CMS Issues 2026 Rate Announcement and Final CY 2026 Part D Redesign Program Instructions

CMS Issues 2026 Rate Announcement and Final CY 2026 Part D Redesign Program Instructions 

• On April 7, 2025, the Centers for Medicare and Medicaid Services issued the Calendar Year (CY) 2026 Rate Announcement and Final CY 2026 Part D Redesign Program Instructions.

The Rate Announcement

• The Rate Announcement updates the 2026 Star Ratings and incorporates the Universal Foundation quality measures.
• CMS is implementing the updated version of the RxHCC risk adjustment model proposed in the CY 2026 Advance Notice (Advance Notice) that reflects changes made to the Part D benefit as a result of the Inflation Reduction Act (IRA).
• The Rate Announcement supersedes the Advance Notice but any policies in the Advance Notice that were not modified or retracted in the Rate Announcement become effective for the upcoming payment year.
• CMS will implement updates to the Part D risk adjustment models to include the continued implementation of the Manufacturer Discount Program, the updated out-of-pocket threshold, and the Medicare Drug Price Negotiation Program’s negotiated prices for selected drugs for initial price applicability year 2026.

Part D Redesign Program Instructions

• The Part D Redesign Program Instructions provide guidance on implementation of the IRA’s changes to the defined standard Part D drug benefit. The following provisions of the IRA become effective on January 1, 2026:
  • The annual out-of-pocket (OOP) threshold will be $2,100.
  • Liability of enrollees, sponsors, manufacturers, and CMS in the new standard Part D benefit design will be shifting to account for the start of negotiated prices taking effect with respect to selected drugs for initial price applicability year 2026 under the Negotiation Program.
  • The establishment of the selected drug subsidy program.
• Creditable Coverage. CMS has developed a revised simplified determination methodology where the group health plan coverage is designed to pay at least 72% of participants’ prescription drug expenses (60% under the existing methodology). For CY 2026 only, group health plans that are not applying for the retiree drug subsidy (RDS) may use either the existing simplified determination methodology or the revised simplified determination methodology to determine whether their prescription drug coverage is creditable.
• Successor Regulation. The IRA requires Part D sponsors to include drugs with a negotiated maximum fair price (MFP) on their formularies, starting in 2026, unless removal would be permitted under § 423.120(b)(5)(iv) or “any successor regulation.” When the IRA was enacted, this regulation permitted a plan to immediately substitute a newly available generic for the brand drug in certain circumstances. This section no longer exists in the current Part D regulations. CMS identified the provisions at § 423.120(e)(2)(i), (f)(2), (3), and (4) as the “successor regulation.”

More on This Topic:

• Rate Announcement 
• Rate Announcement Fact Sheet 
• Part D Redesign Program Instructions 
• Part D Redesign Program Instructions Fact Sheet 
• Press Release 
• Advance Notice

For questions, please reach out to Vicky Jucelin.