Medicare Revamps Rules, Alters Plan Ratings
TL/DR –
Starting 2027, Medicare beneficiaries will experience changes in health and drug plans under a new federal rule aimed at simplifying choices and reducing costs. The new rule changes include a revised rating system for Medicare plans focusing more on health outcomes and less on paperwork, a restructured prescription drug cost with lower out-of-pocket limits, and the removal of some regulations and reporting requirements for plans. The new rule will also implement adjustments to out-of-pocket cost calculations, how certain high-cost drugs are categorized and reimbursed, and eligibility rules for certain supplemental benefits, among others.
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Changes are on the horizon for Medicare beneficiaries as a new federal rule aimed at simplifying choices and reducing costs will alter the way health and drug plans are rated, priced, and administered starting in 2027.
What Does This Mean for Beneficiaries?
- Health outcomes will now play a greater role in Medicare plan ratings, minimizing the emphasis on paperwork
- Prescription drug costs will be restructured, introducing lower out-of-pocket limits
- Some regulations and reporting requirements for plans will be eliminated
The Centers for Medicare & Medicaid Services issued the final rule, which includes updates to Medicare Advantage, prescription drug coverage, and cost plan programs for the 2027 contract year.
Modifications to Plan Ratings
Medicare’s Star Ratings system, a tool for beneficiaries to compare plan quality, is being revamped to emphasize clinical outcomes and patient experience more than before.
In order to make these comparisons more meaningful, the CMS is getting rid of 11 measures that were predominantly focused on administrative processes or showed negligible difference between plans. A newly introduced measure will monitor depression screening and follow-up care, and existing measures such as diabetes eye exams will still be in place.
The CMS has also decided against implementing a reward tied to health equity performance, opting instead to stick with the existing reward system that encourages consistent performance across all patients.
Overhauling Prescription Drug Costs
Changes to Medicare Part D, the program that covers prescription drugs, were finalized under the Inflation Reduction Act. This includes eliminating the “coverage gap,” often dubbed the “donut hole,” which will be replaced by a simplified benefit structure that reduces annual out-of-pocket costs.
Patients with very high drug spending, who reach the catastrophic coverage phase, will no longer be subjected to additional cost-sharing requirements. Other technical updates include adjustments to how out-of-pocket costs are calculated and how specific high-cost drugs are categorized and reimbursed.
Supplemental Benefits and Restrictions
The new rule makes it clear that chronically ill enrollees cannot be offered cannabis-related products that are illegal under federal or state law as supplemental benefits. Moreover, the CMS now requires Medicare Advantage plans to clearly publish eligibility rules for certain supplemental benefits, and to enhance the delivery of these benefits via debit cards.
For practical purposes, debit cards must now be electronically linked to approved services and verified at the point of sale to prevent misuse.
Scaling Back Regulations
The new rule does away with several existing requirements for insurers and plans, including:
- Removal of mid-year notices about unused supplemental benefits
- Scraping certain health equity reporting and committee requirements
- Reduction of disclosure requirements for certain account-based plans
- Loosening restrictions on how beneficiaries communicate with agents and brokers
Officials have said these changes are designed to reduce administrative burdens and lower costs.
The Bigger Picture
The new rule also incorporates ongoing policy changes affecting those enrolled in both Medicare and Medicaid, as well as potential future updates related to marketing oversight and plan operations, based on feedback received during the rule-making process.
What’s Next?
The changes will come into effect for the 2027 Medicare plan year. The full rule can be found here.
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