On November 26, 2024, Centers for Medicare & Medicaid Services (“CMS”) released a proposed rule revising the Medicare Advantage (“MA”) Program (Part C), Medicare Prescription Drug Benefit Program (Part D), Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly (PACE).
Among other goals, the proposed rule for Contract Year 2026 aims to enhance accountability for MA and Part D plans to protect Medicare beneficiaries’ access to care. To the extent this proposed rule is finalized, healthcare providers and plans will be required to adapt their marketing strategies in significant ways, which can increase the risk of enforcement (especially for marketing-related changes) and carry substantial operational and compliance costs in six key areas, each of which is summarized and explained in this alert:
- expanded definition of “marketing” to remove content standards;
- guardrails for Artificial Intelligence (“AI”);
- increased transparency regarding MA services;
- revised requirements for Part D sponsors;
- changes to Medical Loss Ratio (“MLR”) standards; and
- additional measures to protect MA beneficiaries, such as enhancements for prior authorization and internal coverage criteria.
At a high-level, the proposed rule is particularly relevant due to the anticipated increase in MA enrollment in the Trump Administration and the evolving role of broker services. With more beneficiaries opting for MA plans, there will be heightened scrutiny on how these plans are marketed and sold, necessitating robust compliance measures and risk management.
Additionally, the administration changes in the upcoming year and potential CMS leadership by Dr. Mehmet Oz, an eager advocate of Medicare Advantage, add an element of uncertainty regarding the future development of this proposed rule. In particular, the Congressional Review Act (“CRA”) could play a significant role in the finalization of this rule. The CRA allows Congress to review and potentially invalidate new federal regulations by passing a joint resolution of disapproval. Given the forthcoming legislative and executive administration changes, there is an increased possibility that final rules, including this proposed rule, could be invalidated more easily, such that many MA plans and providers may want to play a “wait and see” approach on these items before rushing towards implementation. That said, the proposed rule should, at a minimum, give insight into the compliance landscape and best practices that MA plans and providers should consider taking in these areas.
- Broadened Definition of “Marketing” by Eliminating Content Standard
MA plans and Part D sponsors are subject to Medicare Communications & Marketing Guidelines (“MCMG”), which provide guidance and examples on what qualifies as marketing material, the procedures for sponsors to submit those marketing materials, and the proper use of marketing materials.1 When contacting Medicare beneficiaries, plans and sponsors must submit marketing materials to CMS through the Health Plan Management System (“HPMS”) Marketing Module. Although there is generally greater flexibility for provider or educational messaging, all marketing materials must be submitted for CMS review and approval through HPMS.
CMS proposed a significant change to the definition of “marketing” for MA and Part D plans, intending to increase CMS oversight and address misleading marketing practices. Under the current regulations, “marketing” is a subset of communications materials and activities that reflect intent to market and specific content.2 The intent standard focuses on activities intended to draw attention to a plan, influence decision-making surrounding enrollment, or retain enrollees.3 The content standard requires that materials include specific information about plan benefits, cost-sharing, or ranking standards.4 Communications that fail to satisfy both the regulatory intent and content standards are not classified as “marketing” and thus not subject to CMS’s specific submission, review, and distribution requirements per the MCMG.
CMS noted, however, that the current definition of “marketing” may be too narrow, creating a perceived loophole for MA plans and Part D sponsors to create broad and misleading advertisements that evade CMS oversight. Under the current rules, many advertisements that can influence beneficiary decisions do not meet the content standard, and therefore are not “marketing,” because they do not explicitly mention specific benefits or cost-sharing details. Accordingly, MA plans and Part D plans could take the position that submission for CMS review is not required. CMS decided to broaden the definition of marketing by eliminating the content standard altogether, thereby including any material or activity intended to influence beneficiary decisions, regardless of specific content. By eliminating the content standard, CMS intends to ensure that all materials designed to influence beneficiary decisions are subject to regulatory oversight through submission to CMS.
The proposed change to eliminate the content standard offers several benefits that can significantly enhance the regulatory oversight of marketing activities in the healthcare sector. By broadening the definition of marketing, more materials will be submitted to CMS under the MCMG, and CMS will be able to review a wider array of materials, ensuring that all marketing efforts, regardless of their specific content, are subject to scrutiny. This comprehensive oversight aims to prevent potentially misleading advertisements from reaching beneficiaries, thereby ensuring that they receive clear, accurate, and relevant information about their healthcare options. Additionally, a broader definition allows CMS to more effectively target and review materials that are likely to impact beneficiary decisions, streamlining the review process and enhancing its efficiency and effectiveness. By requiring more materials to be submitted for review, the change also increases responsibility among MA plans and Part D sponsors to provide clear and accurate marketing materials.
The proposed change to eliminate the content standard, however, also introduces several ambiguities and challenges that MA plans and Part D sponsors must navigate. One significant challenge is the increased compliance burden, as more materials will now be subject to CMS submission and review. This heightened scrutiny could lead to increased operational costs and necessitate additional resources to ensure compliance. The elimination of the content standard means that all marketing materials and activities that meet the existing intent standards will be considered marketing for CMS’s MA and Part D marketing communications regulations, making the interpretation of intent behind these materials even more critical. This expanded definition may compel providers and plans to review and revise their communication strategies to ensure compliance, potentially requiring substantial changes to marketing campaigns and materials, which could affect how they reach beneficiaries. CMS, however, did not explicitly address any retroactive actions that MA plans or Part D sponsors must take with respect to eliminating the content standard and increasing the scope of marketing materials for review. Given more materials would be classified as marketing and thus submitted for CMS review, providers and plans could be subject to greater unnecessary regulatory burdens and potentially stifled legitimate communication efforts aimed at beneficiaries.
- Guardrails for AI
Among other requirements to ensure equitable access to MA services, CMS proposed a new rule to ensure that the use of AI within MA plans does not exacerbate health disparities or impede equitable access to healthcare services. Currently, MA plans are required to provide services in a culturally competent manner, addressing the unique needs of diverse populations.5 With the growing use of AI in healthcare, there have been concerns about algorithmic discrimination, such that AI tools may unintentionally deepen existing inequities in historically marginalized communities. CMS’s proposed rule aims to clarify that MA plans must ensure that AI and other automated systems are used in a way that promotes equitable access to care and complies with existing CMS regulations.
The proposed changes include revising § 422.112(a)(8) to explicitly require that services provided by MA plans, whether through human or automated systems, must be equitable and non-discriminatory. CMS emphasizes that AI tools should not result in biased treatment or differential access to healthcare services. The proposal also includes definitions for “automated systems” and “patient care decision support tools” to ensure clarity and compliance. CMS indicates that it seeks to address the potential for AI to perpetuate biases by requiring MA plans to regularly review and mitigate the impact of biased data inputs. In addition, the proposed rule emphasizes that if MA plans utilize AI tools or automated systems, they must ensure that the usage of such tools complies with all existing Medicare policies in a non-discriminatory manner. MA plans will be held ultimately responsible for any discriminatory outcomes, even if they use a First Tier, Downstream, or Related Entity to fulfill their obligations.
Although the current CMS proposed rule emphasizes non-discriminatory use of AI in healthcare, it is likely that the new administration, and Elon Musk’s influential role within it, may seek to modify or relax such stringent regulatory measures, potentially shifting the focus towards innovation and economic growth. The Trump administration’s preference for less stringent regulations contrasts with the Biden administration’s rigorous standards for AI safety and accountability. Musk’s dual stance—advocating for rapid technological advancement while acknowledging the existential risks of AI—adds a layer of complexity to the future of AI regulation.
- Transparency Regarding MA Services
Among other changes aimed at increase transparency for enrollees regarding MA services, the proposed rule provides guidance for MA plans regarding the administration of supplemental benefits coverage through debit cards. Currently, MA plans can offer supplemental benefits such as vision, dental, and gym memberships, which are not covered by traditional Medicare. Many MA plans use debit cards to administer these benefits, allowing enrollees to pay for covered items and services. However, observing that there has been confusion and misuse regarding these debit cards, CMS proposes to codify existing guidelines and introduce new requirements for the administration of supplemental benefits through debit cards. MA plans must ensure that debit cards are electronically linked to plan-covered benefits, providing real-time verification at the point of sale. Additionally, MA plans must provide clear instructions and customer support for debit card use and have alternative reimbursement processes in place if the debit card system fails.
- Part D Benefits: Transparency and Access for Beneficiaries
Notification Requirements
To enhance transparency for network pharmacies under Part D, CMS proposes to require Part D sponsors to notify network pharmacies of the plans they will be in-network for by October 1 of the year prior to the plan year. This proposed rule is intended to mitigate the current confusion for pharmacies and beneficiaries caused by the fact that pharmacies often do not know which plans they will be in-network for until months after contracts are executed. This notification requirement would enable pharmacies to provide accurate information to their customers, helping beneficiaries make informed decisions during the Annual Enrollment Period.
Reciprocal Termination Rights
To address the current imbalance between contract pharmacies and Part D sponsors and their pharmacy benefit managers (“PBMs”) who may terminate contracts with such pharmacies without cause on short notice, CMS proposes to require that if a network pharmacy contract allows the sponsor to terminate without cause, it must also allow the pharmacy to terminate without cause after providing the same notice period. This change aims to protect beneficiaries from disruptions in receiving Part D benefits that occur when pharmacies stop providing services before formally terminating their contracts.
Coverage of Anti-Obesity Medication (“AOMs”)
AOMs have historically been excluded from Part D coverage based on the interpretation that drugs used for weight loss are not covered, even when used to treat obesity. Recognizing the evolving medical consensus that obesity is a chronic disease, CMS proposes to reinterpret the exclusion to allow AOMs to be covered under Part D when used for the treatment of obesity. Additionally, this change would apply to Medicaid, requiring state Medicaid programs to cover AOMs for the treatment of obesity.
Vaccine and Insulin Cost-Sharing Charges
CMS proposed codifying the cost-sharing requirements for covered adult vaccine and insulin products under Part D, as mandated by the Inflation Reduction Act. Effective for plan years beginning on or after January 1, 2023, the Part D deductible will not apply to, and there will be no cost-sharing for, adult vaccines recommended by the Advisory Committee on Immunization Practices (“ACIP”). This includes any new ACIP-recommended adult vaccines that become available during a plan year.
- Changes to MA and Part D MLR Standards
Currently, the MLR requirements mandate that MA plans and Part D sponsors spend at least 85% of their revenue on patient care and quality improvement activities, with the remaining 15% allocated to administrative costs, marketing, and profit.6 If the MLR falls below 85%, the organization must remit the difference to CMS. CMS is proposing several changes to enhance the accuracy and transparency of MLR reporting. These changes include reinstating detailed reporting requirements that were in effect from 2014 to 2017, establishing clinical and quality improvement standards for provider incentives and bonus arrangements, and prohibiting administrative costs from being included in quality improvement activities. Additionally, CMS proposes new audit and appeals processes for MLR compliance and the release of Part C and Part D MLR data. These changes aim to align Medicare MLR standards with those of commercial and Medicaid programs, improve oversight, and ensure that funds are appropriately spent on patient care and quality improvements.
- Additional MA Beneficiary Protections
Metrics for Prior Authorization
The proposed rule revises the current metrics for the annual health equity analysis on the use of prior authorization by disaggregating data by each covered item and service, such as percentages of prior authorization requests approved, denied, and approved after appeal, as well as the average and median time for determinations. Through this change, CMS aims to detect specific services that may be disproportionately denied. The rule also directs that the utilization management committee include a health equity expert and conduct an annual analysis to identify and address disparities affecting enrollees with social risk factors. The results must be publicly posted with an executive summary to ensure transparency and accessibility.
“Internal Coverage Criteria”
Aiming to enhance the regulations regarding internal coverage criteria for MA plans, the proposed rule clarifies that MA plans must align their coverage criteria with traditional Medicare statutes and regulations and establishing specific guardrails to ensure access to basic benefits. The rule proposes to revise the definition of “internal coverage criteria” in 42 C.F.R. § 422.101(b)(6)(ii) as any policies or guidelines not explicitly stated in Medicare laws or CMS manuals used by MA plans to make medical necessity determinations. It requires that these criteria be based on current evidence, publicly available, and not used to automatically deny coverage without individual assessment. Additionally, the rule proposes prohibitions on criteria that lack clinical benefit or are used to reduce utilization of an item or service without considering individual medical necessity. These changes aim to protect beneficiaries’ access to medically necessary care and promote transparency in MA plans’ internal coverage decisions.
We will continue to monitor developments relating to the Proposed Rule. If you have any questions concerning this alert, please do not hesitate to contact one of the authors or your usual Ropes & Gray advisor.
- See, e.g., Medicare Communications and Marketing Guidelines (MCMG), dated Sept. 5, 2018 (providing guidance regarding marketing communications and how CMS would evaluate the intent and content of such materials).
- 42 C.F.R. §§ 422.2260 and 423.2260.
- 42 C.F.R. §§ 422.2260(1)(i) and 423.2260(1)(i).
- 42 C.F.R. §§ 422.2260(2) and 423.2260(2).
- See 65 FR 40170.
- See 42 C.F.R. §§ 422.2410 and 423.2410.
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