Highlights: CMS’s Proposed Rule for Medicare Part C & D (CY 2027 NPRM)

What You Need to Know

On November 26, 2025, the Centers for Medicare & Medicaid Services (CMS) published its Proposed Rule for the Medicare Program; Contract Year 2027 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, and Medicare Cost Plan Program (the “CY 2027 NPRM” or “proposed rule”) for public comment. In addition to outlining prospective policy and technical changes to Medicare Advantage (Part C), the Medicare Prescription Drug Benefit (Part D), and Medicare Cost Plan regulations, the proposals showcase the government’s plans to make comprehensive updates in response to statutory changes—notably the Inflation Reduction Act of 2022 (IRA)—as well as feedback from interested parties, and current federal deregulatory priorities.

The 465-page proposed rule covers several key areas, all of which are reviewed in additional detail below:

Key Takeaways

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Table of Contents

• • Part D Redesign and Manufacturer Discount Program
  • Star Ratings Program Updates
  • Marketing, Communications, and Agent/Broker Oversight
  • Program Integrity Reforms
  • Special Needs Plans (SNPs): Growth and Future Policy
  • Reducing Regulatory Burden: Compliance with Deregulatory E.O. 14192
  • Future Directions in Medicare Advantage and Potential Changes to CMS’s Risk Adjustment Model

Part D Redesign and Manufacturer Discount Program

Like CMS’s  , this proposed rule seeks to implement specific and significant Inflation Reduction Act of 2022 (IRA)-related changes to the Part D benefit. Specifically, this proposed rule seeks to codify certain changes to the deductible, initial coverage limit, coverage gap, annual out-of-pocket threshold, and alternative prescription drug coverage options. The proposed rule also seeks to amend CMS’s specialty tier regulations, payments that count towards True Out-of-Pocket costs (TrOOP), and methodology for reinsurance payments, as well as to codify certain policies related to the Manufacturer Discount Program (MDP) and to implement the Selected Drug Subsidy.

For additional information on CMS’s implementation of the Part D redesign components of the IRA, including on the issues codified by this proposed rule, readers should refer to the CY 2025 and CY 2026 Part D redesign program instructions. As a reminder, Section 11201(f) of the IRA directed the Secretary to implement the Part D redesign components of the statute for 2024, 2025, and 2026 by program instruction or other forms of program guidance.

Major Points

If finalized, the proposals would:

• • Codify the sunsetting of the Coverage Gap Discount Program (CGDP) and termination of all CGDP agreements.
  • Codify the Manufacturer Discount Program, which began January 1, 2025 as a replacement to the CGDP and requires manufacturers that enter into MDP agreements to provide discounts on applicable drugs in the initial and catastrophic phases of the Part D benefit.
  • Update rules for specialty tiers, including a modification to allow for bidirectional adjustments to the specialty-tier cost threshold (existing regulations only contemplate increases, and not decreases, to the threshold).
  • Adjust definitions and treatment of TrOOP-eligible incurred costs.
  • Introduce other IRA-related amendments to the regulation text.

Our Perspective

The IRA made sweeping changes to the Medicare Part D prescription drug benefit, including the implementation of a new, three-phase benefit design: the deductible phase, the initial coverage phase, and the catastrophic phase. While these proposals contemplate material adjustments to the Part D regulations, they largely represent the codification of IRA-initiated Part D benefit amendments and CMS’s previously issued subregulatory program instructions.

CMS’s proposed approach to codifying many of these IRA-related changes would not replace the entire existing framework, but rather to add an “end date” where required; the agency notes it is preserving the prior language “for historical purposes and for any reconciliation activities related to benefit years prior to 2025.”

Star Ratings Program Updates

CMS proposes the following significant changes to Star Ratings: (1) adding and removing several measures; (2) not implementing the Health Equity Index (HEI); and (3) codifying Plan Preview processes. These changes—if codified into a final rule—will have a significant impact on health plans and their operations, as they will streamline the measures and emphasize member outcomes. After simulating the impact of these changes, the agency concluded that most contracts (62%) would have no change in the overall Star Rating. Of the remaining contracts, 13% would increase by a half star, 25% would decrease by a half star, and one contract would decrease by one Star. In addition, 5% of contracts would gain Quality Bonus Payments (QBPs), while 4% of contracts would lose QBPs.

CMS also requests information on how to make value-added changes to QBPs that will accelerate the implementation of new measures and reduce the lag between measurement and payment for existing measures. The agency is seeking input on whether it should test an Innovation Center model that would delink QBPs from MA bids.

Major Points

If finalized, the proposals would:

• • Remove twelve measures and add one measure. CMS has proposed removing twelve measures (from Part C and Part D) beginning with either the 2028- or 2029-Star Ratings years. The agency explained that these changes are intended to simplify and refocus the measure set on clinical care, outcomes, and patient experience of care measures as well as align with goals of the Make America Healthy Again (MAHA) initiative. CMS articulated a desire to streamline the measure set while continuing to include enough measures to assess performance with a focus on patient care experiences. The agency also explained that it wanted to reduce the number of operational and administrative measures to avoid plans “teaching to the test.”

The following are the measures that CMS proposes to remove and when that removal would be effective:

Part C or D	Measure Name	Star Ratings Year Proposed for Removal
C	Plan Makes Timely Decisions about Appeals	2029 Star Ratings
C	Reviewing Appeals Decisions	2029 Star Ratings
C	Special Needs Plan (SNP) Care Management	2029 Star Ratings
C	Call Center—Foreign Language Interpreter and TTY Availability	2028 Star Ratings
D	Call Center—Foreign Language Interpreter and TTY Availability	2028 Star Ratings
C and D	Complaints about the Health/Drug Plan	2029 Star Ratings
D	Medicare Plan Finder Price Accuracy	2029 Star Ratings
C	Diabetes Care—Eye Exam	2029 Star Ratings
C	Statin Therapy for Patients with Cardiovascular Disease	2028 Star Ratings
C and D	Members Choosing to Leave the Plan	2029 Star Ratings
C	Customer Service	2029 Star Ratings
C	Rating of Health Care Quality	2029 Star Ratings

 

In addition to removing measures, CMS proposes adding a new measure of “Depression Screening and Follow-Up” (DSF), which would measure 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. This measure is intended to address behavioral health gaps starting with the 2027 measurement year and 2029 Star Ratings.

• • Remove the HEI and continue the reward factor. The proposed rule would not implement the HEI (previously renamed by the Trump administration as the Excellent Health Outcomes for All [EHO4all] reward) and instead continue the historical reward factor. CMS explained that it wants to incentivize improvement efforts focused on clinical care, outcomes, and patient experience for all members.
  • Codify data provided during Plan Preview periods. CMS proposes codifying its current practice of providing de-identified contract-level sample data for one of each type of measure (i.e., one CAHPS measure, one measure for Part C, and one for Part D that uses clustering, and any measures requiring a different type of calculation such as complaints about the plan).

Our Perspective

These proposed changes to the Star Rating system, if finalized, will have a significant operational impact on health plans. CMS has stated that it intends to shift the focus from the operational and administrative measures to patient care measures. This is important because, while plans can control their operational and administrative processes, they have less control over patient care and outcomes. As a result, plans may need to shift resources toward managing patient care and ensuring better outcomes.

Marketing, Communications, and Agent/Broker Oversight

CMS seeks to rescind several Biden-era regulations that enhanced oversight over Medicare Advantage and Part D marketing. If finalized, these changes would be effective for all CY 2027 marketing and communications as of October 1, 2026.

Major Points

If finalized, the proposals would:

• • Remove requirements relating to the time and manner of plans’ outreach to beneficiaries. The proposed rule seeks to specifically permit marketing events to occur immediately after (and in the same location as) an educational event with appropriate notice, as well as allow plans to collect scope of appointment (SOA) forms at educational events and eliminate the mandatory 48-hour waiting period after a beneficiary completes an SOA.
  • Remove restrictions on the use of superlatives in marketing materials as a “technical change.” The proposed revision seeks to eliminate duplication with general restrictions that prohibit plans from providing misleading, confusing, or materially inaccurate information.
  • Require the third-party marketing organization (TPMO) disclaimer to be read earlier. Currently, CMS requires plans to read the TPMO disclaimer—which is mandatory for TPMOs that do not sell all plans in a service area—within the first minute of a call. The proposed rule suggests the disclaimer be read “prior to discussion of any benefits” and would further remove state health insurance assistance programs as a source of information for beneficiaries.
  • Relax call recording retention requirements for sales and marketing calls from ten years (the standard Medicare Advantage and Part D record retention period) to six years.
  • Rescind Notice of Availability of language assistance services and auxiliary aids and services requirements as duplicative of the requirements issued by the Office of Civil Rights implementing Section 1557 of the Affordable Care Act.
  • Remove the annual mid-year notice for unused supplemental benefits due to burden and perceived limited benefit.

Our Perspective

The proposed rule demonstrates a significant shift in CMS’s approach to Medicare Advantage and Part D marketing. Under President Biden, CMS promulgated extensive regulations aimed at strengthening the compliance framework for Medicare-relevant marketing and ensuring that outreach would not mislead or confuse beneficiaries, paying particular attention to arrangements with TPMOs. The proposed rule removes several of those requirements that the current administration perceives to be duplicative, unnecessary, or overly burdensome.

If CMS relaxes these restrictions, plans and TPMOs will be able to expand current marketing activities (particularly in the context of educational events) and eliminate procedures that were designed by CMS to prevent beneficiary confusion. CMS indicates that the proposed rule would modernize and reduce the burden of marketing and agent/broker oversight requirements, reduce costs and burden on Medicare Advantage organizations and Part D plan sponsors, and create a more beneficiary-friendly outreach experience.

Lastly, CMS is specifically seeking comment on additional “ways to modernize [CMS’s] approach to marketing oversight and agent/broker regulation in the Medicare program while ensuring beneficiaries continue to receive accurate information about plan choices.”

Program Integrity Reforms

CMS is proposing to standardize the type of detailed documentation plans must maintain if used to support a coverage determination or point-of-sale (POS) claim adjudications. CMS notes that, in conducting Part D program integrity Prescription Drug Event (PDE) record review audits, it has discovered that available documentation and record keeping practices vary significantly between plans. The new language will be added to the record maintenance and audit contract provisions under 42 C.F.R. § 423.505(d) and (e). In addition to providing a detailed list of what information must be maintained, the revisions will require such information to be maintained in its original format—something that not all plans currently do, especially for audio recordings.

CMS is also proposing to amend the language pertaining to Medicare Part D at § 423.2600 to state that plan sponsors may appeal program integrity PDE record review audit determinations, and to further identify what types of findings are or are not considered to be appealable.

Major Points

If finalized, the proposals would:

• • Enable CMS to review original format documentation or information from all written, electronic, and verbal communications between the pharmacist, prescriber, enrollee, or other relevant parties, in addition to what is included on the pharmacy claim, if such information is relied upon by the Part D plan sponsor to make a coverage determination or otherwise permit a POS claim adjudication that determines a drug’s coverage under the Part D benefit.
  • Require that the original coverage determination be maintained as documentation, and all information contributing towards that determination must be made available to CMS during Part D program integrity PDE record review audits. This information potentially includes any of the following, if it is relied on to make a coverage determination:
    • • The date and time that the request for a coverage determination or POS claim adjudication was received.
      • The identity of the individual who submitted the request.
      • The name and title (as applicable) of the individual that the Part D plan sponsor contacted to verify the request (i.e., pharmacist, prescriber, enrollee, or enrollee representative).
      • The information obtained by the Part D plan sponsor, including the questions asked, the responses received, and the final decision rendered.
      • The diagnosis code(s) for a coverage determination or POS claim adjudication used to support a medically accepted indication.
      • Any additional information that the Part D plan sponsor utilized to determine the outcome of the coverage determination or POS claim adjudication request.
  • Ensure that failure to produce this documentation results in an improper Part D audit determination, subject to PDE record deletion in accordance with § 423.325(a)(2).
  • Permit appeals for certain types of audit findings. Proposed language would specify that Part D sponsors may appeal factual or data errors, such as a determination that a drug, item or service was excluded from coverage or a determination that a Medicare Part D payment was a duplicate payment.
  • Identify audit findings that are not appealable, including the failure to submit documentation, or challenging the audit methodology, such as the manner in which data was extracted.

Our Perspective

The proposed requirement mandating that plans preserve supporting documentation in its original format could potentially constitute a significant shift in documentation procedures for plans that are not retaining original format documentation for one or more of the items that are required to be maintained if they are used to support a coverage determination.  The proposed rule also appears to impose an automatic penalty of striking PDEs that do not adhere to these new requirements. While the proposed rule also seeks to allow plans to appeal PDE record review audit findings, the appeal rights would be relatively limited and  not permit the plan to appeal any failure to provide required documentation that is requested during the audit itself.

Special Needs Plans (SNPs): Growth and Future Policy

Prompted by significant enrollment growth in Chronic Condition Special Needs Plans (C-SNPs) and Institutional Special Needs Plan (I-SNPs), CMS has issued a request for information (RFI) to gather more context on enrollment trends for C-SNPs and I-SNPs and learn more about how enrollment in C-SNP and I-SNP plans may be impacting state integration efforts. The agency also put forward several suggested changes for regulatory requirements regarding Dual-Eligible Special Needs Plans (D-SNPs) in the proposed rule.

Major Points

If finalized, the proposals involving D-SNPs would:

• • Revise regulations involving passive enrollment for beneficiaries who are covered by an integrated D-SNP and transition from a terminated or non-renewing D-SNP.
  • Introduce flexibility for states without mandatory Medicaid managed care.
  • Codify that loss of a State Medicaid Agency Contract (SMAC) is a basis for termination.
  • Notably, the RFI solicits comment on several topics relevant to SNPs, including:
    • • Whether or not CMS should adopt a SMAC requirement for C-SNPs and/or I-SNPs with high concentrations for dually eligible individuals and potential Federal requirements for those SMACs.
      • Methods to increase care coordination for dually eligible individuals enrolled in C-SNPs and I-SNPs.
      • Approaches for applying the D-SNP look-alike contracting limitations to C-SNPs.
      • Other policy suggestions support high quality integrated care for dually eligible enrollees, given the increasing proportion of such individuals enrolling in C-SNPs and I-SNPs.
      • Approaches for how SNPs can support improved access to treatment and care coordination for individuals with mental health conditions or substance use disorders

Our Perspective

CMS’s RFI may be particularly significant, as it indicates that CMS has observed the recent growth of C-SNP plans—which do not require the same level of integration as D-SNP plans or a contract with a state Medicaid agency—and that the agency is concerned that C-SNP plans have experienced rapid growth due to an effort by Medicare Advantage organizations to circumvent integration requirements; many dual-eligible individuals have chronic conditions and thus will qualify for enrollment in a C-SNP plan.

We anticipate that CMS will be using this RFI process to explore future changes to C-SNP enrollment requirements.

Reducing Regulatory Burden: Compliance with Deregulatory E.O. 14192

Seeking to align its codified rules with the 2025 executive order on deregulation (E.O. 14192, “Unleashing Prosperity Through Deregulation”), which emphasizes eliminating requirements that the Trump administration perceives to be redundant or low-value for the sake of enhancing program efficiency, CMS has proposed to roll back several existing regulations pertaining to Medicare Advantage and Part D.

Major Points

If finalized, the proposals would:

• • Modify existing regulations to confirm that account-based plan types that do not provide coverage for prescription drugs (i.e., health reimbursement arrangements [HRAs] and Individual Coverage HRAs [ICHRAs]) are not required to make creditable coverage disclosures.
  • Eliminate a pathway (§ 422.102(e)) that currently allows D-SNPs adhering to certain integration and performance standards to offer additional supplemental benefits (e.g., benefits that CMS does not allow most Medicare Advantage plans to offer).
  • Rescind a requirement that Medicare Advantage organizations provide annual mid-year notices to enrollees regarding unused supplemental benefits.
  • Remove several requirements pertaining to health equity, DEI, and the culturally competent provision of services
  • Remove the enrollment sanction on Medicare Advantage organizations offering D-SNP(s) that failed to meet at least one of the new integration standards after plan year 2025.

Our Perspective

None of these changes are likely to substantially impact health plans, as all relate either to DEI rollbacks—which Medicare Advantage organizations already expected, given the federal government’s position on DEI—or pertain to provisions that are redundant, outdated, or otherwise unnecessary.

Future Directions in Medicare Advantage and Potential Changes to CMS’s Risk Adjustment Model

CMS is actively seeking input on alternative options for risk adjustment, including “near-term changes to the existing risk adjustment methodology” and “entirely new approaches” that account for recent advances in technology.

Major Points

• • CMS is seeking input on alternatives to the HCC risk adjustment model. CMS states that the existing HCC risk adjustment model relies on medical diagnoses to predict health care costs, which could lead plans to “code more intensely” and “prioritize investments in coding activities” over care management and treatment to generate higher payments. The agency notes in the proposed rule that it previously contemplated including Medicare Advantage encounter data in the calibration of risk adjustment models rather than solely rely on fee-for-service (FFS) data. CMS is seeking ideas for additional data sources and elements for risk adjustment that do not rely on a collection of diagnoses data and instead incorporate alternative factors to “infer” a patient’s health risk and the severity of that risk.
  • CMS is proposing several changes to existing risk adjustment data collection and usage rules. In addition to the agency’s broad request for input regarding Medicare Advantage and risk adjustment, CMS has proposed revisions to 42 CFR 422.310(f), which establishes requirements for the collection and submission of risk adjustment data, as well as the allowable uses for the data and conditions under which the data can be released. CMS has found that the growth of Medicare Advantage as a percentage of Medicare enrollment has led to a corresponding increase in requests for risk adjustment data. The agency believes the current regulatory scheme is too restrictive and has proposed revisions to increase flexibility regarding the use and release of this data.

Our Perspective
CMS’s RFI on alternative risk adjustment options has the potential to be significant for health plans, as it suggests the agency is considering a pivot away from the HCC model. Given reports of fraud, waste and abuse from improperly reported diagnoses codes as well as the recent district court decision in Humana v. Kennedy—which vacated CMS’s 2023 Final Rule governing the Risk Adjustment Data Validation (RADV) audits of medical records to determine whether they support reported diagnoses codes—it is perhaps not surprising that CMS is considering alternatives to the HCC model.

We strongly encourage Medicare Advantage organizations to provide CMS with comments on alternative risk models. We also recommend that Medicare Advantage organizations provide CMS with comments if the relaxation of the data restrictions raises any concerns regarding confidentiality or the release of information that is considered proprietary and sensitive.

Final Thoughts

Our team is ready and available to assist health care entities that may have an interest in submitting comments to CMS. For further details or clarification on what specific proposed program provisions could mean for your business, please contact any author of this alert or your preferred Crowell and Morning attorney.