The Centers for Medicare & Medicaid Services (CMS) issued a final rule on April 4, 2025, that modernizes and improves Medicare Advantage (MA), Medicare Prescription Drug Benefit (Part D), Medicare cost plan, and Programs of All-Inclusive Care for the Elderly (PACE) programs. The Contract Year (CY) 2026 MA and Part D final rule implements changes related to prescription drug coverage, the Medicare Prescription Payment Plan, dual eligible special needs plans (D-SNPs), Star Ratings, and other programmatic areas, including the Medicare Drug Price Negotiation Program. This final rule also codifies existing sub-regulatory guidance in the MA and Part D programs.
CMS is not finalizing certain provisions from the proposed rule at this time. CMS may address these proposals in future rulemaking, as appropriate. CMS is also announcing that it is not finalizing three provisions from the proposed rule (Enhancing Health Equity Analyses: Annual Health Equity Analysis of Utilization Management Policies, Procedures and Ensuring Equitable Access to Medicare Advantage Services—Guardrails for Artificial Intelligence, and Part D Coverage of Anti-Obesity Medications (AOMs) and Application to the Medicaid Program).
This fact sheet discusses the major provisions of the CY 2026 MA and the Part D final rule. The final rule can be downloaded here: https://www.federalregister.gov/public-inspection/2025-06008/medicare-and-medicaid-programs-contract-year-2026-policy-and-technical-changes-to-the-medicare.
Enhancements to Medicare Advantage and Medicare Part D
Holding Plans to Approved Inpatient Admission Decisions
CMS is finalizing a provision that will restrict plans’ ability to reopen and modify a previously approved inpatient hospital decision on the basis of information gathered after the approval. Under this final rule, MA plans will only be able to reopen an approved admission for obvious error or fraud. The goal of this provision is to ensure that if a plan approves an inpatient admission, it will have to honor the prior authorization
Closing MA Appeals Loopholes
CMS is taking steps to close MA appeals loopholes that adversely affect providers and enrollees. These steps include:
- Clarifying that the definition of “organization determination” (decisions that are subject to MA appeal and notification requirements) includes MA plan decisions made concurrent to the enrollee’s receipt of services. This clarification will ensure that MA appeals rules apply to adverse plan decisions, regardless of whether the decision is made before, after, or during the receipt of services.
- Codifying existing guidance that requires plans to give a provider notice of a coverage decision, in addition to notifying the enrollee, whenever the provider submits a request on behalf of an enrollee.
- Modifying existing regulations to clarify that an enrollee’s liability to pay for services cannot be determined until an MA organization makes a decision on a contracted provider’s claim for payment. This clarification will ensure that an enrollee always has the right to appeal MA plan coverage denials that affect their ongoing course of treatment.
Non-allowable Special Supplemental Benefits for the Chronically Ill (SSBCI)
SSBCI are benefits that can be offered non-uniformly to qualifying MA enrollees with chronic conditions. These benefits may be non-primarily health-related; however, the benefit must have a reasonable expectation of improving or maintaining the health or overall function of the chronically ill enrollee. This rule establishes guardrails for these benefits by codifying a list of non-allowable examples (e.g., non-healthy food, alcohol, tobacco, life insurance).
Risk Adjustment Data Updates
The proposed rule included a series of technical updates and clarifications that CMS is finalizing as proposed:
- Making a technical change to the definition of Hierarchical Condition Categories to make the reference to International Classification of Diseases (ICD) general rather than version specific (i.e., from ICD-9 to ICD), and substituting the terms “disease codes” with “diagnosis codes” and “disease groupings” with “diagnosis groupings” to be consistent with ICD terminology.
- In keeping with longstanding practice, codifying requirements for PACE organizations and cost plans to submit risk adjustment data to CMS.
Improving Experiences for Dually Eligible Enrollees
CMS is finalizing new federal requirements for certain dual eligible special needs plans (D-SNPs) to, by 2027: 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. CMS is also codifying timeframes for all special needs plans (SNPs) to conduct HRAs and individualized care plans and prioritize the involvement of the enrollee or the enrollee’s representative, as applicable, in the development of such care plans.
Inflation Reduction Act of 2022 (IRA) and IRA-Related Provisions
The final rule includes several IRA provisions that require codification, given that their program instruction authority expires at the end of CY 2025, as well as policies related to effectuation of the maximum fair prices for selected drugs under the Medicare Drug Price Negotiation Program.
Vaccine Cost Sharing
CMS is finalizing the proposal to codify the statutory requirements 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) and covered under Part D.
Insulin Cost Sharing
CMS is finalizing the proposal to codify the statutory requirements that, effective for plan years beginning on or after January 1, 2023, the Medicare Part D deductible does 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 covered insulin product applicable cost-sharing amount. For 2026 and each subsequent year, the applicable cost-sharing amount is the lesser of:
- $35;
- An amount equal to 25% of the maximum fair price established for the covered insulin product under the Medicare Drug Price Negotiation Program; or
- An amount equal to 25% of the negotiated price, as defined in § 423.100, of the covered insulin product under the stand-alone Medicare prescription drug plan (PDP) or MA plan with prescription drug coverage (MA-PD plan).
Medicare Prescription Payment Plan
Beginning in 2025, the Medicare Prescription Payment Plan requires all Medicare Prescription Drug Plans (Part D plans) – including both stand-alone Medicare PDPs and MA-PDs – to offer Part D enrollees the option to pay their out-of-pocket (OOP) prescription drug costs in the form of monthly payments over the course of the year instead of all at once at the pharmacy.
CMS issued two parts of final guidance to implement the Medicare Prescription Payment Plan for CY 2025, which CMS generally proposed to codify along with select new requirements for 2026 and future years to allow stakeholders to gain additional experience with the program, minimize burden for Part D plan sponsors, and minimize disruption for Medicare Prescription Payment Plan participants. In this rule, CMS is finalizing these requirements as proposed with minor modifications. Specifically, CMS is finalizing new requirements for an automatic election renewal process that extends a Part D enrollee’s participation in the program for the next calendar year, unless the enrollee opts out, with a modification to the proposed timing requirements for the renewal notice. CMS is not finalizing the proposed requirement for Part D sponsors to ensure that pharmacies are prepared to inform Part D enrollees of the actual OOP cost of a Part D prescription processed under the program at the pharmacy point of sale, in response to comments that the OOP cost information is already provided to pharmacies through the established claims processing methodology. CMS continues to encourage pharmacies to leverage standard industry transaction set data to provide OOP costs to participants verbally upon request. Additionally, CMS is not proceeding with any changes to the 24-hour requirement for election effectuation. CMS will continue to monitor program implementation for any potential concerns.
Timely Submission Requirements for Prescription Drug Event (PDE) Records, Including a Distinct Timeliness Requirement for Selected Drugs
CMS is finalizing PDE submission timeframes that are similar to the timeframes described in the October 2011 guidance on the timely submission of PDE records. CMS is codifying that initial PDE records are due within 30 calendar days following the date the claim is received by the Part D sponsor (or its contracted first tier, downstream, or related entity). Adjustment and deletion of PDE records are due within 90 calendar days following discovery of the issue requiring a change to the PDE. Resolution of rejected PDE records are due within 90 calendar days following the receipt of rejected record status from CMS. In addition, CMS is finalizing regulatory changes to establish a distinct PDE submission timeliness requirement for selected drugs under the Medicare Drug Price Negotiation Program, in which CMS requires that a Part D sponsor must submit initial PDE records within seven calendar days from the date the Part D sponsor (or its contracted first tier, downstream, or related entity) receives the claim.
Medicare Transaction Facilitator Requirements for Network Pharmacy Agreements
CMS is finalizing the proposal that Part D sponsors’ network participation agreements with contracting pharmacies, including any contracts with first tier, downstream, and related entities, must require such pharmacies to be enrolled in the Medicare Drug Price Negotiation Program’s Medicare Transaction Facilitator Data Module (“MTF DM”) and that such pharmacies certify the accuracy and completeness of their enrollment information in the MTF DM. CMS believes the inclusion of the requirement for Part D sponsors’ network pharmacies to be enrolled in the MTF DM that will be added to Part D sponsors’ network contracts with pharmacies will facilitate continued beneficiary access to selected 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.