the negotiated price regardless of the days' supply dispensed.

While Part D sponsors must not charge cost-sharing that exceeds the “covered insulin product applicable cost-sharing amount,” Part D sponsors may charge cost-sharing that is equal to or less than the “covered insulin product applicable cost-sharing amount.” This means that Part D sponsors have the flexibility to specify cost-sharing that is equal to or lower than the lesser of: a $35 copayment, or 25 percent coinsurance based on the MFP (if established for such product under the Medicare Drug Price Negotiation Program for that year), or 25 percent coinsurance based on the negotiated price. Part D sponsors could meet this cost-sharing requirement by establishing a copayment amount that is equal to or lower than $35 for a 1-month supply, establishing a coinsurance percentage that is equal to or lower than 25 percent of the product's MFP or negotiated price, or establishing both a copayment amount equal to or lower than $35 and a coinsurance percentage equal to or lower than 25 percent of the product's MFP or negotiated price.

In the September 26, 2022 HPMS memorandum, we provided guidance on managing out-of-network claims. We are now proposing that enrollees who submit direct member reimbursement (DMR) requests for covered insulin products accessed at either out-of-network pharmacies or providers (in accordance with § 423.124(a) and (c)), or at in-network pharmacies or providers, must not pay more than the “covered insulin product applicable cost-sharing amount.” While Part D sponsors generally may charge the enrollee for the difference between the cash price and plan allowance for DMRs for covered Part D drugs accessed from both out-of-network and in-network pharmacies, neither § 423.124(b) nor Chapter 14 of the Prescription Drug Benefit Manual directly addresses covered Part D drugs that have statutorily limited cost sharing.

Therefore, for covered insulin products accessed at either out-of-network pharmacies or providers (in accordance with § 423.124(a) and (c)), or at in-network pharmacies or providers, we propose at § 423.120(h)(4) that the Part D sponsor must reimburse the enrollee for the full cash price paid to the pharmacy or provider for a covered insulin product minus the “covered insulin product applicable cost-sharing amount.”

https://www.cms.gov/medicare/prescription-drug-coverage/prescriptiondrugcovcontra/downloads/chapter-14-coordination-of-benefits-v09-17-2018.pdf

The total gross covered drug cost (TGCDC) usually is reported differently on prescription drug events (PDEs) depending on whether the drug was accessed at an out-of-network or in-network pharmacy or provider. Specifically, Part D sponsors report the cash price that the enrollee paid to the pharmacy or provider as the TGCDC for out-of-network DMRs but only report the negotiated price as the TGCDC for in-network DMRs. However, we are clarifying here that with respect to covered insulin products, as an exception to the Chapter 14 guidance, the sponsor should report the cash price paid to the pharmacy or provider as the TGCDC on the PDE for both out-of-network and in-network DMRs. Additionally, true out-of-pocket (TrOOP) cost accumulation for covered insulin products would be limited to the beneficiary's cost-sharing amount, which cannot exceed the “covered insulin product applicable cost-sharing amount.”

As described in the April 4, 2023 HPMS memorandum, Part D sponsors may place covered insulin products on any tier, and apply utilization management strategies (for example, prior authorization and step therapy), insofar as such tier placement or utilization management strategy is consistent with the requirements of CMS's formulary review and approval process under § 423.120(b). However, regardless of a covered insulin product's tier placement or applicable utilization management strategy, the statutory cost-sharing limits under this proposed rule still apply.

We propose to codify at § 423.120(h)(1) and (2) that with respect to coverage of a covered insulin product, as we propose to define such term at § 423.100, prior to an enrollee reaching the annual out-of-pocket threshold, a Part D sponsor must not apply a deductible and must ensure any enrollee cost-sharing for each prescription fill up to a 1-month supply does not exceed the “covered insulin product applicable cost-sharing amount” as defined at § 423.100. We also propose to codify at § 423.120(h)(3) that Part D sponsors must ensure that any enrollee cost sharing for each prescription fill greater than a 1-month supply does not exceed the cumulative “covered insulin product applicable cost-sharing amount,” that would apply if the same days' supply was dispensed in the fewest number of 1-month supply increments necessary. Finally, we propose to codify at § 423.120(h)(4) that these cost-sharing requirements apply for covered insulin products obtained from either in-network and out-of-network pharmacies and providers.

C. Medicare Prescription Payment Plan (§§ 423.137, 423.2265, 423.2267, and 423.2536)

1. Background

The Inflation Reduction Act of 2022 (IRA) (Pub. L. 117-169) made several additions and amendments to the Social Security Act (the Act) that affect the structure of the defined standard Part D drug benefit. Section 11202 of the IRA (Maximum Monthly Cap on Cost-Sharing Payments under Prescription Drug Plans and MA-PD Plans) added a new section 1860D-2(b)(2)(E) to the Act requiring all Medicare prescription drug plans to offer their Part D enrollees the option to pay out-of-pocket (OOP) Part D drug costs through monthly payments over the course of the plan year instead of at the pharmacy point of sale (POS) beginning January 1, 2025.

CMS undertook consumer focus group testing to select a name for the program

established at section 1860D-2(b)(2)(E) of the Act that would resonate with Medicare Part D enrollees. After multiple rounds of consumer testing fieldwork and evaluation of the results, CMS announced the official name of the program as the “Medicare Prescription Payment Plan.” We refer to the program herein using this name.

Section 11202(c) of the IRA directs the Secretary to implement the Medicare Prescription Payment Plan for 2025 by program instruction or other forms of program guidance. In accordance with the law, CMS released guidance establishing critical operational, technical, and communication requirements for the Medicare Prescription Payment Plan for 2025. To provide Part D sponsors with sufficient time to implement the program, CMS released the guidance in two parts: the first addressed critical operational and technical requirements and the second addressed communications-related requirements.

In order to solicit the feedback of interested parties, CMS initially published both parts as draft guidance and voluntarily solicited comment. After consideration of the comments, we then released final versions of each part.

See: Medicare Prescription Payment Plan: Final Part One Guidance on Select Topics, Implementation of Section 1860D-2 of the Social Security Act for 2025, and Response to Relevant Comments; Medicare Prescription Payment Plan: Final Part Two Guidance on Select Topics, Implementation of Section 1860D-2 of the Social Security Act for 2025, and Response to Relevant Comments.

CMS released the draft part one guidance in August 2023, which covered topics such as how incurred OOP pharmacy costs should be re-calculated into monthly billed amounts (“program calculations”); participant billing requirements; pharmacy payment obligations and claims processing; requirements related to Part D enrollee outreach; requirements related to Part D enrollee election; procedures for termination of election; reinstatement and preclusion; participant disputes; and data submission requirements. CMS also provided examples of the program calculations to help Part D sponsors program their claims and billing systems correctly for 2025. After consideration of comments received on the draft part one guidance, CMS released the final part one guidance (hereinafter referred to as “final part one guidance”) in February 2024.

CMS released the draft part two guidance in February 2024, which covered topics such as outreach, education, and communications requirements for Part D sponsors; CMS Part D enrollee education and outreach; pharmacy processes; and Part D sponsor operational requirements. After consideration of comments received on the draft part two guidance, CMS released the final part two guidance (hereinafter referred to as “final part two guidance”) in July 2024.

In addition to the final part one and final part two guidance, CMS released a technical memorandum in July 2023 providing examples to demonstrate the calculations of the maximum monthly cap on cost sharing payments under the program in different scenarios, a second technical memorandum in April 2024 providing additional examples of calculations that reflect IRA-related changes to the incurred costs that count toward true out-of-pocket costs (TrOOP), and a set of frequently asked questions in October 2024 providing clarifications on the final part one and final part two guidance.

CMS also developed model and standardized materials to be used by Part D sponsors in meeting the statutory requirement for Part D sponsors to communicate with enrollees about the program. The materials developed by CMS include a model election request form, a model notice of election approval, a standardized likely to benefit notice, a model notice of voluntary termination, a model notice of failure to pay, and a model notice of involuntary termination. Where possible, CMS based development of the Medicare Prescription Payment Plan model materials on Part D plan enrollment and disenrollment notices to promote consistency across the Part D program. CMS issued the model materials through the Office of Management and Budget's Information Collection Request (ICR) process and released final model materials in July 2024 after consideration of public comments received on the ICR package.

CMS does not have authority to implement the Medicare Prescription Payment Plan through program instruction authority beyond 2025. As such, we are pursuing rulemaking to codify the requirements of the program for 2026 and subsequent years.

With only a few exceptions, we are proposing to codify, without modification, the requirements established in the final part one and final part two guidance at § 423.137 for 2026 and subsequent years. Because we are codifying existing guidance, these provisions are not expected to impact the baseline.

Instances where we are making modifications to the requirements previously finalized for 2025 include—

• Proposing to modify the requirements for how Part D sponsors handle adjustments for Part D claims under the Medicare Prescription Payment Plan; and

• Proposing to modify the timing requirements for the grace period and initial notice of failure to pay.

We are also proposing new requirements for three additional topics:

• Requirements related to year-over-year participation for existing participants in the Medicare Prescription Payment Plan and addition of a renewal notice to the required notices related to election into the program;

• Requirements for the effective date of voluntary terminations from the program;

• Requirements for Part D plans to provide pharmacies with easily accessible information on a Part D enrollee's costs incurred under the program.

We are also proposing to modify § 423.2267(e), which lists CMS-required materials and content for Part D sponsors, to include model and standardized materials for the Medicare Prescription Payment Plan, and to modify the list of required content for Part D sponsor websites at § 423.2265 to include Medicare Prescription Payment Plan information. Finally, we are proposing to modify § 423.2536 to waive requirements related to the Medicare Prescription Payment Plan for the Limited Income Newly Eligible Transition (LI NET) program.

2. Provisions of the Proposed Regulation

(a) Basis, Scope, and General Rule

Section 1860D-2(b)(2)(E)(i) of the Act requires that each PDP sponsor offering a prescription drug plan and each MA organization offering an MA-PD plan must provide to any enrollee of such plan, including an enrollee who is a subsidy eligible individual (as defined in paragraph (3) of section 1860D-14(a) of the Act), the option to elect, with respect to a plan year, to pay cost sharing under the plan in monthly amounts that are capped in accordance with section 1860D-2(b)(2)(E) of the Act.

In the final part one guidance, CMS stated that, for calendar year 2025, the provision applies to all Part D sponsors, including both stand-alone PDPs and MA-PDs, as well as Employer Group Waiver Plans (EGWPs), cost plans, and demonstration plans.

In the final part two guidance, CMS stated that while the Medicare Prescription Payment Plan is applicable to all Part D plans, it has no practical

application for PACE participants or enrollees in plans that exclusively charge $0 cost sharing for Part D covered drugs. As such, CMS does not expect Part D plans that exclusively charge $0 cost sharing for covered Part D drugs to all plan enrollees to offer enrollees the option to pay their OOP costs through monthly payments over the course of the plan year or otherwise comply with the final part one guidance or the final part two guidance for calendar year 2025. CMS further stated that, if a Part D plan has any enrollees that could pay any cost sharing, even a nominal amount, under the Part D plan at any point during the year, then this clarification would not be applicable to such a plan.

For the reasons articulated in the final part two guidance, we intend to continue to not expect such plans to offer enrollees the option to pay their OOP costs through monthly payments over the course of the plan year or otherwise comply with the Medicare Prescription Payment Plan requirements set forth in this proposed rule and in the proposed new regulation at § 423.137.

In this proposed rule, we propose to codify at § 423.137(a) the rules we established in the 2025 guidance to apply to plan year 2026 and subsequent years and, in the case of a plan operating on a non-calendar year basis, for the portion of the plan year starting on January 1, 2026. CMS recognizes that implementing the proposed modifications to the requirements established in the final part one and final part two guidance and the new requirements in this proposed rule could be operationally challenging for plans operating on a non-calendar year basis to implement midway through a plan year. As such, we intend to not expect plans operating on a non-calendar year basis to comply with the Medicare Prescription Payment Plan requirements set forth in this proposed rule and in the proposed new regulation at § 423.137 to the extent that those requirements differ from those established in the final part one and final part two guidance during any portion of the non-calendar plan year that starts in 2025 and continues into 2026.

However, such plans would be expected to comply with all requirements set forth in this proposed rule and in the proposed new regulation at § 423.137 for non-calendar plan years beginning in 2026 and subsequent non-calendar plan years.

Specifically, during any portion of the non-calendar plan year that starts in 2025 and continues into 2026, we intend to not expect plans operating on a non-calendar year basis to comply with the proposed modifications to the requirements for how Part D sponsors handle adjustments for Part D claims under the Medicare Prescription Payment Plan and the timing requirements for the grace period and initial notice of failure to pay. During any portion of the non-calendar plan year that starts in 2025 and continues into 2026, we also intend to not expect plans operating on a non-calendar year basis to comply with proposed new requirements related to year-over-year participation for existing participants in the Medicare Prescription Payment Plan and addition of a renewal notice to the required notices related to election into the program; for the effective date of voluntary terminations from the program; and for Part D plans to provide pharmacies with easily accessible information on a Part D enrollee's costs incurred under the program.

In our final part one guidance, we also established definitions of key terms related to the Medicare Prescription Payment Plan for plan year 2025. We now propose to codify our existing definitions at § 423.137(b) for plan year 2026 and subsequent years with certain clarifications. Specifically, at § 423.137(b)(1), we propose to define “OOP costs for the Medicare Prescription Payment Plan” as the cost sharing amount the Part D enrollee is directly responsible for paying. In the final part one and final part two guidance, we referred to these costs simply as “OOP costs.' ” We propose to codify the more specific definition of “OOP costs for the Medicare Prescription Payment Plan” to avoid confusion with other uses of the term OOP costs, which may be inconsistent with the use of that term in the final part one and final part two guidance.

As described in section (b) of this proposed rule, the formula for calculating the maximum monthly cap differs for the first month of participation in the program versus the remaining months of the year. The cap for the first month for which the Part D enrollee has opted into the Medicare Prescription Payment Plan incorporates an enrollee's TrOOP prior to election into the program. However, the subsequent month calculation is determined by calculating the sum of any remaining OOP costs owed by the participant from a previous month that have not yet been billed and any additional OOP costs for the Medicare Prescription Payment Plan in the subsequent month. As such, for the subsequent month calculation of the Part D cost sharing incurred by the Part D enrollee, the term “OOP costs for the Medicare Prescription Payment Plan” includes those Part D cost sharing amounts that the enrollee is responsible for paying after accounting for amounts paid by third-party payers. Specifically, the OOP costs for the Medicare Prescription Payment Plan do not include the covered plan pay amount or other TrOOP-eligible amount(s), such as any amount paid by potential third-party payers, such as State Pharmaceutical Assistance Programs or charities. Additionally, within the definition of OOP costs for the Medicare Prescription Payment Plan, we propose to define “remaining OOP costs owed by the participant” to be the sum of OOP costs for the Medicare Prescription Payment Plan that have not yet been billed to the program participant. For example, if a Medicare Prescription Payment Plan participant incurs $2,000 in January and is billed $166.67, the remaining OOP costs owed by the participant are $2,000 − $166.67 = $1,833.33.

Finally, in the final part two guidance, CMS stated that it does not expect the LI NET program to offer enrollees the option to pay their OOP costs through monthly payment over the course of the plan year or to comply with the final part one guidance or final part two guidance for calendar year 2025. CMS clarified that, consistent with the agency's longstanding interpretation and implementation of the LI NET program, participants in the LI NET program are considered to be enrolled in a PDP. However, because the LI NET program is limited to offering Part D-eligible individuals with temporary coverage during a limited, transitional period, CMS stated it does not expect the LI NET program to comply with the requirements of the final part one guidance or the final part two guidance for calendar year 2025 in connection with the offering of such transitional coverage. Pursuant to our authority under section 1860D-14(e)(5)(B) of the Act to waive such requirements of title XI and title XVIII of the Act as may be necessary to carry out the purposes of the LI NET program, we propose to codify in this rule a waiver for the LI NET program with respect to the requirements of the Medicare Prescription Payment Plan for plan year 2026 and subsequent years. The LI NET program is limited to temporary coverage during a limited, transitional period and applying the Medicare Prescription Payment Plan to the LI NET program would be inconsistent with the purposes of such transitional coverage and would raise various operational challenges for the program. Accordingly, we are proposing to revise § 423.2536 to redesignate paragraphs (c) through (k) as paragraphs (d) through (l) and add new paragraph (c) to include the proposed Medicare Prescription Payment Plan requirements at § 423.137 discussed in this section to the list of Part D requirements waived for the LI NET program. In addition, we

are proposing to revise newly redesignated paragraphs § 423.2536(i)(1) and (i)(4) to add the materials proposed at §§ 423.2265(b)(16) and 423.2267(e)(45) through (51) (discussed previously) to the list of communication requirements waived for the LI NET program.

(b) Calculation of the Maximum Monthly Cap on Cost-Sharing Payments

Section 1860D-2(b)(2)(E)(iv) of the Act specifies how the monthly caps on OOP cost sharing payments are to be calculated. The formula for calculating the cap differs for the first month of participation in the program, versus the remaining months of the year. The maximum monthly cap calculations include specifics of a participant's Part D drug costs (previously incurred costs and new OOP costs), as well as the number of months remaining in the plan year; as such, the amount can vary from person-to-person and month-to-month. Assuming a program participant remains in the Medicare Prescription Payment Plan through the end of the plan year, the total amounts billed monthly through the December payment (which would be billed and paid in the following year) will equal the total OOP costs for the Medicare Prescription Payment Plan during the year.

Under section 1860D-2(b)(2)(E)(iv)(I) of the Act, for the first month for which the Part D enrollee has opted into the Medicare Prescription Payment Plan, the term “maximum monthly cap” means an amount calculated by taking the annual OOP threshold minus any Part D costs the Part D enrollee incurred during the year before opting into the program, divided by the number of months remaining in the plan year. The number of months remaining in the plan year includes the current reference month (for example, for a calendar year plan, the months remaining in the calculation for the January maximum cap would be 12).

Additionally, incurred costs for the Medicare Prescription Payment Plan (as used in the statutory definition of the first month's maximum cap calculation) means the incurred costs, with the meaning set forth at section 1860D-2(b)(4)(C) of the Act and described in section 30 of the Final CY 2025 Part D Redesign Program Instructions (Final 2025 Program Instructions), that were incurred prior to effectuation of an election into the Medicare Prescription Payment Plan, including all TrOOP-eligible costs.

If election into the program occurs mid-month, this would include Part D costs incurred within the calendar month of election but prior to election.

Final CY 2025 Part D Redesign Program Instructions:

https://www.cms.gov/inflation-reduction-act-and-medicare/part-d-improvements.

Under section 1860D-2(b)(2)(E)(iv)(II) of the Act, for each subsequent month for which the Part D enrollee has opted into the program, the maximum monthly cap is determined by calculating the sum of any remaining OOP costs owed by the participant from a previous month that have not yet been billed and any additional OOP costs for the Medicare Prescription Payment Plan in the subsequent month, divided by the number of months remaining in the plan year. The number of months remaining includes the month for which the cap is being calculated. This calculation repeats for each month in which the participant remains in the Medicare Prescription Payment Plan. The resulting maximum monthly cap will change if additional OOP costs for the Medicare Prescription Payment Plan are incurred.

Under section 1860D-2(b)(4)(B)(i)(VII) of the Act, the annual OOP cost threshold for 2025 is $2,000. Under section 1860D-2(b)(4)(B)(i)(VII) of the Act, for 2026 and subsequent years, the annual OOP cost threshold is equal to the amount specified for the previous year, increased by the annual percentage increase described in section 1860D-2(b)(6). “Incurred costs” means any costs incurred or treated as incurred under section 1860D-2(b)(4)(C) of the Act.

In the final part one guidance, we established standards for calculating the maximum monthly cap for the Medicare Prescription Payment Plan. The participant will not have any monthly bills to pay under this program until opting into the program and incurring OOP costs for covered Part D drugs. Once a participant incurs an OOP Part D drug cost, all their OOP costs for all covered Part D drugs will be billed on a monthly basis as long as the participant remains in the program. Program calculations apply to all OOP costs for the Medicare Prescription Payment Plan, including those in the deductible phase. Part D sponsors must include all covered Part D drugs in the program. However, non-covered drugs are excluded. Part D sponsors are responsible for correctly calculating the monthly caps based on the statutory formulas, determining the amount to be billed (not to exceed the cap), and sending monthly bills to program participants.

In the final part one guidance, we also established that opting into the program will not impact how a program participant moves through the Part D benefit or what counts towards their TrOOP costs. Under section 1860D-2(b)(4)(F) of the Act, a participant's TrOOP-eligible costs under the Medicare Prescription Payment Plan will still be treated as incurred based on the date each Part D claim is adjudicated. Opting into the program only provides participants with the ability to spread OOP costs over the year—the total incurred costs and the timing of TrOOP accumulation do not change.

In the final part one guidance, we also established standards for how to incorporate extended day supplies of medications in the calculations. For participants who fill prescriptions for an extended day supply, their OOP costs for those prescriptions will be attributed to the month the prescription was filled and will not be pro-rated over the months covered by the prescription. For example, if a participant in the program has $300 in OOP costs for the Medicare Prescription Payment Plan for a 90-day supply dispensed in January, the full $300 will be counted as incurred in January.

In addition, we stated that when an individual opts into the Medicare Prescription Payment Plan during the plan year, the individual's incurred costs used to calculate the first month maximum cap are equal to the individual's accumulated TrOOP before opting into the program. If election into the program occurs mid-month, this would include Part D costs incurred within the calendar month of election but prior to election (refer to example B4 in Appendix B of the final part one guidance for an illustration of a mid-month election). The number of months remaining in the plan year includes the month when an individual opts into the program. When an individual opts into the Medicare Prescription Payment Plan prior to the start of the plan year (such as during open enrollment), the first month maximum monthly cap calculation applies to their first month of active coverage within the plan year.

The final part one guidance also stated that in scenarios where the OOP costs for the Medicare Prescription Payment Plan in the first month of participation in the program are less than the maximum monthly cap, a Part D sponsor cannot bill the participant more than their actual incurred OOP costs. Specifically, a Part D sponsor must bill the participant the lesser of the participant's OOP costs for the Medicare Prescription Payment Plan or the first month's maximum monthly cap. Section 1860D-2(b)(2)(E)(iv)(I) of the Act clearly states that the first month maximum cap calculation applies to the

first month an enrollee has elected to participate in the Medicare Prescription Payment Plan; in scenarios in which a participant incurs $0 in OOP costs for the Medicare Prescription Payment Plan in the first month, the Part D sponsor must not bill the participant for the first month and would use the subsequent month maximum monthly cap calculation for all succeeding months in the year in which the participant remains in the program.

Finally, the final part one guidance established that “OOP costs” (defined as “OOP costs for the Medicare Prescription Payment Plan” for the purposes of this rule) refers only to the patient pay portion for covered Part D drugs that a program participant would have paid at the POS if they had not opted into the Medicare Prescription Payment Plan, not to all incurred costs as defined under section 1860D-2(b)(4)(C) of the Act. For these calculations, the OOP costs for the Medicare Prescription Payment Plan do not include the covered plan paid amount or amounts paid by third parties, such as qualified State Pharmaceutical Assistance Programs (SPAPs) or charities. OOP costs for the Medicare Prescription Payment Plan also do not include any amounts paid by enrollees for monthly premiums.

In this proposed rule, we propose to codify the standards we established in the final part one guidance for plan year 2026 and subsequent years at § 423.137(c).

Under section 1860D-2(b)(2)(E)(i) of the Act, Part D sponsors must provide the option to opt into the Medicare Prescription Payment Plan to all Part D enrollees, including enrollees who are eligible for the Low-Income Subsidy (LIS). For 2026 and subsequent years, we propose to codify the statutory requirement that Part D sponsors must offer the program to all Part D enrollees, including those who are LIS eligible, at § 423.137(d).

In the final part one guidance, we explained that while the statute requires that an LIS enrollee must have the option to become a Medicare Prescription Payment Plan participant, individuals with low, stable drug costs (such as LIS enrollees) are not likely to benefit from the program. Further, LIS enrollment, for those who qualify, is more advantageous than participation in the Medicare Prescription Payment Plan. We are aware that there may be limited circumstances in which an LIS enrollee would benefit from participation in the Medicare Prescription Payment Plan, but, in general, participation in the Medicare Prescription Payment Plan is unlikely to benefit LIS enrollees. It is important that Part D sponsors inform any individual interested in the Medicare Prescription Payment Plan of potential eligibility for the LIS program. In this rule, for 2026 and subsequent years, we propose to require Part D sponsors to include information on the availability of the LIS program and other financial assistance programs in the election-related materials described at proposed § 423.137(d)(10) with the goal of alerting Part D enrollees to the availability of these programs that can lower costs.

In addition, under section 1860D-2(b)(2)(E)(v)(III)(aa) of the Act, Part D sponsors may not restrict the application of the Medicare Prescription Payment Plan benefit to specific covered Part D drugs. To minimize potential confusion and operational challenges, in the final part one guidance, we stated that for 2025, once an individual has opted into the program, OOP cost sharing for all covered Part D drugs must be included in program bills until the participant reaches the OOP threshold, opts out of the Medicare Prescription Payment Plan, or is terminated from the Medicare Prescription Payment Plan due to failure to pay. The program must apply to all of a program participant's prescriptions for covered Part D drugs. We propose to codify this requirement for 2026 and subsequent years at § 423.137(d)(5).

Section 1860D-2(b)(2)(E)(v)(II) of the Act states that a Part D enrollee may opt into the Medicare Prescription Payment Plan prior to the beginning of the plan year or in any month during the plan year. In the final part one guidance, we established requirements for a process for enrollees to opt into the Medicare Prescription Payment Plan in 2025, consistent with the statutory requirement cited previously. The final part one guidance set forth the following requirements for 2025:

• Part D sponsors must allow Part D enrollees to opt into the Medicare Prescription Payment Plan prior to the plan year (including the Annual Election Period for the subsequent plan year, the Part D initial enrollment period, and Part D special election periods) or at any point during the plan year.

• Part D sponsors must allow Part D enrollees to opt into the Medicare Prescription Payment Plan after the conclusion of an enrollment period and before the new plan enrollment effective date (for example, an enrollee could opt into the program for the upcoming plan year after the conclusion of the Annual Election Period and in advance of the January 1 new plan enrollment effective date).

In this proposed rule, for 2026 and subsequent years, we propose to codify these requirements at § 423.137(d)(4)(1).

In the final part one guidance, we also established requirements for election into the program in 2025, which were designed to reduce administrative burden by aligning with existing requirements and procedures for Part D plan enrollment and to provide a uniform experience for Part D enrollees by reducing potential variation in program administration across Part D plans. We required the Part D enrollee, or their authorized legal representative, to complete an election request, provide the required information to the Part D sponsor, and be approved by the Part D sponsor to opt into the Medicare Prescription Payment Plan. Part D sponsors must have the following mechanisms available to Part D enrollees who wish to opt into the Medicare Prescription Payment Plan:

• A paper election request form that can be mailed.

• A toll-free telephone number that must provide the individual with evidence the election request was received (for example, a confirmation number).

• A website application that must provide the individual with evidence the election request was received (for example, a confirmation number).

Part D sponsors must consider Medicare Prescription Payment Plan election requests regardless of the election mechanism or format (for example, a handwritten letter). For an election request to be considered complete, the Part D sponsor must receive the name of the Part D enrollee, their Medicare ID number, and the signature (or verbal attestation, in the case of telephonic requests)

of the Part D enrollee or their authorized legal representative validating that the requestor understands and accepts the Part D sponsor's terms and conditions for the program. In this proposed rule, for 2026 and subsequent years, we propose to codify these requirements at §§ 423.137(d)(2) and 423.137(d)(3).

We are committed to ensuring that Part D enrollees, once they request to participate, are able to access the benefits of the program as timely as possible and recognize the importance of timely access to prevent enrollees from not filling prescriptions due to affordability challenges. To that end, we requested comment in the draft part one guidance on real-time or POS election approaches that would require Part D sponsors to effectuate election into the

Medicare Prescription Payment Plan without any delay or with only a nominal delay between the election request and effectuation. As we clarified in the final part one guidance, real-time election refers to a process that would enable a Part D enrollee to request election and be effectuated into the program in one instance from any setting (and so is not limited to only the pharmacy POS setting). POS election, rather, is limited to the pharmacy POS setting and would require updates to pharmacies' claims processing systems.

In response to the request for comment in the draft part one guidance, many commenters expressed support for real-time election, noting that it would prevent dispensing delays and prescription abandonment. However, due to a number of policy and operational barriers and the restricted lead-up time to the statutory implementation date of January 1, 2025, we did not require real-time or POS election for 2025. In the final part one guidance for 2025, we required a 24-hour effectuation timeframe for election requests made during the plan year, to reduce the likelihood of dispensing delays and prescription abandonment while reducing operational burden for plans and pharmacies. Specifically, we stated that when a Part D sponsor receives a program election request for the next, upcoming plan year (or in advance of a new plan enrollment effective date during a plan year) through either an election request form or through other means, the Part D sponsor must process the request within 10 calendar days of receipt, or the number of calendar days before the plan enrollment starts, whichever is shorter. When a current Part D enrollee requests to opt into the Medicare Prescription Payment Plan during the plan year, Part D sponsors must process the election request within 24 hours.

Since publication of the final part one guidance, we have conducted extensive outreach with a variety of stakeholders and conducted in-depth research to assess the feasibility of real-time or POS election options for 2026 or future years. Our research indicates that there is no mechanism for program election information to be passed through the current National Council for Prescription Drug Programs (NCPDP) Telecommunication Standard and easily integrated into Part D sponsor and/or pharmacy benefit manager (PBM) systems; updates to current standards would also be needed to support POS election. These updates would require significant lead time and coordination with industry standards committees that have existing processes and timelines outside of CMS's purview. However, real-time election (facilitated by Part D sponsors outside of the POS) is operationally feasible and need not involve changes to the current Telecommunication Standard; in fact, some Part D sponsors have indicated to CMS that they plan to offer real-time election to their enrollees in 2025. We also note that real-time election facilitated by Part D sponsors could still

take place

at the POS; for example, an individual who receives the “Medicare Prescription Payment Plan Likely to Benefit Notice” while picking up a high-cost prescription could step away from the pharmacy counter to call their Part D plan or submit an online election request, and then return to the counter, request that the pharmacist re-process the claim, and pay $0 at POS for the prescription.

In this rule, for 2026 and subsequent years, we propose to codify the 24-hour effectuation requirement at § 423.137(d)(4), but request comment on a potential requirement for Part D sponsors to effectuate election requests received via phone or web in real-time for 2026 or future years. In particular, we are interested in the operational feasibility of implementing a real-time election requirement for 2026, what technology and processes would be required to enable a real-time election requirement for 2026, implications for Part D enrollees, and potential burden on interested parties. We are also interested in opportunities for pharmacists to support enrollees in using any future Part D sponsor-adjudicated real-time election mechanisms at the POS.

In the final part two guidance, we stated that for 2025, paper election requests are considered received on the date and time—

• The Part D sponsor initially stamps a document received by regular mail (that is, U.S. Postal Service); or

• A delivery service that has the ability to track when a shipment is delivered (for example, U.S. Postal Service, UPS, FedEx, or DHL) delivers the document.

A telephonic election request is considered received on the date and time:

• The verbal request is made by telephone with a customer service representative; or

• A message is left on the Part D sponsor's voicemail system if the Part D sponsor utilizes a voicemail system to accept requests or supporting statements after normal business hours.

An electronic election request is considered received on the date and time a request is received through the Part D sponsor's website and/or portal. This is true regardless of when a Part D sponsor ultimately retrieves or downloads the request. In this rule, for 2026 and subsequent years, we propose to codify these processing time requirements at § 423.137(d)(2).

In the final part one guidance, we stated that in 2025, if a Part D sponsor receives an election request that does not have all necessary elements required to consider it complete, the sponsor must not immediately deny the request. For requests received prior to the plan year, the Part D sponsor must contact the individual to request the additional documentation necessary to process the request within 10 calendar days of receipt of the incomplete election request. For requests received during the plan year, the Part D sponsor must contact the individual to request the additional documentation necessary to process the request within 24 hours of receipt of the incomplete election request. Additional documentation to make the program election request complete must be received by the Part D sponsor within 21 calendar days of the request for additional information. The Part D sponsor may deny the election request if the requisite information is not received from the individual in that timeframe. If a Part D enrollee has fulfilled all program election requirements, but the Part D sponsor is unable to process the election into the program in the required amount of time due to no fault of the individual, the Part D sponsor must process a retroactive election back to the original date when the individual should have been admitted into the Medicare Prescription Payment Plan (that is, within 24 hours of the individual providing the requisite information for election into the program). In addition, the Part D sponsor must reimburse the participant for any OOP cost sharing paid on or after that date and include those amounts, as appropriate, in a monthly bill under the program within 45 calendar days. In this rule, for 2026 and subsequent years, we propose to codify these requirements for how Part D sponsors must process program election requests, including timing and notice requirements, procedures for collecting missing information on election requests, and requirements for retroactive election in the event the Part D sponsor fails to process an election within 24 hours at § 423.137(d)(4). Section 423.137(d)(4)(i) includes proposed requirements for processing election requests made prior to the plan year, and § 423.137(d)(4)(ii) includes proposed requirements for processing

election requests made during the plan year.

In the final part one guidance, we also included requirements for Part D sponsors to process retroactive election requests in cases where an enrollee cannot have immediate election into the program and believes that any delay in filling a prescription due to the 24-hour timeframe required to process a program election request may seriously jeopardize their life, health, or ability to regain maximum function and so must pay out-of-pocket to the pharmacy. In the final part one guidance, we state that in this situation in 2025, the enrollee must request retroactive election within 72 hours of the date and time when the claim was adjudicated. In this rule, for 2026 and subsequent years, we propose to codify these requirements at § 423.137(d)(6). These requirements ensure that enrollees can participate in the program in cases where they believe that a delay in filling a prescription would seriously jeopardize their life, health, or ability to regain maximum function and can be reimbursed for costs they paid for the prescription before being effectuated in the program.

At § 423.137(d)(7), for 2026 and subsequent years, we propose to codify requirements for Part D sponsors to develop standardized procedures for determining and processing reimbursements for excess program payments made by participants who become LIS eligible, consistent with the final part one guidance for 2025. CMS regulations at 42 CFR 423.800(c) apply to all subsidy eligible individuals and require Part D sponsors to reimburse subsidy-eligible individuals, and any organizations paying cost sharing on behalf of such individuals, any excess premium or OOP cost sharing paid by the individual or organization after the effective date of the individual's eligibility for a subsidy. This requirement applies to any OOP cost sharing paid under the Part D benefit, including cost sharing paid by or on behalf of an enrollee who has participated in the Medicare Prescription Payment Plan. Under the timeframes specified at 42 CFR 423.800(e) and 423.466(a), Part D sponsors must process retroactive claims and premium adjustments for LIS-eligible individuals and make any resulting refunds and recoveries within 45 calendar days of the Part D sponsor's receipt of complete information regarding these adjustments.

These same requirements apply to enrollees who have elected into the Medicare Prescription Payment Plan and later become LIS-eligible.

Refer to Medicare Prescription Drug Benefit Manual; Chapter 13—Premium and Cost-Sharing Subsidies for Low-Income Individuals.

Section 1860D-2(b)(2)(E)(v)(II) of the Act requires Part D sponsors to offer the Medicare Prescription Payment Plan to all Part D enrollees in any month during the year. At § 423.137(d)(8), for 2026 and subsequent years, we propose to codify requirements for mid-year plan switches, consistent with the requirements included in the final part one guidance for 2025. If a Part D enrollee who opted into the Medicare Prescription Payment Plan switches plans (Plan Benefit Package (PBP)) during the plan year or is reassigned by CMS, regardless of whether the new plan is offered by the same or a different Part D sponsor, the Part D sponsor of the prior Part D plan must offer the participant the option to repay the full outstanding amount in a lump sum. If the individual chooses to continue paying monthly, the Part D sponsor must continue to bill the participant monthly based on the participant's accrued OOP costs while in the program under that sponsor's Part D plan. The Part D sponsor cannot require full immediate repayment.

The Part D sponsor is not permitted to automatically sign up the individual for the Medicare Prescription Payment Plan under the new plan. However, an individual must be able to opt into the program regardless of whether they had participated in the program under the prior plan. If an individual opts into the Medicare Prescription Payment Plan under their new plan after switching plans mid-year, the new Part D sponsor must calculate the individual's monthly cap for the first month of participation under the new plan using the formula for the calculation of the maximum monthly cap in the first month. This is the case even when the first plan and the second plan are administered by the same Part D sponsor.

As outlined in section (e) of this proposed rule, preclusion is only permitted in plans that are offered by the same Part D sponsor and may extend beyond the immediately subsequent plan year if a Part D enrollee remains in a plan offered by the same Part D sponsor and continues to owe an overdue balance. If an individual pays off the outstanding balance during a subsequent year, the enrollee is eligible to request to participate in the Medicare Prescription Payment Plan program again.

At § 423.137(d)(9), for 2026 and subsequent years, we propose to codify requirements related to participation renewal year-over-year, a topic CMS did not address in the final part one or final part two guidance because the IRA limited CMS program instruction for a single year of the program (CY 2025). To streamline the process for Part D enrollees and Part D sponsors, we propose an automatic election renewal process, wherein program participation continues into the next upcoming year automatically, provided the participant remains in the same PBP in the upcoming year, unless the program participant indicates otherwise. If an enrollee is switching Part D plans, including switching between two PBPs offered by the same Part D sponsor, the automatic election renewal process would not apply. We propose requiring Part D sponsors to send a notice alerting the Part D enrollee that their participation in the program will continue into the next year unless they indicate that they would like to opt out for the upcoming year. This notice would be required to be sent out to program participants by the end of the Annual Election Period (no later than December 7) and must include the Part D sponsor's program terms and conditions for the upcoming year. This proposed automatic renewal process reduces burden for Part D enrollees who would like to remain in the program, as they would not need to complete additional paperwork to renew their election, and it is consistent with automatic renewal of Part D plan enrollment, which provides a seamless experience for Part D enrollees. Automatic renewal also entails less administrative burden for Part D sponsors, as they are not required to process full election request forms again for program participants and would not be required to perform “likely to benefit” analyses (see section (d) of this proposed rule) for the upcoming plan year on program participants. CMS also considered requiring Part D enrollees to actively re-elect into the program each year. Under this approach, Part D sponsors would be required to terminate an enrollee's participation at the end of the contract year and the enrollee would be required to opt back into the program (with the standard election request form or a streamlined renewal form) in order to participate in the following year. CMS opted to propose the automatic election renewal, because the alternative active re-election process places additional burden on both Part D enrollees and Part D sponsors. In addition, this approach is consistent with the existing Part D enrollment process, which automatically renews each year. We request comment on the proposal for automatic election renewal, including the process for enabling

automatic election and associated notification requirements.

In the final part two guidance, we addressed program election communications and notice requirements for Part D sponsors, including timing, content, and supplemental information requirements for each required notice in 2025. We required Part D sponsors to make an election request form available throughout the plan year and during the Part D plan enrollment periods.

Part D sponsors must send a paper election request form within the same timeframe as the membership ID card mailing specified at 42 CFR 423.2267(e)(32)(i).

The election request form may be sent in the membership ID card mailing, or in a separate mailing in the same timeframe. The election request form must include all of the following:

• Fields for the Part D enrollees' first and last name, Medicare Number, birth date, phone number, permanent residence street address, and mailing address, if different from permanent residence street address.

• A signature field, allowing the enrollee to attest that they understand—

++ That the form is a request to participate in the Medicare Prescription Payment Plan, and the Part D sponsor will contact them if more information is needed to complete the request;

++ That by signing the form, they have read and understood the form and the Part D sponsor's terms and conditions; and

++ That the Part D sponsor will inform the individual when their participation in the program is active, and, until the individual receives that notification, that they are not a participant in the program.

• Instructions for how to submit the form to the Part D sponsor.

• Instructions for how the Part D enrollee can contact the Part D sponsor for questions or assistance.

A Part D sponsor may include the program terms and conditions on the election request form or may include them on a separate attachment. In this rule, we propose to codify these requirements for 2026 and subsequent years at § 423.137(d)(10)(i).

Once a program election request is accepted by the Part D sponsor, the Part D sponsor must communicate to the Part D enrollee that the request to participate in the Medicare Prescription Payment Plan has been accepted and effectuated via written notice of election approval, within the timeframes described at § 423.137(d)(10)(ii)(A). For requests received prior to the plan year, Part D sponsors are required to send the written notice of election approval within the timeframe described at § 423.137(d)(10)(ii)(A)(1). For requests received during the plan year, regardless of how the Part D enrollee submitted the election request (paper, telephone, or electronic), the Part D sponsor must deliver the notice of election approval within the timeframe described at § 423.137(d)(10)(ii)(A)(2) first telephonically and then via a written notice. The call must include the required elements for the notice of election approval described at § 423.137(d)(10)(ii)(B). The Part D sponsor must then deliver the written notice of election approval to the program participant either via mail or electronically, depending on the participant's preferred and authorized communication method, within 3 calendar days of delivering the initial telephone notice.

If a Part D sponsor is processing an election request over the phone and is able to confirm in that phone call that the election request is approved and the Part D enrollee's participation is active, that same phone call can serve to meet the acceptance of election telephone notification requirement. Similarly, if an electronic election request is approved and effectuated in real time and the Part D sponsor is able to provide a digital confirmation of program participation, the Part D sponsor is not required to also deliver the notice of election approval via phone call. In either case, the Part D sponsor must still deliver the written notice within 3 calendar days.

In the final part two guidance, we set forth requirements for Part D plan sponsors related to the contents of the notice of election approval in 2025. The notice of election approval must include—

• The effective date of the individual's participation;

• A description of how payments for covered Part D drugs under the program will work, including that the individual will pay $0 to the pharmacy for covered Part D drugs and the Part D plan will bill the individual each month;

• An overview of how the monthly bill is calculated, including a statement on how monthly bills may change each month, and a statement outlining that under the program, the individual will not pay more for covered Part D drugs than they would have paid without the program or more than the Medicare Part D annual out-of-pocket maximum;

• Information about procedures for involuntary termination due to failure to pay and how to submit an inquiry or file a grievance, as well as a statement informing the individual that they can voluntarily leave the program at any time;

• A statement describing that leaving the Medicare Prescription Payment Plan, either involuntarily or voluntarily, will not affect the individual's Medicare Part D coverage with the Part D plan;

• A description of how if an individual leaves the program, they may still owe a program balance, they can pay the balance all at once or be billed monthly, and they will resume paying the pharmacy directly for their Part D prescriptions after leaving the program; and

• An overview of other Medicare programs that can help lower costs, including Extra Help, the Medicare Savings Program, the State Pharmaceutical Assistance Program, and the Manufacturer's Pharmaceutical Assistance Program, and how to learn more about these programs.

In this rule, we propose to codify these requirements for 2026 and subsequent years at § 423.137(d)(10)(ii).

Part D sponsors are required to send a notice of denial upon denial of an election request. In the final part one guidance, we set forth the following requirements for 2025. For requests received prior to the plan year, the notice of denial must be sent within 10 calendar days of receipt of the election request. For requests received during the plan year, the notice of denial must be sent within 24 hours of receipt of the election request. For incomplete election requests, the notice of denial must be sent within 10 calendar days of the expiration of the timeframe for submission of additional information.

Finally, the notice of denial must explain the reason for denial and provide a description of the grievance process available to the individual. In this rule, for 2026 and subsequent years, we propose to codify these requirements at § 423.137(d)(10)(iii).

For 2026, we also propose to require Part D sponsors to send a renewal notice alerting the program participant that their participation in the program will continue into the next year unless they indicate that they would like to opt out for the upcoming year. This notice would be required to be sent out to program participants by the end of the AEP (no later than December 7) and must include the Part D sponsor's program terms and conditions for the upcoming year and a reminder that the participant may opt out of the program at any time, including for the upcoming plan year.

In this rule, for 2026 and subsequent years, we propose to codify these requirements at § 423.137(d)(10)(iv) and to add the election request form, notice

of election approval, and renewal notice as required materials and content for Part D sponsors at § 423.2267(e)(45), (e)(46) and (e)(51).

CMS issued model materials that Part D enrollees can use to fulfill the election request and election approval requirements through the Medicare Advantage and Prescription Drug Programs: Part C and Part D Medicare Prescription Payment Plan Model Documents (CMS-10882; OMB 0938-1475) ICR package. As established in § 423.2267(c), model materials and content are required materials and content created by CMS as an example of how to convey beneficiary information. If Part D sponsors choose to not use a CMS-developed model version of a particular required material or content, they must still accurately convey the vital information in the required material or content to the beneficiary.

For the required program election request form that CMS proposes to codify at § 423.2267(e)(45), this means that a Part D sponsor who chooses to develop their own form must include or provide all of the elements outlined at § 423.137(d)(10)(i)(B). For the notice of election approval that CMS proposes to codify at (e)(46), a Part D sponsor who chooses to develop their own notice must include all of the elements outlined at § 423.137(d)(10)(ii)(B). Finally, for the renewal notice that CMS proposes to codify at (e)(51), a Part D sponsor who chooses to develop their own notice must include all of the elements outlined at § 423.137(d)(10)(iv)(B). These notification and content requirements are consistent with the requirements outlined in the final part two guidance for 2025, with the exception of the renewal notice, which was not included in the program instructions.

Additionally, Part D sponsors are required to furnish additional educational information on the Medicare Prescription Payment Plan with the election request form and the notice of acceptance. Part D sponsors are encouraged to use the CMS-developed program fact sheet available on

Medicare.gov

to satisfy these requirements. If the Part D sponsor develops and uses alternative informational materials in lieu of the CMS-developed fact sheet to satisfy these requirements, they must ensure that these alternative materials accurately convey program information and are compliant with existing Part D requirements specified at 42 CFR part 423 subpart V. In this rule, for 2026 and subsequent years, we propose to codify this requirement at § 423.137(d)(10)(i)(C) and 423.137(d)(10)(ii)(C).

(d) Part D Enrollee Targeted Outreach

The statute establishes that some Part D enrollees will incur OOP costs that make them likely to benefit from election into the Medicare Prescription Payment Plan. As stated in the final part one guidance for 2025, by “likely to benefit,” we generally mean that a participant's monthly costs would be lower under the program compared to any single monthly amount they would have had to pay at the pharmacy without the program. We acknowledge, however, that individuals may consider a number of other factors in determining whether they, personally, would benefit from the program.

While this program is open to all Part D enrollees, Part D enrollees incurring high OOP costs earlier in the plan year are generally more likely to benefit. Section 1860D-2(b)(2)(E)(v)(III)(dd) of the Act requires that Part D sponsors have a mechanism in place to notify a pharmacy when a Part D enrollee incurs OOP costs with respect to covered Part D drugs that make it likely the enrollee may benefit from participating in the program.

CMS recognizes, however, that notification of Part D enrollees likely to benefit from the Medicare Prescription Payment Plan prior to reaching the pharmacy POS will be a critical component to program success. Early notification will streamline the election process and prevent potential drug dispensing delays. As such, in addition to the statutory requirement for pharmacy POS notification (as outlined in section 1860D-2(b)(2)(E)(v)(III)(dd) of the Act), in the final part two guidance, CMS also established requirements for 2025 for Part D sponsors to undertake targeted outreach, both prior to and during the plan year, directly to Part D enrollees likely to benefit from the program.

While the statute requires a likely to benefit notification, it does not outline the specific criteria or define the profile of someone who is likely to benefit under the program. In the final part one guidance, CMS developed a standardized, quantitative framework for assessing “likely to benefit,” which was used to inform targeted outreach requirements both prior to and during the plan year. However as noted previously, CMS recognizes that an individual Part D enrollee may find that they would personally benefit from the program even if they would not be identified as likely to benefit under this particular standardized framework. Those individuals are certainly permitted to opt into the program, as are all Part D enrollees. The definition and framework for “likely to benefit” described in the final part one guidance is specifically for identifying Part D enrollees for targeted outreach and communication in the absence of any information regarding an individual's specific financial circumstances.

As described in the final part one guidance, in retrospective modeling of prescription drug event (PDE) data, CMS found that to be “likely to benefit” from the program, the Part D enrollee would have to incur some level of substantial OOP costs; further, the Part D enrollee's highest monthly OOP cost incurred would have to be more than the highest monthly paid amount under the Medicare Prescription Payment Plan (if the program had applied). CMS used this approach to identify “likely to benefit” because it focuses on addressing Part D enrollees' potential cash-flow concerns by lowering their maximum OOP costs in a month (and limiting the potential for participants to be faced with Medicare Prescription Payment Plan monthly payments that may initially provide substantial financial relief but later, due to timing constraints, result in monthly beneficiary payments that are higher than they would have been absent the program). This approach strictly compares the monthly OOP amounts with and without the Medicare Prescription Payment Plan, without any subjective assessments of what amount might be beneficial to an individual Part D enrollee. CMS used the approach described previously to set thresholds for targeted outreach criteria in the first year of the program (2025). In the final part one guidance, we established a 2025 POS notification threshold of $600 for a single prescription. Additional details regarding the POS notification process are described in section (h) of this proposed rule.

In the final part two guidance, we established a requirement for Part D sponsors to notify enrollees who were likely to benefit prior to the 2025 plan year. In setting criteria to identify Part D enrollees likely to benefit prior to the plan year, CMS seeks to identify individuals who have persistently high costs for covered Part D prescription drugs. That is balanced, however, by a desire to limit notifications to Part D enrollees who are not likely to benefit from participation in the program (such as Part D enrollees for whom the program would initially provide substantial financial relief but later, due to timing constraints, would result in monthly payments that are higher than they would have been absent the

program). With the goal of assessing the persistence of high OOP costs, and thus, the likelihood of a prior year's OOP costs predicting future OOP burden, CMS analyzed PDE records. CMS first identified Part D enrollees who had incurred total OOP costs of at least $2,000 in the first three quarters of 2021, then examined their total OOP costs in the subsequent year, 2022. CMS's analysis was based on the patient payment amount for covered Part D claims only, reflecting the actual OOP financial burden for Part D enrollees.

In the final part two guidance, we established that to fulfill the requirements for prior to the plan year notification, during the fourth quarter of the year, Part D sponsors must review their Part D claims history from the first three quarters of the year to identify Part D enrollees likely to benefit in the upcoming year. For CY 2025, Part D sponsors are required to conduct outreach to Part D enrollees who incurred at least $2,000 in OOP costs for covered drugs through September of 2024. Based on this analysis and any additional analysis Part D sponsors conduct to identify enrollees who may be likely to benefit from this program, the Part D sponsor must send the “Medicare Prescription Payment Plan Likely to Benefit Notice” to identified enrollees no later than the end of the Annual Election Period (open enrollment), which is December 7 of each year. For example, for CY 2025, Part D sponsors assessed claims for covered Part D drugs with dates of services from January through September 2024 and sent the “Medicare Prescription Payment Plan Likely to Benefit Notice” in October, November, or early December 2024 (no later than December 7, 2024). If Part D sponsors develop supplemental strategies for identification of Part D enrollees likely to benefit prior to the plan year, these notifications must be provided during the same timeframe.

In the final part two guidance, we established that prior to the plan year, when a Part D sponsor identifies current Part D enrollees as likely to benefit using the methods noted previously, it is then required to notify each such Part D enrollee in writing that they are likely to benefit from the Medicare Prescription Payment Plan, using the standardized “Medicare Prescription Payment Plan Likely to Benefit Notice.” This outreach may be done via mail or electronically (based on the Part D enrollee's preferred and authorized communication methods) and must include a Medicare Prescription Payment Plan election request form. The outreach must also include additional information about the Medicare Prescription Payment Plan; this additional information requirement may be fulfilled by including with the notice the CMS-developed fact sheet about the program. If Part D sponsors develop and use alternative informational materials in lieu of the CMS-developed fact sheet to satisfy this requirement, they must ensure that these alternative materials accurately convey program information and are compliant with existing Part D requirements specified at 42 CFR part 423 subpart V and in the Medicare Communications and Marketing Guidelines (MCMG) Additionally, the initial notice may be provided via telephone, so long as the standardized “Medicare Prescription Payment Plan Likely to Benefit Notice” and additional information are sent within 3 calendar days of the telephone notification.

In the final part two guidance, we established that while Part D sponsors are required to notify all Part D enrollees who meet the criteria outlined previously, Part D sponsors should be aware that potential changes to a Part D enrollee's clinical condition, medication status, or cost sharing (for example, discontinuation of therapy or addition of supplemental payers) could affect the likelihood that a Part D enrollee may benefit from the Medicare Prescription Payment Plan. Part D sponsors should be aware of potential status changes when contacted by an enrollee to discuss participation in the program and should counsel enrollees accordingly.

In addition to the criteria for identification of Part D enrollees likely to benefit from the program

in advance of

an upcoming plan year, in the final part two guidance, CMS established a requirement for 2025 for Part D sponsors to put in place reasonable guidelines for ongoing identification of Part D enrollees likely to benefit

during

the plan year. For example, Part D sponsors may undertake targeted outreach to Part D enrollees if they become aware in advance of a new high-cost prescription for a Part D enrollee that would trigger the pharmacy POS notification process. If Part D sponsors have prior authorization or other utilization management edits in place for a drug that, based on their benefit structure, would result in OOP costs above the pharmacy POS notification threshold, then the Part D sponsor could initiate outreach to the Part D enrollee based on approved prior authorization requests, informing them of the Medicare Prescription Payment Plan and of the opportunity to opt into the program.

A Part D enrollee is less likely to benefit from opting in during the last quarter of a year (for example, in December, the last month of the plan year, because OOP costs for the Medicare Prescription Payment Plan in that month cannot be spread over more than 1 month). As such, in the final part one and final part two guidance, we established that a Part D enrollee should not be notified that they are likely to benefit in the last month of the plan year for that plan year; however, Part D sponsors may choose to provide them with information on how to opt into the program for the upcoming year. Participants who have already opted into the Medicare Prescription Payment Plan should not be notified about opting into the program while their participation is in effect. Additionally, enrollees who are precluded from opting into the program due to failed monthly payment after conclusion of the required grace period should not be notified that they are likely to benefit from the program during the plan years in which they are precluded from participating in the program. Finally, PDPs that are non-renewing their contracts or individual plan benefit packages are not required to comply with the requirements at § 423.137(e)(3)(i) related to prior to plan year targeted outreach. Non-renewing PDPs must still comply with the requirements at § 423.137(e)(3)(ii) related to during the plan year targeted outreach through the end of the plan year but are not required to identify and outreach to Part D enrollees likely to benefit from the program in the upcoming plan year.

In the final part two guidance, we established that Part D sponsors may develop strategies other than the approach outlined previously for identification of additional Part D enrollees likely to benefit during the plan year. However, Part D sponsors must develop standardized processes for implementing their criteria for identification of enrollees likely to benefit from the program during the plan year, including outreach timeframe and mode of communication, and must apply any identification criteria to every Part D enrollee uniformly.

In the final part two guidance, we established that during the plan year, when a Part D sponsor identifies current Part D enrollees as likely to benefit from the program, it is required to provide the “Medicare Prescription Payment Plan Likely to Benefit Notice” to the identified Part D enrollee along with a Medicare Prescription Payment Plan election request form and additional information about the Medicare Prescription Payment Plan. This additional information requirement may be fulfilled by including with the notice

the CMS-developed fact sheet about the program. If Part D sponsors develop and use alternative informational materials in lieu of the CMS-developed fact sheet to satisfy this requirement, they must ensure that these alternative materials accurately convey program information and are compliant with existing Part D requirements specified at 42 CFR part 423 subpart V and in the MCMG. This outreach may be done via mail or electronically (based on the Part D enrollee's preferred and authorized communication methods). Additionally, the initial notice may be provided via telephone, so long as the written “Medicare Prescription Payment Plan Likely to Benefit Notice,” election request form, and additional information are sent within 3 calendar days of the telephone notification. Part D sponsors are encouraged to inform the Part D enrollee that they are likely to benefit when contacting the Part D enrollee for other reasons, such as while communicating a prior authorization coverage determination.

For the initial years of the program, we propose to maintain the criteria for Part D sponsor outreach prior to the plan year, during the plan year, and at the point of sale that were established in the final part one and final part two guidance for 2025. More specifically, we propose that Part D sponsors must notify a pharmacy when a Part D enrollee incurs OOP costs for a single prescription that equal or exceed the POS threshold of $600. To identify Part D enrollees likely to benefit in advance of the plan year, we propose that Part D sponsors be required to assess their current Part D enrollees' prescription drug costs from the current year and conduct outreach to Part D enrollees who incurred $2,000 in OOP costs for covered Part D drugs through September of that year. We also propose that Part D sponsors will be required to put in place reasonable guidelines for ongoing identification of Part D enrollees likely to benefit

during

the plan year. As described in this section, an example of a reasonable guideline for ongoing identification during the plan year would be a standardized approach in which a Part D sponsor undertakes targeted outreach to Part D enrollees when they become aware in advance (such as through the prior authorization process) of a new high-cost prescription that would trigger the pharmacy POS notification process. We remind Part D sponsors that they must develop standardized processes for implementing their criteria for identification of enrollees likely to benefit from the program during the plan year, including outreach timeframe and mode of communication, and must apply any identification criteria to every Part D enrollee uniformly.

We plan to revisit these requirements in future rulemaking, as CMS gains program experience and can evaluate program data and operations. In general, we expect to maintain the same overall framework for targeted outreach, which will include a POS notification threshold based on incurred OOP costs, prior to plan year criteria based on incurred OOP costs in the current year, and requirements for Part D sponsors to put in place reasonable guidelines for ongoing identification of Part D enrollees likely to benefit during the plan year. We would assess the targeted outreach requirements for the POS notification threshold and prior to plan year criteria on an annual basis and make modifications, if needed, based on review and analysis of Medicare Prescription Payment Plan data and other Medicare data, including: (1) analysis of program participation levels; (2) analysis of the proportion of participants who met our definition of “likely to benefit,” as established in the final part one guidance and described in this section, based on actual OOP costs incurred and program payments; (3) analysis of the proportion of Part D enrollees who would have met our definition of “likely to benefit” if they had elected into the Medicare Prescription Payment Plan but were not identified based on current targeted outreach criteria; (4) program operations; and (5) level of burden on pharmacies and Part D sponsors. After the assessment and review of the aforementioned factors, CMS would then publish the specific targeted outreach parameters for the upcoming plan year. In this proposed rule, CMS is not codifying an approach to modifying targeted outreach criteria for future years of the program; however, we seek comment on the approach described here and will use feedback from interested parties to support future policy development.

In addition to the agency's authorities with respect to the Medicare Prescription Payment Plan under section 11202 of the IRA, CMS also has authority under section 1860D-12(b)(3)(D) of the Act to impose additional contractual terms and conditions on Part D plan sponsors that are necessary and appropriate. Consistent with our authority under section 11202 of the IRA and under section 1860D-12(b)(3)(D) of the Act, in this proposed rule, we propose to codify the targeted outreach framework and thresholds established in the final part one and final part two guidance at § 423.137(e).

Specifically, we propose to codify the likely to benefit criteria at paragraph (e)(1), the requirements for the pharmacy POS notification at paragraph (e)(2), and the requirements for Part D sponsor direct outreach to identified likely to benefit enrollees prior to and during the plan year at paragraph (e)(3). Additionally, we propose to codify the targeted outreach notification and education requirements at paragraph (e)(4) and to codify targeted outreach exclusions at paragraph (e)(5). Finally, we propose to add the “Medicare Prescription Payment Plan Likely to Benefit Notice” as a required standardized communication material for Part D sponsors at § 423.2267(e)(47).

As stated in the final part two guidance for 2025, the thresholds published by CMS are a minimum requirement. Part D sponsors may develop supplemental strategies for identification of additional Part D enrollees likely to benefit prior to and during the plan year. If supplemental strategies are implemented, then Part D sponsors must apply any additional identification criteria to every enrollee of each plan equally, which we propose to codify at paragraph (e)(1)(ii).

We are not scoring any aspects of this provision related to the development and distribution of the “Medicare Prescription Payment Plan Likely to Benefit Notice” in the Collection of Information section of this rule since we believe all information impacts of those provisions have already been accounted for under OMB control number 0938-1475.

(e) Termination of Election, Reinstatement, and Preclusion

Section 1860D-2(b)(2)(E)(v)(IV)(aa) of the Act requires a Part D sponsor to terminate an individual's Medicare Prescription Payment Plan participation if that individual fails to pay their monthly billed amount. In addition, under section 1860D-2(b)(2)(E)(v)(IV)(bb) of the Act, Part D sponsors may preclude an individual from opting into the Medicare Prescription Payment Plan in a subsequent year if the individual fails to pay the amount billed for a month as required under the program.

In the final part one guidance, we established standards for termination of election, reinstatement, and preclusion in 2025 consistent with the statutory requirements. CMS established procedures for voluntary termination of election, under which Part D sponsors are required to have a process to allow a participant who has opted into the

Medicare Prescription Payment Plan to opt out during the plan year. In the final part two guidance, we stated that the Part D sponsor must process the participant's voluntary termination request and send the individual a notification confirming the termination within 10 calendar days of receipt of the request but did not specify the effective date of termination. For 2026 and subsequent years, we propose to maintain the requirement for Part D sponsors to send the notice of voluntary termination within 10 calendar days of receipt but require that the effective date of termination must be within 24 hours of receipt of the voluntary termination request. We believe this aligns with the required timeframe for processing election requests during the plan year and ensures timely response to opt out requests during the plan year. We seek comment on this proposal.

When a participant opts out of the Medicare Prescription Payment Plan, a Part D sponsor must provide the individual with a notice of termination after the individual notifies the Part D sponsor that they intend to opt out under the Part D sponsor's established process. The notice of voluntary termination must include—

• Pertinent dates, including the date on which the individual's participation in the program ends;

• An explanation that the individual is receiving the notice either because they requested a voluntary termination or because they changed Part D plans;

• A statement clarifying that the notice only applies to participation in the Medicare Prescription Payment Plan, and that the individual's Part D drug coverage will not be impacted;

• A statement clarifying that the individual will continue to be billed monthly or can choose to pay the amount owed all at once, and that the individual will not pay interest or fees on the amount owed;

• A statement clarifying that the individual can join the Medicare Prescription Payment Plan again and instructions for how to do so, which may differ depending on whether the voluntary termination was requested by the individual or if it was because the individual changed Part D plans; and

• An overview of other Medicare programs that can help lower costs, including Extra Help, the Medicare Savings Program, the State Pharmaceutical Assistance Program, and a Manufacturer's Pharmaceutical Assistance Program, and how to learn more about these programs.

The Part D sponsor must also offer the participant the option to repay the full outstanding amount in a lump sum. However, the Part D sponsor is prohibited from requiring full immediate repayment from a participant who has been terminated from the Medicare Prescription Payment Plan. If the participant opts not to repay the full outstanding amount in a lump sum, the sponsor must continue to bill amounts owed under the program in monthly amounts not to exceed the maximum monthly cap according to the statutory formula for the duration of the plan year after an individual has been terminated. In this rule, for 2026 and subsequent years, we propose to codify these requirements at § 423.137(f)(2)(i) and to add the voluntary termination notice as a required material and content for Part D sponsors at § 423.2267(e)(50).

CMS issued model material that Part D enrollees can use to fulfill the voluntary termination notice requirement through the Medicare Advantage and Prescription Drug Programs: Part C and Part D Medicare Prescription Payment Plan Model Documents (CMS-10882; OMB 0938-1475) ICR package. As established in § 423.2267(c), model materials and content are required materials and content created by CMS as an example of how to convey beneficiary information. If Part D sponsors choose to not use the CMS-developed model notice and develop their own voluntary termination notice, they must include all of the required elements outlined at § 423.137(f)(2)(i)(A)(2)(ii). These notification and content requirements are consistent with the requirements outlined in the final part two guidance for 2025.

We also established standards for involuntary termination in 2025, including requirements for the provision of a grace period of at least two months when an individual has failed to pay the billed amount by the payment due date. If an individual fails to pay the billed amount within 15 calendar days of the payment due date, the Part D sponsor must send the individual an initial notice of failure to pay. The notice of failure to pay must include—

• Pertinent dates and key pieces of information, including the date the missed monthly payment was due, the amount the individual must pay to remain in the program, and the date by when payment must be received, which is the date of the end of the grace period;

• A statement clarifying that the notice only applies to participation in the Medicare Prescription Payment Plan, and that the individual's Part D drug coverage will not be impacted;

• Instructions for how to submit payment;

• Information about procedures for involuntary termination due to failure to pay, including the date on which the participant would be removed if payment is not received, and how to submit an inquiry or file a grievance;

• A statement on how individuals should pay their Part D plan premium first if they cannot afford both their premium and their program balance; and

If the individual fails to pay the amount due by the end of the grace period, the Part D sponsor must send the individual an involuntary termination notice explaining that the individual has been terminated from the Medicare Prescription Payment Plan. The involuntary termination notice must be sent within 3 business days following the last day of the end of the grace period, and must include the following:

• Pertinent dates, including the date the individual was originally notified of the missed monthly payment and the due date for that payment, as well as the date on which the individual's participation in the program ends, which should be the same date as the notice;

• A statement clarifying that the notice only applies to participation in the Medicare Prescription Payment Plan, and that the individual's Part D drug coverage will not be impacted;

• Instructions for how to submit payment and the amount owed;

• How to submit an inquiry or file a grievance;

• A statement clarifying that the individual can join the Medicare Prescription Payment Plan again if they pay the amount owed; and

If either the notice of failure to pay or notice of involuntary termination is returned to the Part D sponsor as undeliverable, the Part D sponsor must immediately implement its existing procedure for researching a potential change of address. In this rule, for 2026

and subsequent years, we propose to codify these notice requirement standards at § 423.137(f)(2)(ii) and to add the notice of failure to pay and notice of involuntary termination as required model materials and content for Part D sponsors at § 423.2267(e)(48) and (e)(49).

CMS issued model materials that Part D enrollees can use to fulfill the failure to pay and involuntary termination notice requirements through the Medicare Advantage and Prescription Drug Programs: Part C and Part D Medicare Prescription Payment Plan Model Documents (CMS-10882; OMB 0938-1475) ICR package. As established in § 423.2267(c), model materials and content are required materials and content created by CMS as an example of how to convey beneficiary information. If Part D sponsors choose to not use the CMS-developed models and develop their own notice of failure to pay or involuntary termination notice, they must include all of the required elements for each notice outlined at § 423.137(f)(2)(ii)(C)(

) and (D)(

), respectively. These notification and content requirements are consistent with the requirements outlined in the final part two guidance for 2025.

We also set forth requirements for 2025 related to the grace period and reinstatement. When a program participant fails to pay a program bill, the Part D sponsor must provide individuals with a grace period of at least two months upon notifying the individual of the initial missed payment.

We propose to make certain modifications to the timing requirements for the grace period and initial notice of nonpayment established in the final part one guidance. Specifically, in the final part one guidance, we stated that the grace period must begin on the first day of the month for which the balance is unpaid or the first day of the month following the date on which the payment is requested, whichever is later. In this proposed rule, we propose to change the date on which the grace period must begin to the first day of the month following the date on which the initial notice is sent. We believe this would simplify the timing requirements for the notice of nonpayment and the required grace period. We seek comment on whether to adopt this change or continue with the approach described in the final part one guidance.

In the final part one guidance for 2025, we also stated that if a participant fails to pay their monthly billed amount with fewer than two full calendar months remaining in the calendar year, the grace period must carry over into the next calendar year. If the program participant is within their grace period from the prior year, the Part D sponsor must allow the participant to opt into the program for the next year, but if the participant fails to pay the amount due from the prior year during the required grace period, the Part D sponsor may terminate the individual's participation in the program in the new year.

A participant must be allowed to pay the overdue balance in full during the grace period to remain in the program. Additionally, Part D sponsors must reinstate an individual who has been terminated from the Medicare Prescription Payment Plan within a reasonable timeframe if the individual demonstrates good cause for failure to pay the program billed amount within the grace period and pays all overdue amounts billed. In response to public comments received on the final part one guidance, we clarified that CMS was adopting the same meaning of “good cause” outlined in section 60.2.4 of the Medicare Prescription Drug Benefit Manual, Chapter 3—Eligibility, Enrollment and Disenrollment that applies to reinstatements when an enrollee fails to pay their Part D premiums. CMS also described specific circumstances that constitute good cause, including—

• A serious illness, institutionalization and/or hospitalization of the program participant or their authorized representative (that is, the individual responsible for the participant's financial affairs), that lasted for a significant portion of the grace period for Medicare Prescription Payment Plan payment;

• Prolonged illness that is not chronic in nature, a serious (unexpected) complication to a chronic condition or rapid deterioration of the health of the participant, a spouse, another person living in the same household, a person providing caregiver services to the participant, or the participant's authorized representative (that is, the individual responsible for the participant's financial affairs) that occurs during the grace period for the Medicare Prescription Payment Plan payment;

• Recent death of a spouse, immediate family member, person living in the same household, or person providing caregiver services to the participant, or the participant's authorized representative (that is, the individual responsible for the participant's financial affairs);

• Home was severely damaged by a fire, natural disaster or other unexpected event, such that the participant or the participant's authorized representative was prevented from making arrangement for payment during the grace period for the Medicare Prescription Payment Plan;

• An extreme weather-related, public safety or other unforeseen event declared as a Federal or state level of emergency prevented premium payment at any point during the Medicare Prescription Payment Plan grace period. For example, the participant's bank or U.S. Post Office closes for a significant portion of the grace period; or

• For Part D plan disenrollments effectuated by CMS for failure to pay Part D Income Related Monthly Adjustment Amount (IRMAA), Federal government error (that is, CMS, SSA or the Railroad Retirement Board (RRB)) caused the Medicare Prescription Payment Plan payment to be incorrect or late, and the participant was unaware of the error or unable to take action prior to the disenrollment effective date.

In addition, we stated that there may be circumstances other than those listed which meet the definition of good cause, provided these circumstances meet the standard of being outside of the participant's control or are unexpected such that the participant could not have reasonably foreseen their occurrence, and the

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