CMS Reverses Course on Certain Medicare Advantage and Part D Proposals and Further Implements Inflation Reduction Act

On April 4, 2025, the Centers for Medicare & Medicaid Services (CMS) published an annual final rule (Final Rule) that updates the Medicare Advantage (MA) and Medicare Prescription Drug Benefit Programs for calendar year 2026 and adds new measures to implement certain provisions of the Inflation Reduction Act (IRA). However, CMS notably declined to finalize certain key provisions from the MA and Medicare Prescription Drug Benefit Programs Proposed Rule (Proposed Rule) that was issued on December 10, 2024, including its proposal to reinterpret the Medicare Part D and Medicaid statutes to allow for Part D coverage and require Medicaid coverage of weight-loss agents when used to treat beneficiaries with obesity or for chronic weight management. CMS also declined to adopt an earlier proposal that would have required MA plans to adopt certain guardrails when using artificial intelligence (AI) tools for patient management in order to preserve equitable access to MA services.

Most of the provisions of the Final Rule are appliable to coverage beginning on January 1, 2026, except as otherwise noted.

A summary of key provisions follows below.

CMS Declined to Finalize Several Notable Provisions of the Proposed Rule. In the Final Rule, CMS rejected several proposals from the Proposed Rule, which was issued on December 10, 2024, by the prior administration. CMS specifically declined to finalize the following provisions, citing Executive Order 14192 (“Unleashing Prosperity Through Deregulation”):

• Part D Coverage of Anti-Obesity Medications (AOMs) and Application to the Medicaid Program. Citing the increase of obesity in the United States and prevailing medical consensus, CMS originally proposed to permit Part D coverage of AOMs for the treatment of obesity or chronic weight management, despite the agency’s long history of excluding weight-loss drugs from Part D coverage. Under the Proposed Rule, CMS also proposed to require Medicaid coverage of AOMs when medically necessary, even though such products had historically been considered an optional drug benefit for Medicaid programs. Despite broad support from medical groups, CMS has declined to finalize these proposals without providing a substantive explanation in the Final Rule. Trade press outlets are reporting, for example, that CMS “may consider future policy options for AOMs pending further review of both the potential benefits of these drugs, including updated clinical indications, and relevant costs including fiscal impacts on stakeholders such as state Medicaid agencies.”¹

   

• Ensuring Equitable Access to Medicare Advantage Services: Guardrails for AI. Citing concerns that growing use of AI within the healthcare sector may lead to “algorithmic discrimination” that exacerbates inequitable access to care, CMS had proposed revising current MA regulations to explicitly state that MA plans that use AI or “automated services” must do so in “a manner that preserves equitable access to MA services.” CMS declined to finalize this proposal, citing Executive Order 14192. However, CMS did acknowledge its “broad interest in regulation of AI” and stated that it will consider “the extent to which it may be appropriate to engage in future rulemaking in this area.”

   

• Enhancing Health Equity Analyses: Annual Health Equity Analysis of Utilization Management Policies and Procedures. In response to concerns that the use of prior authorizations may disproportionately affect historically underserved individuals, CMS had proposed to revise required metrics for annual health equity analysis of the use of prior authorization, to require MA plans to report such metrics by each item or services, rather than on an aggregate basis, as required under current regulations. CMS declined to finalize this proposal, citing Executive Order 14192.

IRA-Related Provisions

The Final Rule implements several of the statutory requirements from the IRA, including the following:

• Insulin Cost-Sharing Changes. CMS finalized its proposal to codify Section 11406 of the IRA to require that for 2026 and each subsequent plan year, the applicable cost-sharing amount of a covered insulin product is the lesser of (1) $35; (2) an amount equal to 25% of the maximum fair price established for the covered insulin product under the Medicare Drug Price Negotiation Program (Negotiation Program); or (3) an amount equal to 25% of the negotiated price, as defined at 42 C.F.R. § 423.100, of the covered insulin product under the Medicare Part D Plan or an MA plan.

  CMS finalized its definition of “covered insulin product” to mean an insulin product that includes a drug that is a combination of more than one type of insulin product or a drug that is a combination of an insulin product and a noninsulin product. However, CMS clarified that a “covered insulin product” does not include a compounded drug product, as defined at 42 C.F.R. § 423.120(d), because these types of drugs are not licensed by the Food and Drug Administration.

  CMS finalized its proposal that the cost-sharing requirements will apply regardless of whether a less than one-month supply of insulin is dispensed, meaning a patient could face monthly cost-sharing obligations in excess of the amounts described above if less than one-month supply of insulin is dispensed. Additionally, Part D and MA plans will be required to honor the cost-sharing price regardless of the tier placement of the covered insulin product and even if a beneficiary fills the prescription with an out-of-network pharmacy or provider.

• Vaccine Cost-Sharing Changes. CMS finalized its proposal to codify Section 11401 of the IRA to require that beginning in plan year 2026, 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.

  CMS also finalized its proposal that enrollees who submit direct member reimbursement requests for ACIP-recommended adult vaccines that a Part D sponsor determines are coverable under their benefit must not be subject to cost sharing.

• Medicare Prescription Payment Plan. CMS finalized with limited modifications its proposal codifying two parts of previously issued final guidance implementing Section 11202 of the IRA. These measures establish the Medicare Prescription Payment Plan and require Part D sponsors to provide all Part D enrollees the option to pay their out-of-pocket (OOP) prescription drug costs in monthly amounts over the course of the plan year, instead of paying OOP costs at the point of sale, for 2026 and subsequent years. Importantly, to the benefit of Part D sponsors, CMS did not finalize a previously proposed provision that would have required Part D sponsors to ensure that pharmacies provide information regarding OOP costs for the Medicare Prescription Payment Plan at the point of sale.
• Medicare Transaction Facilitator Requirements for Network Pharmacy Agreements. CMS finalized its proposal to require pharmacies (via the Part D network contracts) to enroll in the Negotiation Program’s Medicare Transaction Facilitator Data Module (MTF DM) and to maintain and certify “up-to-date, complete, and accurate enrollment information” with the MTF DM, in the form and manner to be determined by CMS. CMS stated that the MTF DM will provide a single platform for manufacturers and pharmacies to use in the exchange of claim data for drugs selected to the Negotiation Program. CMS has issued a draft MTF DM Contractor Agreement for dispensing entities and expects to issue the final MTF agreements in spring 2025. In December 2024, it was reported that CMS had selected Data Computer Corporation of America to develop the MTF DM.

Revisions to MA and Medicare Part D Regulations

The Final Rule also implements a number of changes to the MA and Medicare Part D regulations, including the following:

• Provider Notice Requirements. CMS finalized its proposal to strengthen provider notice requirements by codifying its existing guidance, which requires MA plans and applicable integrated plans “to notify an enrollee’s physician or provider, as appropriate, of an organization determination or integrated organization determination on a request for a non-drug item or service (in addition to existing requirements to notifying an enrollee).” CMS noted that this was motivated by its belief that “an enrollee’s provider is often in the best position to receive, explain, and timely act upon the MA organization decision for an enrollee.”
• Rules for Reopening Approved Hospital Inpatient Admission. CMS finalized its proposal to bar MA organizations that approved the furnishing of a covered item or service through prior authorization or preservice determination of coverage or payment from denying coverage on the basis of lack of medical necessity and reopening a decision for any reason except for good cause or reliable evidence of fraud or similar fault.
• Nonallowable Special Supplemental Benefits for the Chronically Ill (SSBCI). CMS finalized a modified version of its proposal to codify a list of non-primarily-health-related items or services that cannot be offered as SSBCI by adding “non-healthy food” to the list. The list also includes cosmetic procedures that do not extend upon traditional Medicare coverage, alcohol, tobacco, cannabis, funeral planning and expenses, life insurance, hospital indemnity insurance, and broad membership-type programs inclusive of multiple unrelated services and discounts.