On April 5, 2023, the Centers for Medicare & Medicaid Services (CMS) released the Contract Year 2024 Policy and Technical Changes to the Medicare Advantage (MA) and Medicare Prescription Drug Benefit Programs (Part D) Final Rule and accompanying fact sheet.

Highlights from the rule include:

Inflation Reduction Action: Part D drugs judged by gross spending for negotiation
CMS finalized its proposal to clarify the regulatory definition of “gross covered prescription drug costs” to remove the references to “actually paid costs.” For the purposes of the Inflation Reduction Act’s Government Negotiation policy, this clarification means the targeting of negotiation-eligible Part D drugs will be based on gross, instead of net, spending.
Changes to an Approved Part D Formulary and Medication Therapy Management (MTM)
CMS did not address its proposal to allow Part D plans to immediately substitute interchangeable biosimilars and authorized generics for their brand name counterparts (Part D plans are already allowed to immediately substitute generic drugs).
CMS also does not address its proposed changes to the MTM program in the final rule.
CMS broadly states that proposals not addressed in the Final Rule will be addressed in a subsequent rulemaking.
Utilization Management Requirements
CMS finalized several new standards for MA plans that would limit use of utilization management for Part A and B services covered under Traditional Medicare.
Clinical Trial Coverage
CMS finalized its proposal that for beneficiaries enrolled in MA plans who are participating in an approved clinical trial, traditional Medicare is responsible for coverage of routine costs associated with the clinical trial.
MA and Part D Quality Rating System
CMS finalized its proposal to create a new health equity index reward program for MA and Part D plans in addition to adding several new measures. CMS states that several other Star Ratings provisions of the proposed rule are not being finalized and will be addressed in a later final rule.
Health Equity in MA
CMS finalized new requirements and clarified current rules for MA organizations related to cultural competency, low digital health literacy among enrollees, providers’ cultural and linguistic capabilities within provider directories, and disparities in quality improvement programs.
MA and Part D Marketing
CMS finalized requirements to prohibit certain types of ads, prevent predatory behavior, and govern how MA and Part D marketing agents may interact with beneficiaries. 
Behavioral Health in MA
CMS added 2 new provider specialty types to network adequacy reviews and clarified MA coverage requirements of behavioral health services.

Below, ADVI provides an initial review of notable topics. Please get in touch with any additional questions.

IRA Implementation and Gross Covered Prescription Drug Costs
The current regulatory definition of “gross covered prescription drug costs” refers to “actually paid costs,” although the statutory definition does not use that phrase or otherwise specify that such costs must be net of all direct and indirect remuneration. This regulatory definition was codified for the sole purpose of calculating reinsurance payment amounts.

In this Final Rule, CMS finalized its proposal to remove the phrase “actually paid” from the regulatory definition to make it clear that the targeting of negotiation-eligible Part D drugs will be based on gross, instead of net, spending. CMS noted that this “clarification” will not constitute a change in policy, but would remove ambiguity when “gross covered prescription drug costs” is referenced outside of the reinsurance context.

Changes to an Approved Part D Formulary – Immediate Substitutions 
Part D plans are currently permitted to immediately remove a brand name drug from its CMS-approved formulary and substitute its newly released generic equivalent. CMS permits Part D plans meeting those requirements to provide notice of those specific changes after they take place.  No transition supply of the substituted drug is required to be made and Part D plans can make these changes at any time.

CMS previously proposed to codify its process for review and approval of changes to approved formularies consistent with Chapter 6 of the Prescription Drug Benefit Manual (PDBM). This included proposals to define several types of formulary changes, adopt rules for CMS approval of negative formulary changes, revise requirements for implementation of certain formulary changes that may be made immediately, and update and streamline its notice requirements. These proposals are not addressed in the Final Rule, however CMS broadly states that it “intends to address all of the remaining proposals from the December 2022 proposed rule in a subsequent rulemaking” to be effective no earlier than January 1, 2025.
 
Relevant proposals from the Proposed Rule, which are not included in the Final Rule but may be included in future rule making, include the following:

Consistent with current regulations, create a new term, “immediate negative formulary change” and extend the scope of immediate substitutions to permit Part D sponsors to immediately substitute: (i) a new interchangeable biological product for its corresponding reference product; (ii) a new unbranded biological product for its corresponding brand name biological product; and (iii) a new authorized generic for its corresponding brand name equivalent.
CMS stated that the proposal would exempt negative immediate changes that meet their requirements from the negative change request and approval process but would require Part D sponsors to submit such changes in their next required or scheduled CMS formulary updates.
Consistent with existing requirements for immediate generic substitutions, require advance general notice of immediate substitutions and market withdrawals, followed by written notice to affected enrollees as soon as possible, but by no later than the end of the month following any month in which a change takes effect.
CMS previously clarified that its proposal would not permit Part D sponsors to immediately substitute biosimilar products (only interchangeable biosimilar products).
CMS also stated that its proposal would permit plans to make more than one negative formulary change to that drug.
Relation to the IRA
In the Proposed Rule, CMS clarified that plans would still be permitted to make these negative formulary changes even for a drug which would otherwise be required to be listed on a Part D formulary because it is a selected drug for which a maximum fair price is in effect. This is consistent with language in the IRA which stipulates that “nothing shall be construed as prohibiting a part D sponsor from removing such a selected drug from a formulary if such removal would be permitted under…any successor regulation.”

Utilization Management Requirements
CMS finalized several policies clarifying MA plans’ use of prior authorization for covered Part A and B services. Specifically:

MA plans must follow Traditional Medicare coverage NCDs, LCDs, statutes and regulations when making medically necessary determinations.
CMS finalized their proposal to codify the standard that MA coverage criteria for basic benefits must comply with NCDs, LCDs, and general coverage and benefit conditions included in Traditional Medicare.
If coverage criteria are not fully established in Medicare statute, regulation, NCD, or LCD, a MA plan may create internal coverage criteria that are based on current evidence available in widely used treatment guidelines or clinical literature. In these scenarios, the MA plan must demonstrate that the additional coverage criteria they set form provide benefits that are likely to outweigh harms, including from delayed or decreased access to the item or service.
CMS codified language that MA organizations should make coverage determinations based on medical necessity as outlined in coverage policies (that are no more restrictive than Traditional Medicare), involvement and review by the plan’s medical director when appropriate, and the enrollee’s medical history.
MA plans may use PA to confirm the presence of diagnoses or other medical criteria that are the basis for coverage determinations.
MA plans are permitted to cover items and services more broadly than FFS Medicare through supplemental benefits.
MA plans must provide a publicly accessible summary of evidence that was considered during the development of the internal coverage criteria used to make medical necessity determinations, a list of sources for that evidence, and an explanation of the rationale that supports adoption of the coverage criteria.  
An approval granted through PA processes must be valid for as long as medically necessary to avoid disruptions in care in accordance with applicable coverage criteria, the patient’s medical history and the treating provider’s recommendation. MA plans are required to provide a minimum 90-day transition period when an enrollee who is currently undergoing treatment switches to a new MA plan, switches from Traditional Medicare to an MA plan, or is new to Medicare.
MA plans must establish a Utilization Management committee, led by the Medical Director, that reviews policies annually and keeps current of relevant clinical guidelines, LCDs, NCDs, and other Traditional Medicare coverage policies. CMS finalized their proposal that after January 1, 2024, MA plans may no longer use coverage policies that have not been reviewed and approved by the UM committee.
These finalized requirements will be applicable for MA plans beginning January 1, 2024.

Clinical Trial Coverage
CMS finalized their proposal that traditional Medicare is responsible for coverage of routine costs associated beneficiaries enrolled in MA plans who are participating in an approved clinical trial under NCD 310.1.

FFS Medicare covers routine costs of qualifying clinical trials consistent with National Coverage Determination 310.1 – Routine Costs in Clinical Trials. Routine costs include:
Items or services that are typically provided absent a clinical trial
Items or services required solely for the provision of the investigational item or services
Clinically appropriate monitoring of the effects of that item or service
Prevention, diagnosis, and treatment of complications that arise from provision of an investigational item or services
MA plans will be responsible for paying the difference between FFS Medicare cost sharing incurred for qualifying clinical trial items and services and the MA plan’s in-network cost-sharing requirements for the same items and services. The enrollee in-network cost sharing portion must be included in the plan’s maximum out-of-pocket calculation
MA plans may not require prior authorization or create other impediments to participate in a qualified clinical trial under NCD 310.1
MA plans must provide coverage for:
Services to diagnose conditions covered by clinical trial services
Most services furnished as follow up care to clinical trial services
Services already covered by the MA plan

Separately, CMS also provides Medicare coverage of Category A and B Investigational Device Exemption (IDE) studies. These trials are not covered by NCD 310.1. CMS finalized that MA plans are responsible for covering routine items and services in Category A and B IDE trials covered under FFS Medicare. CMS also finalized that MA plans will be responsible for covering CMS approved Category B IDE devices. MA plans may apply utilization management criteria for this covered benefit. 
 
CMS reiterated in the proposed rule that MA plans must cover NCDs with Coverage with Evidence Development (CED), but they may apply utilization management to the benefits covered under the NCD. CMS did not propose—and the final rule does not make—any changes to these coverage requirements.
 
Expanding Eligibility for Low-Income Subsidies (LIS) Under Part D of the Medicare Program
Beginning January 1, 2024, the Inflation Reduction Act expanded eligibility for the full Low-Income Subsidies (LIS) under Medicare Part D to individuals with incomes up to 150% (up from 135% currently) of the Federal poverty level (FPL).  The IRA also allows individuals to qualify for the full subsidy based on the higher resource requirements currently applicable to the partial LIS group.
 
Individuals who qualify for the full LIS receive assistance to pay their full premiums and deductibles (in certain Part D plans) and have reduced cost sharing. Individuals who qualify for the partial LIS pay reduced premiums (on a sliding scale based on their income) and have reduced deductibles and cost sharing. The expansion created in the IRA will provide the full LIS subsidy to those who currently qualify for the partial subsidy.
 
CMS finalized to implement section 11404 of the IRA as proposed. HHS’ Office of the Actuary (OACT) estimates this policy will increase Medicare spending by $2.3 billion over 10 years.
 
Medicare Advantage/Part C and Part D Prescription Drug Plan Quality Rating System
CMS finalized several proposed changes to the MA and Part D Quality Rating System, including:

Beginning with the 2027 Star Ratings, implement a health equity index (HEI) reward for Parts C and D plans using measurement data from 2024 and 2025.
Reduce the weight of patient experience/complaints and access measures from four to two “to better align” with other CMS quality programs and the current CMS Quality Strategy.
Remove the Part C Diabetes Care – Kidney Disease Monitoring
Implement an additional rule for the removal of Star Ratings measures.
Remove the 60% rule that is part of the adjustment for extreme and uncontrollable circumstances.
Update or add the following measures:
Part C
Kidney Health Evaluation for Patients with Diabetes
Part D
Medication Adherence for Diabetes Medications
Medication Adherence for Hypertension (RAS Antagonists)
Medication Adherence for Cholesterol (Statins)
CMS states that several Star Ratings provisions of the proposed rule are not being finalized and will be addressed in a later final rule. These proposals include the following:
Remove the stand-alone Medication Reconciliation Post discharge measure.
Add the following measures:
Part C:
Colorectal Cancer Screening
Care for Older Adults – Functional Status Assessment
Part D
Concurrent Use of Opioids and Benzodiazepines
Polypharmacy Use of Multiple Anticholinergic Medications in Older Adults
Polypharmacy Use of Multiple Central Nervous System Active Medications in Older Adults

Medication Therapy Management (MTM) Program 
CMS previously proposed the following changes to the MTM targeting criteria to promote health equity and reduce eligibility gaps across MTM services.  While these proposals are not addressed in the final rule, CMS states that it “intends to address all of the remaining proposals from the December 2022 proposed rule in a subsequent rulemaking” to be effective no earlier than January 1, 2025.
 
The previous proposals include:  

Adding HIV/AIDS to the list of core chronic diseases, and requiring plan sponsors to include all these diseases identified by CMS in their targeting criteria
Lowering the maximum number of covered Part D drugs a sponsor may require from eight to five and requiring sponsors to include all Part D maintenance drugs in their targeting criteria
Revisiting the methodology for calculating the cost threshold to commensurate with the average annual cost of 5 generic drugs

Health Equity in Medicare Advantage  
CMS clarified current rules, expanding the example list of populations that MA organizations must provide services in a culturally competent manner. These include people:

with limited English proficiency or reading skills;
of ethnic, cultural, racial, or religious minorities;
with disabilities;
who identify as lesbian, gay, bisexual, or other diverse sexual orientations;
who identify as transgender, nonbinary, and other diverse gender identities, or people who were born intersex;
who live in rural areas and other areas with high levels of deprivation; and
otherwise adversely affected by persistent poverty or inequality.

Furthermore, CMS finalized requirements for MA organizations to:

develop and maintain procedures to offer digital health education to enrollees to improve access to medically necessary covered telehealth benefits
include providers’ cultural and linguistic capabilities in provider directories
include efforts to reduce disparities quality improvement programs

Medicare Advantage (MA) and Part D Marketing
CMS finalized:

the prohibiting of ads that do not mention a specific plan name as well as ads that use words and imagery that may confuse beneficiaries or use language or Medicare logos in a way that is misleading, confusing, or misrepresents the plan
requirements to further protect Medicare beneficiaries by ensuring they receive accurate information about Medicare coverage and are aware of how to access accurate information from other available sources

Furthermore, CMS reinstated important protections that prevent predatory behavior and finalized changes that strengthen the role of plans in monitoring agent and broker activity.
 
Behavioral Health in Medicare Advantage
CMS solicited comments in the 2023 Proposed Rule on strategies to improve MA behavioral health networks and improve beneficiary access. After consideration of these comments and input received on the 2024 Proposed Rule, CMS is finalizing the following proposals.

Add two new behavioral health provider specialty types that will be included in network adequacy reviews. The new provider types are (1) clinical psychology and (2) clinical social work
CMS also proposed adding Prescribers of Medication for Opioid Use Disorder as a new provider specialty type but is not finalizing this proposal.  
Modify MA standards to explicitly include behavioral health services. CMS is making this change to more clearly describe the services MA plans are required to cover.
Codify standards for appointment wait times for primary and behavioral health services. CMS clarified that wait times will be based on business days, which is the approach used for Qualified Health Plans.
Clarify that some emergency behavioral health services cannot be subject to prior authorization.
Establish enrollee notification requirements for no-cause and for-cause provider contract terminations and add more stringent enrollee notification requirements when primary care and behavioral health provider contract terminations occur.
Require MA plans to establish care coordination programs.

Implementation of Certain Provisions of the Bipartisan Budget Act of 2018, the Consolidated Appropriations Act, 2021, and the Inflation Reduction Act of 2022
CMS finalized its proposals, as proposed, regarding implementation of certain provisions of the Bipartisan Budget Act (BBA) of 2018, the Consolidated Appropriations Act (CAA), 2021, and the Inflation Reduction Act (IRA) of 2022, including:

Amendments to close “unforeseen loopholes” in the scope of the regulation adopted to prohibit Dual-Eligible Special Need Plan (D-SNP) look-alikes
Revisions to the Part D Special Enrollment Period (SEP) start and end dates (and entitlement dates), to align with earlier entitlement dates for individuals who enroll in Part B during the General Enrollment Period (GEP) established by the CAA
I.e., The Part D SEP begins when the individual enrolls in Part B, and enrollment is effective the first month after the enrollment request
The addition of exceptional condition SEPs for Medicare Advantage (Part C) and Part D enrollment, based on (and aligned with) an individual’s use of the new Medicare premium Part A and B exceptional condition SEPs established by the CAA
I.e., The Part C & D SEP begins when the individual enrolls in Part A & B (or Part B only), and enrollment is effective the first month after the enrollment request
Regulations to make the Limited Income Newly Eligible Transition (LI NET) demonstration program a permanent part of Medicare Part D, as directed by the CAA.
Amendments to expand the Part D low-income subsidy to individuals with incomes below 150 percent of the Federal Poverty Level and meet the resource standard, beginning January 1, 2024, as required by the IRA.

The final rule also includes the following topics: 

Enrollee Notification Requirements for Medicare Advantage (MA) Provider Contract Terminations
Transitional Coverage and Retroactive Medicare Part D Coverage for Certain Low-Income Beneficiaries through the Limited Income Newly Eligible Transition (LI NET) Program

While CMS previously included several proposals related to Medicare Parts A, B, C, and D Overpayment Provisions of the Affordable Care Act, these proposals are not addressed in the Final Rule.

ADVI will continue monitoring any developments and next steps. This is a delayed release. ADVI Instant content is distributed in real time for retainer clients. Get in touch to learn more about how we can support your commercialization, market access, and policy needs.