CMS recently issued a proposed rule that updates the Medicare Advantage (MA) and Part D prescription drug programs for contract year (CY) 2026. CMS states the intent of the rule is to “remove unnecessary barriers to care stemming from the use of inappropriate prior authorization,” promote access to behavioral health, expand access to GLP-1s to treat obesity, address “misleading” marketing practices, and align the calculation of the medical loss ratio (MLR) for MA plans with Medicaid managed care organizations (MCOs) and commercial plans.
The rule will increase administrative costs as plans act to meet new requirements related to provider directory accuracy and require more transparency when using internal criteria for utilization management. For providers, the rule will improve the ability to manage the total cost of care for MA beneficiaries, as it reduces cost sharing for mental health services. If finalized, the rule will also reduce administrative costs related to prior authorizations for MA enrollees.
It should be noted that this rule will be finalized under the new administration, so there may be more changes than usual from the proposed rule to the final rule.
The proposed rule is extensive and addresses many aspects of the MA program. Below is a summary of select proposed provisions that will impact health plans and providers.
Use of Internal Coverage Criteria
CMS addresses misapplications of existing regulations and questions from MA plans regarding provisions related to internal coverage criteria finalized in the CY 2024 MA final rule. In the proposed rule, CMS defines “internal coverage criteria” as “policies, measures, tools, or guidelines, whether developed by an MA organization or a third party, that are not expressly stated in applicable statutes, regulations, NCDs [national coverage determinations], LCDs [local coverage determinations], or CMS manuals and are adopted or relied upon by an MA organization for purposes of making a medical necessity determination.” This includes any coverage criteria that restrict access to, or payment for, medically necessary Part A or Part B items or services based on the duration or frequency, setting or level of care, or clinical effectiveness of the care.
CMS proposes four additional clarifications of the regulations, which address issues related to:
- Supplementing Existing Content: CMS proposes that internal coverage criteria may only be used to supplement or interpret already existing content within Medicare coverage and benefit rules. Internal coverage criteria may not be used to add new, unrelated coverage criteria for an item or service with existing coverage policies.
- Making Plan Language Available: When MA plans use internal coverage criteria to supplement existing content, they must identify the plain language of the Medicare coverage or benefit criteria they are supplementing or interpreting. The plain language explanation must be available in publicly accessible materials.
- Requiring Clinical Benefit: CMS proposes to prohibit a coverage criterion when it does not have any clinical benefit and exists only to reduce the utilization of an item or service.
- Requiring Individual Medical Necessity Determination: CMS proposes that an internal coverage criterion is prohibited when the criterion is used to automatically deny coverage of basic benefits without the MA plan making an individual medical necessity determination.
Clarifying MA Plan Coverage Determinations & Appeal Rights
CMS proposes modifications to the regulations governing coverage determinations and related enrollee appeal rights. These proposed changes include:
- Clarifying that an enrollee has no further liability to pay for services furnished by an MA organization under an organization determination. Additionally, these services are not subject to appeal.
- Redefining an “organization determination” to clarify that a coverage decision made by an MA organization while an enrollee is receiving such services, including level of care decisions, e.g., inpatient versus outpatient, is an organization determination. The proposed rule notes this determination is subject to appeal.
- Requiring MA plans to provide notice of the organization’s decision to providers who make a standard organization determination or integrated organization determination request on an enrollee’s behalf.
- Changing the reopening rules to eliminate MA plans’ discretion to reopen an approved authorization for an inpatient hospital admission based on any additional clinical information obtained after the initial organization determination.
Cost Sharing for Mental Health Services
For CY 2026, CMS proposes to require MA plans’ in-network cost sharing for behavioral health services be no greater than cost sharing for those services under Medicare fee-for-service. The service categories include mental health specialty services, psychiatric services, partial hospitalization, intensive outpatient services, inpatient hospital psychiatric services, outpatient substance use disorder services, and opioid treatment program services.
Unless otherwise specified in regulation, CMS proposes to apply its determination that payment of less than 50% of total plan financial liability discriminates against enrollees who need mental health services.
Insulin Cost Sharing Changes
CMS proposes that, effective for plan years 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 proposed “covered insulin product applicable cost-sharing amount” as required by the Inflation Reduction Act (IRA).
The applicable copayment amount for 2023, 2024, and 2025 is $35. For 2026 and subsequent years, the applicable cost-sharing amount is the lesser of $35, 25% of the maximum fair price established for the covered insulin product, or an amount equal to 25% of the negotiated price.
Vaccine Cost Sharing Changes
CMS proposes 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 covered under Part D as required by Section 11401 of the IRA.
AI Guardrails
CMS proposes changes in the regulatory language to clarify that MA organizations must provide all enrollees equitable access to services, including when MA organizations use AI or other automated systems to aid their decision making.
The proposed rule also reiterates that if an MA organization licenses an AI or automated system, or contracts with a third party for services that are furnished using one of these tools, the MA organization is ultimately responsible even if it uses a first tier, downstream, or related entity to fulfill obligations and responsibilities under the MA regulations and contract with CMS. The proposed rule also notes MA organizations are responsible for ensuring that the usage of AI tools complies with internal coverage criteria rules.
Enhancing Health Equity Access
To ensure equitable access to services, CMS proposes to revise the previously finalized required metrics for the annual health equity analysis of the use of prior authorization. If finalized as proposed, for CY 2026, the metrics would be reported by each item or service rather than aggregated for all items and services.
CMS also proposes that the health equity analysis include an executive summary. This must include additional context for understanding the results of the health equity analysis, clarify information that could help the public understand it more fully, and offer an overview of the key statistics produced by the analysis.
Provider Directory Formatting
CMS proposes requiring MA plans to submit provider directory data to populate the Medicare Plan Finder. It is the agency’s intent that this information would be available for the 2026 Annual Enrollment Period to help enrollees make more informed plan choices. If finalized, MA plans will be required to attest that the submitted directory information is accurate. CMS states in the proposed rule that it currently envisions an attestation when the data is first made available and yearly thereafter. The agency seeks feedback on the attestation process, including the intervals for the attestation.
CMS is also proposing a requirement that MA organizations update the provider directory data made available to CMS within 30 days of receiving information about a change from providers. This mirrors the current standards for updating provider directory data.
Medical Loss Ratio (MLR) Calculation
CMS proposes changes to the MLR and requests information on how to account for intercompany activity when a health plan is vertically integrated and owns healthcare providers. The proposed changes aim to better align the calculation of the MA MLR with the commercial and Medicaid MLR requirements.
CMS proposes to establish clinical and quality improvement standards for provider incentives and bonus arrangements included in the MA MLR numerator, prohibit administrative costs from being included in quality improvement activities in both the MA and Part D MLR numerator, codify additional requirements for the allocation of expenses in the MLR, and establish new audit and appeals processes for MLR compliance.
In addition, CMS proposes to amend the regulations authorizing the release of MLR data, codify the treatment of Medicare Prescription Payment Plan unsettled balances for MLR purposes, and amend the reporting requirements for provider payment arrangements.
How Forvis Mazars Can Help
Forvis Mazars helps healthcare organizations develop the capabilities necessary to support their pursuit of achieving health for their enterprises and those they serve. One of those core capabilities is regulatory excellence, which means understanding and acting strategically within the rapidly involving regulatory environment. If you have questions about the CY 2026 Medicare Advantage proposed rule and how to navigate the potential impact on your organization, please reach out to our professionals.