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Richard Frank’s comments on the proposed 2026 Medicare Advantage and Part D rule

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Editor's note:

The author submitted the comment letter to the Centers on Medicare and Medicaid Services on January 27, 2025.

Richard Frank commented on a set of 2026 Medicare policy changes proposed by the Centers for Medicare and Medicaid Services (CMS). The letter responds to two main CMS proposals within the Medicare and Medicaid Programs; Contract Year 2026 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly rule. Specifically, the comments focus on provisions related to cost sharing for behavioral health services and policy towards Medical Loss Ratio (MLR) requirements. 

  • CMS proposes to require Medicare Advantage (MA) plans cost sharing for in-network behavioral health services to “be no greater than that in Traditional Medicare (TM) beginning January 1, 2026.”

I applaud CMS’ attention to the need to improve access to and quality of behavioral health services (services to treat mental illnesses and substance use disorders) in Medicare Advantage (MA). Articulation of a maximum cost sharing standard is clearly a step in the right direction.

Together, the evidence suggests that even in TM, which has decreased the level of cost sharing, access to behavioral health services remains constrained. At the same time, evidence shows that utilization management tools are applied more stringently to behavioral health services relative to other types of patients, leading to still more limited access to care. This may be the result of selection incentives to avoid people with behavioral health problems, as they are more costly. It may also stem from an absence of incentives to maintain access to quality behavioral health services, as no behavioral health quality indicators are attached to financial consequences for plans.

The implication is that the evidence does not support 20% as the right level of cost sharing in TM, where it is the main utilization control mechanism. Since MA has both other methods of controlling use and evidence indicating that plans use the wide discretion given plans to apply those tools more stringently to behavioral health care, it suggests that the 20% cost sharing level is likely too high. I would propose that an alternative approach would be to set a lower cost sharing standard than that found in TM, such as 15%, as a prudent step that would be unlikely to create financial threats to MA plans.

  • Request for information on potential policies that CMS could adopt regarding how the MA and Part D MLRs are calculated to enable policymakers to address concerns surrounding vertical integration in MA and Part D.

It is a positive development that CMS is proposing to extend its scrutiny and oversight of the MLR requirements in both MA and Part D plans. The proposed rule constructively seeks to expand reporting requirements and identifies the allocation of spending across related entities. These are vital and necessary steps. A key element necessary for making judgments regarding how reasonable allocation schemes are involves establishing benchmarks for evaluating transfer prices used to move funds between related entities (e.g., health plans and Pharmacy Benefit Managers (PBMs) owned by the same parent company).

For many services, the Medicare fees schedule in TM offers a natural benchmark against which transfer prices can be evaluated. This approach can be applied when a fee schedule exists. There are important cases where no such schedule will exist, like fees paid to PBMs for prescription drug claims.

Developing a PBM benchmark would be considerably more difficult, given the very complicated pricing dynamics of prescription drug markets. One approach consistent with the use of non-vertically integrated exchanges to create a benchmark would be to use contracts between MA plans and independent PBMs. Another strategy would be to employ so-called Advanced Pricing Agreements (APAs). APAs would be prospectively developed agreements between CMS and MA plans that would establish approved methods and pricing mechanisms for transfer prices.

Read the full comment letter here

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