Medicare Program: Contract Year 2027 and Certain Contract Year 2026 Policy and Technical Changes to Medicare Advantage, Prescription Drug Benefit, and Cost Plan Programs
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This final rule implements major changes required by the Inflation Reduction Act of 2022 to the Medicare Part D benefit design. It permanently replaces the Coverage Gap Discount Program with the new Manufacturer Discount Program effective 2025, requiring manufacturers to provide discounts in both the initial coverage and catastrophic phases. The rule codifies the $2,000 annual out-of-pocket cap (indexed annually), eliminates the coverage gap phase, updates True Out-of-Pocket (TrOOP) rules, and revises reinsurance payment methodology. It also makes significant updates to the Star Ratings program by removing several measures (with staggered applicability from 2027–2029 Star Ratings), decides not to implement the proposed Health Equity Index reward, and finalizes new transparency and administration rules for Special Supplemental Benefits for the Chronically Ill (SSBCI) and supplemental benefits delivered via debit cards. The changes take effect June 1, 2026 and apply to coverage starting January 1, 2027.
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Key Changes
- Replaces Coverage Gap Discount Program with Manufacturer Discount Program effective January 1, 2025; manufacturers must discount applicable drugs in initial coverage and catastrophic phases
- Codifies $2,000 annual out-of-pocket threshold (indexed annually) for Part D beginning 2025
- Eliminates the coverage gap phase and updates rules for what counts as True Out-of-Pocket (TrOOP) costs
+ 3 more changes with Pro
Obligations
What this law requires
Manufacturers must provide discounts on applicable drugs in both the initial coverage phase and catastrophic coverage phase under the Manufacturer Discount Program, effective January 1, 2025
Part D plan sponsors must terminate all Coverage Gap Discount Program agreements as of January 1, 2025
CMS must implement and enforce the $2,000 annual out-of-pocket cap (indexed annually) for Medicare Part D beneficiaries
Medicare Advantage organizations and Part D sponsors must comply with updated True Out-of-Pocket (TrOOP) cost counting rules and establish policies for how costs for drugs not subject to the Part D defined standard deductible count towards manufacturer discount eligibility
CMS must revise reinsurance payment methodology to Part D sponsors in accordance with the new Part D benefit design changes