Happy Holidays? CMS Contract Year 2027 Medicare Advantage And Part D Proposed Rule Has Winners And Losers

On November 25, 2025, CMS released the Contract Year ("CY") 2027 Medicare Advantage ("MA") and Part D proposed rule (the "Proposed Rule"). The Proposed Rule would make significant changes to the MA and Part D programs, including revising measures under the Star Ratings program, creating a new special enrollment period for enrollees impacted by a provider termination, expanding access to risk adjustment data, relaxing requirements for marketing and communications materials, shortening certain record retention requirements, and easing certain requirements for offering dual eligible special needs plans ("D-SNPs"). In addition, as previewed in the CY2026 final rule and CMS memoranda to plans, the Proposed Rule would rescind several regulatory requirements promulgated under the prior administration. The Proposed Rule also codifies existing CMS guidance in several areas including Part D Redesign. Finally, the Proposed Rule includes several requests for information that are focused on "approaches and opportunities to streamline regulations and reduce administrative burdens on providers, suppliers, beneficiaries, and other interested parties participating in the Medicare program."

Anticipating legal challenges to the Proposed Rule's changes, and in a move that itself may likely be subject to challenge, CMS asserts that any provision of its final regulation that is ultimately held unlawful or otherwise invalidated shall be severable so as not to impact the remaining regulations.

I. Implementation of Certain Provisions of the Inflation Reduction Act of 2022 ("IRA") and the Substance Use Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act of 2018 ("SUPPORT' Act")

IRA – Part D Redesign

The IRA made significant changes to the Part D benefit design and the payment obligations of enrollees, Part D plan sponsors, manufacturers, and CMS.¹ CMS was required by the IRA to implement much of the new law's changes for 2024, 2025 and 2026 through program guidance. The Proposed Rule would codify at §§ 423.100 and 423.104 the IRA's changes to the Part D deductible, initial coverage limit, the coverage gap, the annual out-of-pocket threshold, and alternative prescription drug coverage options.

The IRA eliminated the Part D "coverage gap" phase as of January 1, 2025, simplifying the benefit to three phases (deductible, initial coverage, catastrophic). As part of this change, all existing Coverage Gap Discount Program agreements with drug manufacturers terminated effective that date, ending manufacturer discount obligations for drugs dispensed on or after January 1, 2025. The Proposed Rule clarifies the process for sunsetting the Coverage Gap Discount Program and specifies how remaining obligations for drugs dispensed prior to January 1, 2025, will be managed (including how applicable discounts for those drugs must still be honored, the continued applicability of program requirements to claims prior to the cutoff, and explicit regulatory timelines and procedures for final reconciliation and agreement closure).

The IRA established a reduced annual out-of-pocket maximum for Part D enrollees, set at $2,000 for 2025 and indexed in future years. Once this threshold is reached, an enrollee pays zero cost-sharing for any covered Part D drug. This change therefore eliminates enrollee costs in the catastrophic phase. The Proposed Rule would implement the statutory requirements, but also provides the specific regulatory framework for these benefit changes, including how and when the cap is updated each year (for example, the Proposed Rule details the precise inflation-based adjustment formulas, the annual timeline for setting the new cap, the rounding methodology, and the associated processes to notify plans and beneficiaries of updated cost limits).

The Coverage Gap Discount Program was replaced by a new Manufacturer Discount Program, under which drug manufacturers are required to provide point-of-sale discounts on applicable drugs during both the initial and catastrophic coverage phases of the Part D benefit once an enrollee meets their deductible. The Proposed Rule would codify this statutory regime, but would also establish terms for manufacturer participation, processes for invoicing, payment, and dispute resolution, and phase-in provisions for certain manufacturers (including how manufacturers must execute and maintain discount agreements, mandatory data submission requirements, deadlines for invoicing and payment cycles, dispute escalation protocols involving an independent review entity, and specific step-down discount schedules for "specified" and "specified small" manufacturers during a multi-year transition period).

The Proposed Rule would establish detailed procedures for how manufacturer agreements under the Manufacturer Discount Program are executed, become effective, renewed, transferred, and terminated, including specific processes for manufacturer acquisitions and bankruptcy. In addition, the Proposed Rule would clarify what constitutes participation in the Manufacturer Discount Program and set out operational requirements for manufacturer reporting, invoicing, and compliance. These clarifications represent substantive updates that build on existing guidance, addressing operational gaps and providing greater transparency and predictability for manufacturers since the passage of the IRA.

The Proposed Rule would revise the methodologies for calculating true out-of-pocket ("TrOOP") costs under Part D, including what supplemental payments and coverage count toward TrOOP in different plan scenarios. CMS also proposes revisions to its specialty tier drug placement and cost-sharing policies, further detailing how drugs are classified as "specialty tier" (including updated thresholds for what constitutes a high-cost drug and rules for adjusting the cost threshold based on annual changes, as well as clarifying the process CMS will use to determine the percentage of Part D drugs eligible for specialty tier status each year). Updates to the Part D reinsurance payment methodologies are proposed to align with the revised benefit phases, such as lowering the government's share of catastrophic costs and differentiating reinsurance rates between applicable and non-applicable drugs, as well as for selected drugs subject to Medicare price negotiation. Additionally, the Proposed Rule introduces new procedural requirements for the selected drug subsidy,² specifying how plan sponsors must account for expected subsidy payments in their annual bids and how reconciliation of those payments will occur after actual utilization is known. Collectively, these are substantive policy and operational changes that will affect not only how plans calculate enrollee cost-sharing and plan liability, but also how plans operationalize their relationships and data exchanges with CMS and manufacturers including processes for invoicing, reporting, and dispute resolution.

SUPPORT Act – Opioid-Related Provisions

The SUPPORT Act requires CMS to share information about "persistent outlier prescribers" with Part D plans on at least an annual basis. To implement this requirement, CMS proposes new procedures for identifying opioid prescribers whose prescribing patterns constitute statistical outliers compared to their peers. Under the proposal, an outlier prescriber of opioids would be defined as a prescriber whose opioid prescribing rates are statistical outliers relative to other prescribers within the same specialty and geographic area (state). A persistent outlier prescriber of opioids would be defined as a prescriber who is identified by CMS as an outlier in three consecutive outlier prescriber notifications using the same methodology. CMS would use these definitions to establish objective thresholds for reporting and would communicate information about persistent outlier prescribers to Part D sponsors to facilitate targeted plan compliance and oversight.

II. Enhancements to the Medicare Advantage and Medicare Prescription Drug Benefit Programs

Proposal to Revise List of Non-Allowable Special Supplemental Benefits for the Chronically III ("SSBCI")

In the CY2026 MA final rule, CMS adopted a non-exhaustive list of items and services that may not be offered as SSBCI because they do not meet the statutory standard of having a reasonable expectation of improving or maintaining the health or overall function of the enrollee. The non-allowable SSBCI list is codified at 42 CFR 422.102(f)(1)(iii) and includes "cannabis products."

The Proposed Rule would amend the non-allowable SSBCI list at 42 CFR 422.102(f)(1)(iii)(G), to make clear that the prohibition on offering cannabis products as SSBCI applies to "[c]annabis products that are illegal under applicable State or Federal law, including the Federal Food, Drug, and Cosmetic Act." According to CMS, the proposed change would allow MA organizations to offer foods containing specific hemp seed-derived food ingredients that have been "generally recognized as safe" by the Food and Drug Administration, i.e., hulled hemp seed, hemp seed protein powder, and hemp seed oil, as SSBCI to qualifying enrollees, to the extent otherwise appropriate as SSBCI.

CMS notes that any SSBCI offering that includes one of these three hemp-derived ingredients would be subject to all other applicable SSBCI requirements, including the bibliography requirements at 42 CFR 422.102(f)(3) to demonstrate through relevant acceptable evidence that the item has a reasonable expectation of improving or maintaining the health or overall function of a chronically ill enrollee.

III. Strengthening Current Medicare Advantage and Medicare Prescription Drug Benefit Program Policies (Operational Changes)

CMS proposes substantial modifications to both MA and Part D requirements that, if finalized, will likely require significant financial and operational adjustments for MA and Part D plans.

Special Enrollment Period ("SEP") for Provider Terminations

CMS proposes revisions to the current process that allows MA enrollees to change MA plans when one or more of their contracted providers leave the plan's network. Under current rules, when a "significant" change occurs in a plan's provider network, MA enrollees may request to enroll in another plan using an SEP or disenroll from the plan and return to Original Medicare. Enrollees become eligible for this SEP if, within the prior three months, they are assigned to, currently receiving care from, or have recently received care from a provider or facility that is being terminated from the plan's network. Unlike routine, smaller‑scale network changes that occur during the year, CMS requires MA organizations to notify enrollees when a provider network change results from the termination (whether for cause or without cause) of a contract with a provider organization, and to inform enrollees of their eligibility for a SEP due to a Significant Change in Provider Network

CMS proposes the following revisions to the SEP for provider terminations:

• Rename the "SEP for Significant Change in Provider Network" to "SEP for Provider Terminations."
• Revise the SEP eligibility criteria so that a "significant" provider network change is no longer required to trigger the SEP.
• Require plan sponsors to include the following information in provider termination notices to enrollees:
  • A description of the Annual Coordinated Election Period and the MA Open Enrollment Period,
  • A statement that the affected enrollee is eligible for a SEP, and include the SEP's start and end dates,
  • Information about Medigap guaranteed issue rights, and
  • A statement advising individuals with employer or union coverage to contact their benefits administrator before leaving their current MA plan in order to understand the impact of changing plans.

Coordination of Election Mechanisms for MA and Part D

CMS proposes additional rules establishing greater CMS oversight on the use of SEPs. With limited exceptions, MA enrollees may submit election requests to enroll in or disenroll from an MA plan, and current regulations require MA organizations to maintain effective systems for receiving, controlling, and processing these requests. Elections may be made using forms provided by the MA organization or other CMS‑approved election mechanisms, and, once an enrollee's eligibility to elect a new plan or disenroll is established, the election request is transmitted to the plan for processing. The Proposed Rule would codify these existing election policies.

CMS also proposes the following regulatory changes:

• For elections made using specified SEPs, an enrollee must either obtain CMS approval for the SEP through a CMS‑operated election mechanism or use another CMS‑operated method.
• For specified SEPs, plans must state that elections may require CMS approval through a CMS-operated election mechanism or through the enrollee's receipt of notice explaining eligibility for the SEP and election instructions.

These changes would apply to SEPs for:

• Individuals who disenroll in connection with a CMS sanction,
• Individuals who were not adequately informed of a loss of creditable prescription drug coverage,
• Contract violations, and
• Other exceptional circumstances.

Agents and brokers may continue to assist beneficiaries, but for these specific SEPs, CMS—not the plans—must determine SEP eligibility.

Use and Release of Risk Adjustment Data

CMS explains that current limits on the use and release of risk adjustment data may be unnecessary, burdensome, and overly restrictive for CMS as well as for private and public stakeholders that request such data. Instead CMS aims to align with the goals of Executive Order 14243, "Stopping Waste, Fraud, and Abuse by Eliminating Information Silos," by increasing access to risk adjustment data, and reducing the regulatory burden and resources expended when requesting risk adjustment data. As a result, CMS proposes removal of limitations on the use and release of risk adjustment data. Specifically, the Proposed Rule would eliminate:

• The list of nine permitted/specified uses of risk adjustment data codified at § 422.310(f)(1),
• The list of entities permitted to access risk adjustment data codified at § 422.310(f)(2),
• Timing requirements for the release of risk adjustment data established under § 422.310(f)(3), and
• The list of exceptions to the release of pre‑reconciled risk adjustment data under § 422.310(f)(3).

Although CMS intends to rescind certain release restrictions under §§ 422.310(f)(2) and (3), CMS would retain existing requirements that limit disclosure to the minimum necessary data and prohibit the release of dollar amounts at the individual encounter level. Under the Proposed Rule, CMS would only release aggregated dollar amounts reported for an associated encounter.

Strengthened Documentation Standards for Part D Plan Sponsors

CMS proposes to establish detailed, standardized documentation requirements for coverage determinations and point‑of‑sale ("POS") claim adjudications used to determine Part D coverage. The proposed changes aim to support CMS audit functions and ensure CMS's ability to verify whether a drug was accurately paid under Medicare Part D.

CMS proposes the following changes to § 423.505:

• Authorize CMS to (1) review original‑format documentation or information from all written, electronic, and verbal communications among pharmacists, prescribers, enrollees, and other stakeholders related to a coverage determination, or (2) allow a point-of-sale claim adjudication that determines a drug's coverage under Part D.
• Require documentation of: (1) the date and time a coverage determination request or POS claim adjudication request is received; (2) the identity of the individual submitting the request; (3) the name and title (if applicable) of the individual the Part D sponsor contacts to verify the request; (4) the questions, responses, and final decision related to the request; (5) diagnosis code for a coverage determination or point-of-sale claim adjudication supporting a medically accepted indication; and (6) any additional information the Part D sponsor relies on in making the final coverage determination or POS claim adjudication.
• Add language referencing the requirement to make available the records that contain information used for coverage determinations or POS claim adjudications

Updating Third-Party Marketing Organizations ("TPMO") Disclaimer Requirements

CMS proposes to amend the disclaimer requirements for TPMOs at § 422.2267(e)(41) and 423.2267(e)(41). First, CMS would require the disclaimer to be delivered before any discussion of benefits begins, rather than within the first minute of a call. Second, any TPMO that markets plans on behalf of more than one MA organization or Part D sponsor would be required to electronically share the disclaimer when communicating via email, online chat, or other electronic means; to prominently display the disclaimer on TPMO websites; and to include the disclaimer in all marketing materials. CMS also proposes removal of State Health Insurance Assistance Programs as a referenced source of beneficiary information within the disclaimer text.

Removing Rules on Time and Manner of Beneficiary Outreach

CMS proposes a deregulatory approach to the timing and manner of beneficiary outreach and introduces three principal changes:

• Permit a marketing event to follow an educational event at the same location without a 12‑hour waiting period.
• Permit a personal marketing appointment to occur at any time after the completion of a Scope of Appointment ("SOA") form.
• Allow plans and agents/brokers to collect SOA forms from beneficiaries at educational events.

Each of the principal changes are described below.

The Proposed Rule would eliminate the required 12-hour delay period between a marketing event and an educational event. The proposal would not only reduce the timeframe between an educational and a marketing event, but would also allow both events to occur at the same location. In place of a 12-hour delay, CMS would require plans and agents/brokers to notify beneficiaries of the end of an educational event and the start of a marketing event. Notice to beneficiaries distinguishing such events may occur, for example, through a verbal announcement or a clear and distinct notation on a written schedule of events. The Proposed Rule would also require plans and agents/brokers to give beneficiaries "sufficient opportunity to leave," such as a bathroom break, prior to the start of a marketing event. These changes are intended to reduce burden and cost for plans and agents/brokers for event planning, and ease the burden on beneficiaries attending these informational events.

CMS currently requires an advance agreement, a SOA form, to be executed by beneficiaries prior to meeting with a plan or agent/broker to ensure that prospective enrollees understand the types of plans that will be discussed. A marketing appointment cannot take place until 48 hours have expired since the beneficiary executed SOA. This 48-hour waiting period does not apply to (1) an SOA is completed during the last four days of a valid election period for the beneficiary, or (2) unscheduled in-person meetings, such as walk-ins, initiated by the beneficiary. The Proposed Rule would eliminate the 48-hour waiting period between SOA completion and a personal marketing appointment and the two exceptions described above. The Proposed Rule would not eliminate the advance agreement requirement; only the 48-hour timeframe thus allowing beneficiaries to complete an SOA form immediately prior to a personal marketing appointment.

Additionally, CMS proposes broadening the definition of a "personal marketing appointment." Existing marketing regulations define a "personal marketing appointment" as is an appointment tailored to an individual or small group, irrespective of the location of such group. CMS aims to expand the meaning of "personal marketing appointment" to include unrelated beneficiaries in a home, public space, or virtually, for example, to minimize the need for separate SOAs for each individual.

CMS proposes to rescind the restriction that prevents plans and agents/brokers from providing and receiving SOA forms from beneficiaries at educational events. In the Proposed Rule, CMS takes the position that a SOA form does not constitute a sales or marketing activity, and is instead an agreement regarding the scope of products to be discussed prior to a personal marketing appointment.

Relaxing the Restrictions on Language in Advertising

Under existing Medicare marketing requirements, MA organizations and Part D sponsors are prohibited from making unsubstantiated statements and from using superlatives in marketing or communications materials unless they can provide supporting documentation or data. CMS now believes that this restriction on the use of superlatives is unnecessary, and notes that MA organizations and Part D sponsors are already broadly prohibited from making misleading, confusing or inaccurate claims. The Proposed Rule would eliminate both of these prohibitions.

MA organizations and Part D sponsors would remain obligated to ensure that all statements in marketing and communications materials are not misleading, confusing, or materially inaccurate. In addition, CMS would continue to review marketing and communications materials and may request data, reports, or other documentation to substantiate an MA organization's or Part D sponsor's claims

TPMO Oversight: Revising the Record Retention Requirements for Marketing and Sales Call Recordings

Currently, MA organizations and Part D sponsors are required to retain call recordings for 10 years and to provide CMS access to such records for the duration of that period. Under the Proposed Rule, only recordings of marketing and sales calls would need to be retained, and only for six years. CMS believes this shorter timeframe will remain sufficient for oversight of agent and broker conduct while reducing administrative burden.

CMS is also considering other alternatives to the record retention requirement, including:

• Reducing the 10-year retention requirement to three years as an alternative to the proposed six-year record retention proposal;
• Determining whether record retention of audio recordings of marketing and sales portion of calls is necessary, and whether the ability to review agent and broker behavior can be achieved through other less costly means;
• Permitting written transcripts of marketing and sales portions of calls in place of audio recordings of such calls; and
• Determining whether record maintenance (audio or otherwise) of marketing and sales portion of calls is necessary at all.

Rescinding the Requirement for the Notice of Availability

CMS proposes to eliminate the requirement to provide a Notice of Availability ("NOA") of language assistance services and auxiliary aids and services. CMS explains that the NOA requirement duplicates obligations enforced by the Department of Health and Human Services' Office for Civil Rights ("OCR"); accordingly, CMS intends to defer to OCR for oversight of language assistance and auxiliary aids and services notifications.

Under the current NOA requirement, MA organizations and Part D sponsors must include materials and content in English and in at least the 15 most commonly languages spoken by individuals with limited English proficiency in the relevant State or States associated with the plan's service area. Plans must also provide alternative formats for individuals with disabilities who require auxiliary aids and services to ensure effective communication. Aligning with Executive Order 14224, "Designating English as the Official Language of the United States," CMS proposes to eliminate the NOA requirement noting that the removal will minimize confusion with OCR regulatory oversight and limit administrative burdens for MA organizations and Part D sponsors.

Appeals Process for Part D Program Integrity Prescription Drug Event Record Review Audits

Under the Proposed Rule, CMS would establish a new appeals process for Part D Program Integrity Prescription Drug Event Record Review Audits. CMS conducts Part D prescription drug event ("PDE") record review audits to identify improper PDE records paid under the Part D. Through its current PDE record review audits, CMS notifies Part D plan sponsors to submit PDE deletion or adjust records for the associated records, if CMS determines that Part D rules and regulations have not been met and a PDE is improper. CMS aims to expand Part D plan sponsors' opportunity to appeal such determinations and demonstrate that a PDE record was appropriate for coverage under the Part D program

CMS would amend the existing Recovery Audit Contractor ("RAC") appeals framework to encompass Part D program integrity PDE record review audits and revise the appeals procedures. Under the proposed new process, Part D sponsors would receive an audit "close‑out letter" that includes:

• An explanation of the drug, item, or service under audit;
• A high-level overview of improper and proper PDE record counts;
• An attached PDE level record file denoting improper and proper PDE records;
• Requirements for the submission of deletion records or adjustment records for the PDEs determined to be improper; and
• Instructions on how the Part D plan sponsor may appeal the findings.

Additional proposed changes include:

• Clarifying that Part D sponsors may appeal program integrity PDE record review audit determinations.
• Identifying appealable issues, including factual or data errors;
• Identifying issues that are ineligible for the appeals process, including failure to submit appeal documentation;
• Replacing the term "demand letter" with "close‑out letter;"
• Establishing timeframes for the independent reviewer's decisions and for communications to plan sponsors.

Prescription Drug Event Submission Timeliness Requirements

Under the current General PDE Submission Timeliness Requirements, Part D sponsors submit PDE records to CMS through the Drug Data Processing System, which validates data for accuracy, missing or invalid information, beneficiary eligibility and cost and payment calculation. If PDE data is rejected as a result of this review, Part D sponsors must resubmit corrected PDE records to CMS within 90 calendar days of receiving the rejection.

Under the Proposed Rule, Part D sponsors would be required to submit a PDE record within 90 calendar days from receipt of the rejection and to continue to submit a PDE record at least once every 90 calendar days thereafter until a revised PDE record is accepted. If a claim associated with a rejected PDE is reversed or deleted, or otherwise found to be submitted in error, then the Part D plan sponsor would not be required to submit revised PDE records.

IV. Medicare Advantage/Part C and Part D Prescription Drug Plan Quality Rating System

(Star Ratings)

Among the most significant changes in the Proposed Rule and likely to be challenged in court if finalized, are those related to the Star Ratings program.

Removal of Measures

CMS proposes to remove 12 Star Ratings measures. The rationales for removal vary with each measure, but generally relate to (1) CMS's desire to simplify and refocus the measure set on clinical care, outcomes and patient experience of care measures where plan performance has not already topped out and where there is more variation in performance across contracts; (2) reducing the number of measures to increase focus on the remaining measures; and (3) responding to recommendations from MedPAC and others for fewer measures.

The measures³ proposed for removal are:

• Plan Makes Timely Decisions about Appeals (Part C) to be removed for the 2029 Star Rating year
• Reviewing Appeals Decisions (Part C) to be removed for the 2029 Star Rating year
• Special Needs Plan (SNP) Care Management* (Part C) to be removed for the 2029 Star Rating year
• Call Center- Foreign Language Interpreter and TTY Availability (Part C) to be removed for the 2028 Star Rating year
• Call Center – Foreign Language interpreter and TTY Availability (Part D) to be removed for the 2028 Star Rating year
• Complaints about the Health/Drug Plan (Parts C and D) to be removed for the 2029 Star Rating year
• Medicare Plan Finder Price Accuracy (Part D) to be removed for the 2029 Star Rating year
• Diabetes Care – Eye Exam* (Part C) to be removed for the 2029 Star Rating year
• Statin Therapy for Patients with Cardiovascular Disease (Part C) to be removed for the 2028 Star Rating year
• Members Choosing to Leave the Plan (Parts C and D) to be removed for the 2029 Star Rating year
• Customer Service* (Part C) to be removed for the 2029 Star Rating year
• Rating of Health Care Quality* (Part C) to be removed for the 2029 Star Rating year

CMS expects the removal of the above measures would result in an overall decrease in Star Ratings as performance on these measures is very high.

Addition of Measure

CMS proposes to add the Part C Depression Screening and Follow-up ("DSF") measure to the 2029 Star Ratings (measurement year 2027). DSF measures the percentage of eligible MA plan members who were screened for clinical depression using a standardized instrument and, if screened positive, received follow-up care within 30 days. CMS notes that, although this is a process measure, health outcomes can be improved by identifying individuals with depression and providing treatment. According to CMS, adding this measure will fill an important gap as there are currently no measures specific to behavioral health care in the Part C and D Star Ratings. Since this is a new measure, CMS will report the measure on the display page for at least two years starting with the 2026 Star Ratings.

Health Equity Index Reward

In the CY2024 final rule, CMS finalized the addition beginning with the 2027 Star Ratings of the Health Equity Index ("HEI") Reward, which was intended to further incentivize Part C and Part D contracts to focus on improving care for enrollees who are dually eligible for Medicare and Medicaid, receive a low-income subsidy, or are disabled. At the same time, CMS finalized the removal of the historical reward factor, which incentivizes consistent high performance across Star Rating measures.

CMS proposes to not implement the HEI Reward and to retain the historical reward factor to incentivize improvement efforts on clinical, outcomes and patient experience, rather than incentivize improvement among certain populations. Acknowledging that some plan may have already expended resources focused on performance improvements for the populations targeted by the HEI Reward, CMS noted that performance improvement among those targeted populations will still contribute to higher Star Ratings.

Impact of Proposed Changes

CMS believes that the overall impact of all of its Star Ratings changes will be 62% of contracts would see no change in their overall rating, 13% of contracts would see a half star increase in their overall rating; 25% would see a half star decrease; and the overall rating for one contract would decrease by one star. CMS also estimates that five percent of contracts would gain quality bonus payments ("QBPs"), but four percent of contracts would lose QBPs.

V. Improvements for Special Needs Plans

CMS proposes several changes to the regulations applicable to special needs plans ("SNPs") and signals that further changes are likely, based on a request for information ("RFI") that discusses CMS's analysis of data regarding SNP enrollment.

Model of Care (MOC) Off-cycle Submission Window

CMS proposes a technical change to create two model of care ("MOC") submission windows for SNPs to submit off-cycle MOC changes to CMS.

Beginning with CY2027, CMS would move the initial and renewal MOC submission deadline from mid-February (aligning with the MA contract application deadline) to the Friday before the first Monday of June. The proposed technical change is intended to accommodate the new MOC submission deadline and ensuing operational considerations for both CMS and the National Committee for Quality Assurance ("NCQA"). If finalized, institutional special needs plans ("I-SNPs") and D-SNPs would have two separate windows of opportunity to submit off-cycle MOC changes: the first window from January 1 to March 31, and the second from October 1 to December 31.

Passive Enrollment by CMS

CMS proposes several changes to its passive enrollment regulations, which are intended to reduce disruptions in coverage for dually eligibles individuals who are enrolled in integrated D-SNPs. Integrated D-SNPs include applicable integrated plans ("AIPs"), which include fully integrated dual eligible special needs plans ("FIDE SNPs"), many highly integrated dual eligible special needs plans ("HIDE SNPs"), and a small subset of coordination-only D-SNPs.

Under current regulations at 42 CFR 422.60(g), CMS may implement passive enrollment for full-benefit dually eligible enrollees currently enrolled in a non-renewing or terminating integrated D-SNP into another, comparable integrated D-SNP under certain circumstances including when CMS determines, after consulting with the applicable state Medicaid agency , that the passive enrollment will promote continuity of care and integrated care. CMS notes that, in multiple situations where CMS has attempted to implement passive enrollment, CMS has encountered difficulties with operationalizing passive enrollment consistent with the current regulations, including the requirement that the receiving integrated D-SNP have substantially similar provider and facility networks and Medicare- and Medicaid-covered benefits to those of the relinquishing integrated D-SNP. In order to operationalize passive enrollment, CMS proposes several changes to § 422.60(g):

• Remove the requirement that the receiving integrated D-SNP have substantially similar networks to the relinquishing integrated D-SNP, and to instead require the receiving integrated D-SNP to provide continuity of care for all incoming enrollees for a minimum of 120 days;
• Require that a receiving integrated D-SNP must have the care coordinator staffing capacity to receive dually eligible enrollees through passive enrollment. CMS does not propose to define a minimum staffing capacity threshold in order to give integrated D-SNPs flexibility in implementing this proposed change; and
• Revise the description of an MA plan that can receive passive enrollment from "a fully integrated dual eligible special needs plan or highly integrated dual eligible special needs plan," to plans that operate as an applicable integrated plan ("AIP") as described at§ 422.561.

Under the Proposed Rule, passive enrollments would be limited to plans that have demonstrated commitment to quality and are able to provide longer continuity of care to minimize service disruption for receiving dually eligible enrollees who have complex and unique care needs.

Continuity in Enrollment for Full-Benefit Dually Eligible Individuals in a D-SNP and Medicaid Fee-for-Service (§§ 422.107 and 422.514)

In response to feedback from stakeholders in prior rulemaking cycles, CMS proposes significant amendments to the "one D-SNP requirement at § 422.514(h), which was promulgated as part of the CY2025 MA final rule. Under the one D-SNP requirement, which is effective beginning CY2027, where an MA organization offers a D-SNP and the MA organization, its parent organization, or any entity that shares a parent organization with the MA organization also contracts with a State as a Medicaid MCO that enrolls full-benefit dual eligible individuals in the same service areas (even if there is only partial overlap of the service areas), the MA organization (a) may only offer, or have a parent organization or share a parent organization with another MA organization that offers, one D-SNP for full-benefit dual eligible individuals, and (b) must limit new enrollment in the D-SNP to individuals enrolled in, or in the process of enrolling in, the Medicaid MCO. Beginning in CY2030, such D-SNPs may only enroll (or continue to cover) individuals enrolled in (or in the process of enrolling in) the Medicaid MCO.

There are two exceptions to the one D-SNP requirement: (1) where the State Medicaid agency contract ("SMAC") with the MA organization differentiates enrollment into D-SNPs by age group or to align enrollment in the D-SNP with the eligibility or benefit design used in the State's Medicaid managed care program; or (2) the MA organization, its parent organization, or an entity that shares a parent organization with the MA organization offers both HMO D-SNPs and PPO D-SNPs.

The Proposed Rule would adopt new exceptions to these D-SNP enrollment limitations based on stakeholder feedback regarding challenges in states without mandatory Medicaid managed care for some or all of the state's dual eligible population, in which full-benefit dually eligible individuals are able to, and do, remain in Medicaid fee-for-service ("FFS"). For example, CMS expresses concerns that the current regulations could create an incentive for MA organizations to terminate their HIDE SNP and transition dually eligible enrollees to the coordination-only D-SNP, which could continue to enroll full-benefit dually eligible individuals regardless of whether an enrollee receives their Medicaid coverage through Medicaid FFS or an unaligned MCO, allowing such a plan to maintain maximum enrollment. CMS indicated that this unintended consequence of the current regulations would put MA organizations with unaligned HIDE SNPs and coordination-only D-SNPs at a disadvantage in comparison to those MA organizations with only coordination-only D-SNPs.

To address these concerns in states without mandatory Medicaid managed care, CMS proposes the following changes, which collectively would benefit MA organizations operating multiple D-SNPs that enroll full-benefit dually eligible individuals in states without mandatory Medicaid managed care:

• Require SMACs to stipulate that full-benefit dually eligible beneficiaries cannot be enrolled in a Medicaid MCO that is owned and controlled by an entity other than the MA organization, its parent organization, or an entity that shares a parent organization with the MA organization. If finalized, this change would permit coordination-only D-SNPs to enroll full-benefit dually eligible individuals who are enrolled in Medicaid FFS .
• Establish an exception for non-AIP HIDE SNPs with a majority of Medicaid FFS enrollees. Specifically, for SMACs that permit full-benefit dually eligible individuals to enroll in (a) a coordination-only D–SNP per proposed amendment at § 422.107(d)(1)(i), or (b) a HIDE SNP with a majority of individuals enrolled in Medicaid fee-for-service, CMS proposes to allow the MA organization, its parent organization, or an entity that shares a parent organization with the MA organization to offer one or more additional D-SNPs for full-benefit dually eligible individuals in the same service area. According to CMS, limiting the proposed exception to HIDE SNPs with a majority of enrollees in Medicaid FFS would prevent application of this exception to HIDE SNPs with a minority of Medicaid FFS enrollees and a majority of Medicaid managed care enrollees whose Medicaid MCO is unaligned with the HIDE SNP. HIDE SNPs with a majority of enrollees in unaligned Medicaid MCOs would have less incentive to achieve aligned membership and detract from the intended goals of promoting integrated care.
• Require any MA organizations with D-SNPs subject to the proposed new exception, to comply with the care coordination responsibilities at § 422.562(a)(5). CMS solicits comments on whether care coordination requirements should be subject to reporting requirements.
• Establish an exemption from the D-SNP enrollment limitations for MA organizations operating in U.S. Territories, based on the unique Medicaid landscape in the U.S. Territories.

If finalized, the proposal would avoid the need for MA organizations in states without mandatory Medicaid managed care to cease enrolling full-benefit dually eligible individuals who are in Medicaid FFS starting in 2027, and to disenroll those members in 2030, as required under the current regulations.

Contract Modifications for D-SNPs Following SMAC Termination

By statute, D-SNPs are required to have both a standard contract with CMS to operate an MA plan and a SMAC to provide or arrange for Medicaid benefits. CMS notes that, as more states move towards integrated care, it has encountered instances in which a SMAC has been terminated by a state during the plan year. For example, if a Medicaid MCO that is an affiliated entity with a D-SNP loses a State procurement or otherwise has its Medicaid MCO contract terminated, the State also terminates the SMAC and the D-SNP cannot continue to operate.

In such instances, CMS has worked with the respective state and the MA organization whose SMAC is being terminated to mutually terminate the CMS contract per § 422.508, a process by which CMS, the state and the D-SNP are able to agree on a timeline for termination and the provision of notice to enrollees of such termination, in an effort to create a smoother transition to an alternative plan for the plan's enrollees. However, an MA organization with a terminating SMAC is not required to seek a mutual termination of its MA contract with CMS.

To address concerns related to mid-year SMAC terminations, including that enrollees may experience harm by losing access to their integrated care, including access to known providers and care plans, CMS proposes to:

• Codify that the loss of a SMAC constitutes a valid basis for a contract termination. CMS notes that when an MA organization has multiple plans under one contract, CMS may sever the D-SNP from the rest of the contract and renew only the portion of the contract that does not include the D-SNP with the terminated SMAC.
• Codify the process of immediate termination of contract by CMS when the D-SNP does not have a SMAC.
• Amend § 422.510(c)(2)(iv) to expressly include termination of a SMAC as an exception to the opportunity for plans to develop and implement a corrective action plan.

Limitation on D-SNP-Only Contracts Submitting Materials under the Multi-Contract Entity Process (§§ 422.2261 and 423.2261)

For D-SNP-only contracts (MA contracts that only include one or more D-SNPs with a service area limited to the state),⁴ CMS proposes to limit the submission of marketing materials on behalf of MA organizations under the Multi-Contract Entity ("MCE") process and to require the use of the MA organization's contract number for such submissions.

Under existing MA and Part D regulations, MA organizations and Part D sponsors must submit all marketing materials, all election forms, and certain designated communication materials for CMS review using the HPMS Marketing Module. Such materials must be submitted directly by the MA organization or Part D sponsor, or by a TPMO if the materials were developed by a TPMO for multiple MA organizations or plans. CMS regulations also require a standardized method of identification for oversight and tracking for materials including the MA organization's contract or Multi-Contract Entity ("MCE") number (such as an "H" number for MA plans or "Y" number for an MCE).

CMS proposes to clarify that MA organizations offering D-SNP-only contracts must submit all materials for the contract in HPMS under the MA organization's contract number and may not submit materials for the contract under the organization's MCE number. Because CMS proposes to prohibit submissions under the MCE number for D-SNP-only contracts, and because TPMOs cannot submit materials under the contract ID number, there would be no way for TPMOs to submit materials for D-SNP-only contracts in the HPMS Marketing Module. Accordingly, the MA organization must submit all materials to be used by TPMOs for D-SNP-only contracts.

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

CMS notes that the number of chronic condition special needs plans ("C-SNPs") offered by MA organizations has increased substantially in recent years, while the number of dually eligible individuals enrolled in C-SNPs has also increased over the same period of time. According to CMS, compared to C-SNPs, the number of I-SNPs offered by MA organizations has remained relatively consistent in recent years. CMS notes that the challenges with C-SNPs and I-SNPs enrolling high proportion of dually eligible individuals are similar to the challenges of D-SNP look-alikes.⁵ CMS expresses concern that C-SNPs could be serving as a workaround to federal and state integration efforts for dually eligible individuals.

In light of the above, CMS solicits comments on policy options to improve integration and outcomes for dually eligible enrollees in C-SNPs and I-SNPs, including requirements for state Medicaid contracts, enhanced care coordination standards, extending D-SNP look-alike contracting limitations to C-SNPs, and strategies to improve plan quality and access, particularly for those with serious mental illness.

CMS will consider comments on these RFIs in future rulemaking.

VI. Reducing Regulatory Burden and Costs in Accordance with Executive Order (E.O.) 14192

CMS proposes the following changes to existing regulations in furtherance of E.O. 14192 "Unleashing Prosperity Through Deregulation."

• Exclude account-based medical plans (e.g., HRAs, FSAs, and HSAs) from the entities required to make disclosures of creditable coverage.
• Remove and reserve for future rulemaking the D-SNP specific supplemental benefit authority at 42 CFR 422.102(e). CMS believes that other existing regulations that expanded plans' authority to offer supplemental benefits, including the expanded definition of primarily health related supplemental benefits and the authority to offer special supplemental benefits for the chronically ill or "SSBCI", have rendered the D-SNP specific authority unnecessary.
• Restore the "culturally competent" services requirement of 42 CFR 422.112(a)(8) to its pre-CY2024 final rule form: "Cultural considerations. Ensure that services are provided in a culturally competent manner to all enrollees, including those with limited English proficiency or reading skills, and diverse cultural and ethnic backgrounds."
• Rescind the mid-year supplemental benefits notices promulgated as part of the CY2024 final rule. CMS previewed its recission of this notice requirement in the CY2026 final rule.
• Rescind the health equity requirements related to plans' utilization management ("UM") committees. Specifically, the Proposed Rule would rescind the following requirements: (1) UM committees must include at least one member with expertise in health equity, (2) UM committee must conduct an annual health equity analysis of the use of prior authorization, and (3) required posting of the health equity analysis on plans' websites in a prominent manner that is publicly accessible. CMS requests comments on ways to reduce administrative burdens associated with other UM committee requirements including UM committee composition and responsibilities requirements.
• Rescind the quality improvement program health disparities requirement that was promulgated as part of the CY2024 final rule.

VII. Request for Information on Future Directions in Medicare Advantage (Risk Adjustment, Quality Bonus Payments, and Well-Being and Nutrition)

CMS is interested in exploring opportunities for modernizing and strengthening the MA program, including regarding payment, risk adjustment, and quality policy, with the aim of supporting competition and maximizing the value of the program for beneficiaries and taxpayers. Regarding competition, CMS is particularly interested in changes that can enhance competition in the MA program; level the playing field for smaller, regional, and less well-resourced MA plans; and address factors that may place these types of plans at a competitive disadvantage. CMS notes that changes could be pursued either through rulemaking or by testing a model under section 1115A of the Social Security Act through which the CMS Innovation Center can test innovative payment and service delivery models.

Risk Adjustment

CMS solicits feedback on options for risk adjustment, including near-term changes to the existing risk adjustment methodology and entirely new approaches for risk adjustment, such as those that account for recent advances in technology. Specific ideas are sought on:

• Additional data sources and data elements for risk adjustment, and for how those data sources should best be incorporated, particularly to minimize opportunities for gaming by MA organizations, incentivize positive health outcomes, and minimize administrative burden for plans and providers.
• Approaches that do not rely on collection of diagnoses data and, instead, incorporate alternative factors to infer a patient's health risk as well as the severity of that risk.
• Risk adjustment approaches that advance competition and foster a level playing field between different types of MA plans and MA organizations.

MA Quality Bonus Payments

CMS solicits information "to inform future policy development and potential refinement" of the QBP structure for MA plans and the impact of QBPs on MA plan rebates. Noting the time lag between Star Ratings measurement year and payment year, CMS seeks information on whether it should test an Innovation Center model that would "delink" QBPs from MA plan bids with the aim of further incentivizing plans to improve quality and providing beneficiaries with more timely and actionable quality information.

Well-Being and Nutrition

CMS seeks comments on policy changes for well-being and nutrition. "Well-being" is a comprehensive approach to disease prevention and health promotion. CMS is interested in hearing about tools and policies that improve overall health, happiness, and satisfaction that could include aspects of emotional well-being, social connections, purpose and fulfillment.

Comments on the Proposed Rule are due January 26, 2026.

Footnotes

1. For a discussion of the IRA's changes to Part D, please refer to our previous blog post.

2. Under the IRA's Selected Drug Subsidy Program, Part D sponsors will receive a government subsidy for selected drugs equal to 10% of the drug's negotiated price. The selected drug subsidy applies to a covered Part D drug that would be an applicable drug with respect to the Manufacturer Discount Program but for being a selected drug during a price applicability period. Under the program, once an enrollee incurs costs exceeding the annual deductible under the Part D defined standard benefit, the selected drug subsidy is available in the initial coverage phase of the benefit.

3. Measures with a * would be moved to the display page.

4. The authority of states to elect D-SNP only contract is at 42 CFR 422.107(e). According to CMS, 13 states have D-SNP only contract requirements for 2026.

5. See 42 CFR 422.514(d).