Insights^

On April 11, 2025, the Medicare Payment Advisory Commission (MedPAC) held the second day of its April 2025 public meeting, which was also the final day of the 2024-2025 cycle of public meetings. Today’s sessions focused on access to hospice care and other services under the Medicare hospice benefit and nursing home quality for Medicare beneficiaries. Today’s sessions were more informative, and no recommendations were presented to or voted on by Commissioners. That said, both topics are clearly of interest to Commissioners, and we expect them to be features of future public meeting sessions.

ACCESS TO HOSPICE AND OTHER SERVICES

The first session focused on access to hospice and certain specialized services for beneficiaries participating in Medicare’s hospice benefit. Specifically, the session focused on four specialized services: dialysis for beneficiaries with end-stage renal disease (ESRD), radiation, blood transfusions, and chemotherapy for beneficiaries with cancer. MedPAC staff shared that the motivation for examining this topic comes from findings that hospice use is substantially lower for decedents with ESRD compared to the overall population. Another motivation for the focus on this topic came from concerns that Medicare beneficiaries may not understand the policy for covering these specialized services, and concerns that the cost of providing these services is higher than the daily hospice payment rate. To examine these concerns, MedPAC conducted a literature review, analyzed available Medicare claims data, and conducted interviews with clinicians, hospice providers, dialysis providers, and family caregivers.

MedPAC staff began the review of their work by providing an overview of the role of these specialized services within the hospice benefit. They shared that Medicare permits, but does not require, hospices to offer these services if they are used for palliative purposes. Staff noted that these decisions are made at the facility level and are dependent on a facility’s governing philosophy on what services fit under the category of palliative care. MedPAC staff also noted that Medicare generally does not have data on how often hospice providers furnish certain services, and there is no data on the costs to provide these services. MedPAC did compare the hospice routine home care (RHC) rate with the average fee-for-service (FFS) payment for dialysis, transfusion, and radiation to patients not enrolled in hospice. They found the average FFS payments for these services generally exceeded the Medicare hospice benefit daily payment rate. MedPAC staff ended their presentation by presenting some potential policy considerations for Commissioners, including the potential for enhanced data reporting, changes to the hospice payment system to address possible disincentives to providing certain services, and developing a program to help beneficiaries transition into hospice care.

MedPAC staff began the review of their work by providing an overview of the role of these specialized services within the hospice benefit. They shared that Medicare permits, but does not require, hospices to offer these services if they are used for palliative purposes. Staff noted that these decisions are made at the facility level and are dependent on a facility’s governing philosophy on what services fit under the category of palliative care. MedPAC staff also noted that Medicare generally does not have data on how often hospice providers furnish certain services, and there is no data on the costs to provide these services. MedPAC did compare the hospice routine home care (RHC) rate with the average fee-for-service (FFS) payment for dialysis, transfusion, and radiation to patients not enrolled in hospice. They found the average FFS payments for these services generally exceeded the Medicare hospice benefit daily payment rate. MedPAC staff ended their presentation by presenting some potential policy considerations for Commissioners, including the potential for enhanced data reporting, changes to the hospice payment system to address possible disincentives to providing certain services, and developing a program to help beneficiaries transition into hospice care.

During the questions and discussion period, some Commissioners asked if comparing the hospice daily payment with the average FFS payments for non-hospice beneficiaries made sense, given how costs under the Medicare hospice benefit tend to be higher at certain times during the course of care. Other Commissioners discussed the uniqueness of dialysis among the services featured in MedPAC’s analysis, since it is critical for keeping ESRD patients alive. There was an agreement among several Commissioners that this could cause a beneficiary to delay entry into hospice. Other Commissioners wanted MedPAC to examine the rationale for why the hospice benefit is carved out of Medicare Advantage and paid for by FFS Medicare. Commissioners also debated having a system where access to specialized services is so dependent on the facility a beneficiary goes to. Some Commissioners expressed concerns that this system leaves many beneficiaries unable to access services that would help ease their suffering. Others countered that the current system allows for flexibility and individualized care and that Medicare should not dictate which services are offered.

MedPAC staff noted that this session will not be a topic in the June 2025 Report to Congress, but they expect it to be a continued topic of interest. The Chairman of MedPAC confirmed that the Commission will continue to look at this issue.

REGULATIONS, STAR RATINGS, AND FFS MEDICARE POLICIES TO IMPROVE NURSING HOME QUALITY

The final session of the April 2025 public meeting focused on a topic that MedPAC has long been interested in improving nursing home quality. MedPAC staff gave an overview of the different regulations and programs promulgated to address concerns about this issue. These include the inspection and certification requirements that nursing homes must meet to participate in Medicare, the star rating system, the skilled nursing facility value-based purchasing (SNF VBP) program, and a Center for Medicare and Medicaid Innovation demonstration aimed at improving nursing home quality. MedPAC staff summarized their findings that there is limited evidence that these regulations and programs have worked. Specifically, staff noted various government and academic studies to support this point.

There was broad agreement among Commissioners that current efforts to address nursing home quality have not been enough to make meaningful improvements. A few Commissioners expressed concerns that part of the star rating system for nursing home quality is based on the results of inspections of facilities, saying that those are really to ensure nursing homes are meeting the minimum standards of quality. There was also support for the standing MedPAC recommendation that the star rating system should include a category to measure beneficiary satisfaction. Other Commissioners highlighted their view that staffing, which is currently a category measured by the star rating system, was an important measurement. The recently vacated nursing home staffing mandate did not come up very much, which is unsurprising given that a federal court recently vacated it. One Commissioner expressed that she was reconsidering her opposition to staffing ratio mandates. However, another Commissioner countered that MedPAC should follow the lead of Congress, which he argued has shown interest in repealing the rule.

Regarding positive recommendations to improve nursing home quality, several Commissioners praised institutional special needs plans (I-SNPs) and high-need accountable care organizations (ACOs) for their record on improving nursing home quality. A few Commissioners also expressed an interest in considering a separate long-term care benefit under traditional Medicare to improve nursing home quality. However, another Commissioner opposed that idea, and others thought it was unlikely to be adopted as a recommendation from Congress in the current environment. The session ended with the MedPAC Chairman stating that although the Commission should be responsive to Congress, it should not shape its work based on what Congress wants to hear. He also said that MedPAC will need to consider whether improving nursing home quality will require more money and ways to improve the system without spending money.

Material from this session will be included, along with previous MedPAC work on this topic, in the June 2025 Report to Congress.

On April 11, 2025, the Medicaid and CHIP Payment and Access Commission (MACPAC) held the second day of its April meeting. The meeting agenda included votes on recommendations for children and youth with special health care needs for the June report to Congress, as well as discussions on Medicaid payment policies to support the home- and community based services (HCBS) workforce, health care access for children in foster care, appropriate access to residential treatment for behavioral health needs for children in Medicaid, and Medicare-Medicaid Plan (MMP) transition.

VOTES ON RECOMMENDATIONS

Due to one vacant seat, the total number of votes was 16. The votes were as follows:

• Recommendation 1.1 – Congress should require that all states develop and implement a strategy for transitions from pediatric to adult care for children and youth with special health care needs, including but not limited to, children enrolled in Medicaid through Supplemental Security Incomerelated eligibility pathways and the Katie Beckett pathway for children with disabilities, those eligible for Medicaid under The Tax Equity and Fiscal Responsibility Act, and children who qualify to receive an institutional level of care. The strategy should address the development of an individualized transition of care plan, and describe (1) the entity responsible for developing and implementing the individualized transition of care plan, (2) the transition of care timeframes, including the age when the individualized transition of care plan is developed, and (3) the process for making information about the state’s strategy and beneficiary resources related to transitions of care publicly available. Vote 16-0 in favor.
• Recommendation 1.2 – The Secretary of the U.S. Department of Health and Human Services should direct the Centers for Medicare & Medicaid Services to issue guidance to states on existing authorities for covering transition of care services for children and youth with special health care needs, including but not limited to, children enrolled in Medicaid through Supplemental Security Income-related eligibility pathways and the Katie Beckett pathway for children with disabilities, those eligible for Medicaid under The Tax Equity and Fiscal Responsibility Act, and children who qualify to receive an institutional level of care. Vote 16-0 in favor.
• Recommendation 1.3 – The Secretary of the U.S. Department of Health and Human Services should direct the Centers for Medicare & Medicaid Services (CMS) to require states to collect and report to CMS data to understand (1) which beneficiaries are receiving services to transition from pediatric to adult care, (2) utilization of services that support transitions of care, (3) and receipt of an individualized transition of care plan. Additionally, CMS should direct states to assess and report to CMS beneficiary and caregiver experience with transitions of care. Vote 16-0 in favor.
• Recommendation 1.4 – The Secretary of the U.S. Department of Health and Human Services should direct the Centers for Medicare & Medicaid Services to amend 42 CFR 431.615(d) to require that inter-agency agreements (IAAs) between state Medicaid and Title V agencies specify the roles and responsibilities of the agencies in supporting CYSHCN transitions from pediatric to adult care. The roles and responsibilities of the state Medicaid agency described in the IAA should reflect the agency’s strategy for transitions of care. Vote 16-0 in favor.

MEDICAID PAYMENT POLICIES TO SUPPORT HCBS WORKFORCE

The session focused on how Medicaid payment policies can better support the HCBS workforce by outlining current HCBS rate-setting practices, emphasizing that wages are the largest cost driver, yet reliable wage data remains limited. Most states rely on Bureau of Labor Statistics (BLS) data, which lack specificity for Medicaid HCBS roles. The CMS “Access Rule” will improve some data transparency, but it doesn’t require states to report or publish average wages. MACPAC proposed a policy requiring states to publicly report, biannually, the average hourly wages paid to HCBS workers—disaggregated by service type and worker classification—to help states set more accurate and competitive rates. The recommendation is intended to give states access to more granular wage data without imposing significant new burdens, as it builds on existing reporting obligations.

Commissioner discussion centered on a proposed policy requiring states to report average hourly wages for HCBS workers, with mixed reactions from commissioners. Several expressed strong support for the concept, viewing it as a rational and important step toward addressing workforce adequacy and helping states set more appropriate rates. Others emphasized the need to consider broader factors—such as health insurance, full-time employment, rural vs. urban dynamics, and managed care environments—that impact workforce stability. Some commissioners raised concerns about feasibility, data accuracy, and administrative burden, particularly how averages would be calculated and who would bear the cost. While many acknowledged the value of improved wage data, there was debate over whether this policy would truly address workforce challenges or simply add complexity.

HEALTH CARE ACCESS FOR CHILDREN IN FOSTER HOMES

The next session highlighted the complex health care needs of children in foster care, emphasizing how trauma, placement instability, and fragmented data systems negatively impact access to care. It noted that while some states are improving collaboration between Medicaid and child welfare agencies—often through workgroups or specialty managed care plans—there are no federal requirements mandating such coordination or data sharing. Children in foster care may have better physical health outcomes when care coordination is strong, but access to behavioral and oral health services remains a challenge due to workforce shortages. States using specialized managed care organizations (MCOS) report reduced administrative burdens and better population-specific outcomes. The study underscored the need for improved interagency collaboration, data sharing, and tailored delivery models to better support this vulnerable population.

All commissioners agreed that there is an urgent need to prioritize health care for children in foster care, particularly regarding their heightened behavioral health needs. Commissioners discussed the potential of specialty managed care programs to address these needs, questioning how widely they are used and how they differ across states. There was interest in identifying best practices, including the use of foster care liaisons and formal agreements between agencies and health plans. Concerns were raised about the long-term challenges faced by youth aging out of foster care and the importance of designing policies that account for their unique circumstances. Overall, commissioners called for deeper analysis of managed care models, data on outcomes, and cross-sector collaboration to improve care for this vulnerable population.

APPROPRIATE ACCESS TO RESIDENTIAL TREATMENT FOR BEHAVIORAL HEALTH NEEDS FOR CHILDREN

The following session outlined gaps in federal data, variation in state practices, and challenges such as limited in-state facility capacity, lack of home- and community-based alternatives, and workforce shortages. It highlighted how out-of-state placements often result from insufficient local resources, and how payment structures may incentivize such placements. The report also addressed the need for improved coordination among federal agencies and called attention to disparities in assessment requirements and data availability. The draft will be finalized for MACPAC’s June 2025 report to Congress. Commissioners pointed out the absence of information on bed shortages, workforce limitations, and challenges related to discharging children from psychiatric residential treatment facilities (PRTFs), particularly when homebased resources are lacking. There was a call to acknowledge how the residential setting itself can become a barrier to appropriate care. Others emphasized the need for future work on quality and safety, especially in light of increasing out-of-state placements and the role of private investor-owned facilities. Additionally, there was a suggestion to include tracking of children with disabilities in ongoing and future research.

MMP TRANSITION: PROCUREMENT, IT, AND ENROLLMENT

The final session of the day outlined Medicaid coverage policies, referral sources, and challenges such as inconsistent data, limited in-state capacity, and financial incentives that encourage out-of-state placements. The presentation highlighted barriers including lack of HCBS workforce shortages, institution for mental diseases (IMD) exclusion rules, and gaps in facility and outcome data. The presentation also emphasized the need for improved guidance, interagency collaboration, and data infrastructure to ensure effective, high-quality care. Final recommendations will be included in MACPAC’s June 2025 report to Congress. Commissioners focused on the challenges and considerations involved in transitioning from current Medicaid managed care models to Dual Eligible Special Needs Plans (D-SNPs). Commissioners emphasized the importance of understanding how protest timelines and blackout periods impact state transitions, as well as the need for continuity of care and technical support, especially regarding member access under MCOs. Concerns were raised about communication with beneficiaries during plan changes, the overlap of organizational roles, and the need for better insight into state experiences. There was also discussion about the structure of CMS and plan contracts, with calls for greater transparency and potential separation of contracts to support smoother transitions.

On April 10, 2025, the Medicare Payment Advisory Commission (MedPAC) met to discuss work for their June 2025 report and beyond. The June report contains recommendations and research on the future of Medicare and is usually filled with new ideas and/or innovations. Today’s sessions focused on proposed reforms to the physician fee schedule (PFS), a comparison of stand-alone Medicare prescription drug plans (PDPs) and Medicare Advantage-Prescription Drug (MA-PD) Plans, discussions about MA supplemental benefits, and a look at the impact of MA plans on rural areas.

PHYSICIAN PAYMENT FORMULA

The first session of the day focused on reforming updates to and ensuring the accuracy of the Medicare PFS. Staff reviewed data presented in March regarding the inadequacy of physician payment updates and the accuracy of the fee schedule Relative Value Units (RVUs). They then voted on two recommendations for the June report.

The first recommendation is: “The Congress should replace the current-law updates to the PFS with an annual update based on a portion of the growth in the Medicare Economic Index (MEI) (Such as MEI minus 1 percentage point.” Commissioners voted unanimously in favor (17-0). Discussion centered around the fact that Commissioners would have liked to have set an actual number (i.e., MEI minus 1) and a minimum or maximum limit on the amount of the payment update. The Chairman pointed out, however, that they wanted to keep things general to give Congress flexibility to implement this recommendation.

For the second recommendation, the staff again presented three examples of potential areas of inaccuracy in RVUs, focusing on concerns that the MEI used to update RVUs is outdated; the need to update global surgical codes to truly address care practices; and inaccuracy in practice expense (PE) RVUs. In the PE RVUs, staff showed that a significant number of physicians no longer have offices outside of the hospital, so indirect PE payments might need to be suspended for these types of physicians.

The second recommendation, which passed unanimously, is: “The Congress should direct the Secretary to improve the accuracy of Medicare’s relative payment rates for clinical services by collecting and using timely data that reflect the costs of delivering care. Again, this was a very general recommendation. The Commissioners’ discussion centered around the fact that they think RVUs are misvalued (some said due to the American Medical Association’s RVS Update Committee RUC process, others said that it is a function of data over time).

This will be a chapter in MedPAC’s June Report to Congress.

STRUCTURAL DIFFERENCES BETWEEN THE PDP AND MA–PD MARKETS

The second session focused on the differences between stand-alone PDPs for fee-for-service (FFS) beneficiaries and the MA–PDs for beneficiaries who choose to enroll in MA. Staff presented additional data explaining the two different systems, how rates were set, payment mechanisms, etc. They also focused on structural issues between the two plan types and discussed changes coming in 2025 from the Centers for Medicare and Medicaid Services (CMS).

Staff showed more data showing that plan offerings and enrollment are continuing to shift away from standalone PDPs. This time, they dug into not just overall numbers, but also into data on low-income subsidy (LIS) beneficiaries.

Staff found four trends. First, the average premiums charged by PDPs exceed those of MA-PDs. Second, fewer PDPs qualify as premium-free to beneficiaries with LIS. Third, PDPs have higher average gross costs but lower risk scores than MA-PDs. Fourth, PDPs are more likely to incur losses compared with MA-PDs.

Staff also looked at the structural reasons for differences between the plans, including MA rebates, the fact that MA-PDPs can adjust premiums after CMS published average amounts, the fact that MA PDs can segment the market by LIS status, and the fact that MA PDs can document additional diagnoses, which enables them to have higher risk scores.

The Commissioners again expressed concerns that stand-alone PDPs might disappear altogether due to unfair competition with MA-PDs, which Commissioners said was unfair to beneficiaries in Medicare FFS because these are the plans those beneficiaries use. Commissioners are concerned that without stand-alone PDPs, traditional FFS will be erased or will be used only for high-income beneficiaries who can afford higher out-of-pocket costs.

Commissioners pointed out that having MA PDPs is not a negative thing, as they can lead to more coordination on beneficiary care and maybe more innovation. A few Commissioners stressed that they would not want to have any recommendations in this area until they see the effects of new risk stabilization payments being rolled out by CMS this year.

As for the next steps, Commissioners also want to investigate the impacts on pharmacy viability from these two types of plans and research into biosimilars.

While there were no recommendations on this topic, this will be a chapter in the June Report to Congress.

ASSESSING THE UTILIZATION AND DELIVERY OF MEDICARE ADVANTAGE SUPPLEMENTAL BENEFITS

In the third session, staff reviewed work on MA supplemental benefits, which are extra benefits delivered by MA plans to beneficiaries as part of their enrollment, like dentistry or vision care. Staff went through a background on the benefits, discussed how MA plans administer these benefits, and what data they do and do not have on these benefits.

Staff reviewed what shares of MA plan rebates are being used on non-Medicare services. For conventional MA plans, dental benefits account for the largest share of non-Medicare supplemental benefits. Special needs plans (SNPs) are using a large amount of their rebates for “other” services like home modifications or home-delivered meals. Commissioners pointed out that this was not surprising, given that Duals are covered under Medicare and Medicaid, so Medicaid is wrapping around traditional benefits; hence, they have a larger amount of capital to use on non-transitional benefits.

Staff outlined the data, or lack thereof, showing that very few claims are available to measure usage or efficacy of these supplemental benefits.

Commissioners had a lot of questions about benefit utilization, how to measure efficacy/outcomes, and beneficiary knowledge about these benefits. Commissioners also discuss standardizing some supplemental benefits and how to create a parallel supplemental benefit in FFS Medicare. Commissioners even threw out the idea of creating an HSA for beneficiaries and letting them choose what supplemental benefits they want to use. The Chairman said they need a lot more data in this area and need to look at the cost of acquiring the data.

This will be a chapter in the June Report to Congress.

EXPLORING THE EFFECT OF MEDICARE ADVANTAGE ON RURAL HOSPITALS

Staff presented a new analysis examining the effect of Medicare Advantage penetration on rural hospitals in their markets. The Commission has been hearing from rural providers for years that MA plans are negatively affecting their profitability through prior authorization, steering patients away from their facilities, and lowering payment rates.

First, staff examined MA growth in rural areas. In addition to growing enrollment volumes, staff found that three insurers control 60% of the rural enrollee market.

After examining financial and volume effects through various calculations, the staff found:

• There is some evidence that MA expansion results in fewer inpatient admissions at CAHs.
• No statistically significant effect of MA expansion on revenue, costs, or profits
• Price for FFS and potentially MA patients increases when volume declines and, in the face of prospective payment system (PPS) hospitals, when volume shifts from FFS to MA.

Commissioners had 45 minutes worth of questions on the analysis and a robust debate about the true impact of MA on rural providers. Some Commissioners said the market was working as it should, and this was a political ploy since some people don’t like MA. Others said this was a true problem and that MA plans use their large market leverage to handicap hospitals through prior authorization and denials.

At the end, the Chairman pointed out that the session combined rural care and MA, and that they started here because MedPAC wanted to answer claims being made. He said that there would be no recommendations, and they would continue to dig into these issues throughout the next cycle.

On April 10, 2025, the Medicaid and CHIP Payment and Access Commission (MACPAC) held the first day of its April meeting. Some sessions had recommendations that will be voted on tomorrow. Topics in the discussion included the following: Medicaid in Context, Children and Youth with Special Health Care Needs (CYSHCN) Transitions of Care, Timely Access to Home and Community Based Services, Access to Medications for Opioid Use Disorder, Understanding the Program of All-Inclusive Care for the Elderly (PACE) Model, Self-Direction for Home-and-Community-based services, and AI in the Prior Authorization Process.

MEDICAID IN CONTEXT: KEY STATISTICS AND TRENDS AND PAYMENT AND FINANCING

MACPAC staff offered a comprehensive overview of Medicaid, highlighting key statistics and trends across eligibility, demographics, spending, and service coverage. In FY 2024, approximately 88.1 million individuals were enrolled in Medicaid, with a significant portion in the newly eligible adult group, while historically over half were part of child, aged, or disabled categories. Demographically, Medicaid and CHIP enrollees in 2023 were predominantly under 65, female, and from low-income households, with racial diversity including significant Hispanic and Black populations. Medicaid spending nearly doubled from 2013 to 2023, reaching $894.2 billion, with managed care covering the majority of enrollees across all eligibility groups. Medicaid plays a critical role in the health care system, covering nearly a third of the U.S. population and funding a significant portion of national health expenditures. It is also the largest payer of maternity care and long-term services and supports (LTSS), including both home- and community-based services (HCBS) and institutional care.

The second presentation provided a comprehensive overview of the Medicaid financing structure, emphasizing the federal-state partnership. It outlined how the federal government shares costs with states through the Federal Medical Assistance Percentage (FMAP), with variations depending on state income levels. The presentation detailed both federal and non-federal funding sources, such as provider taxes and intergovernmental transfers, and explained the types of payments made to providers, including base, supplemental, and directed payments. It highlighted how these payments affect provider revenues, particularly hospitals, and underscored the complexity of Medicaid financing and its critical role in supporting health care infrastructure, especially in rural areas. The presentation also addressed improper payments and the implications of Medicaid policy on state budgets and provider sustainability.

During the discussion, Commissioners explored various aspects of Medicaid financing and coverage. Commissioner Heidi Allen asked about the FPL group and noted enrollment growth after expansion. Commissioner Angelo Giardino highlighted Medicaid’s importance in rural areas and the reliance of hospitals on Medicaid revenue. Commissioner Doug Brown confirmed spending includes expansion populations, while Commissioner Jami Synder asked about HCBS services like personal care and 24-hour support. Commissioner Michael Nardone requested updated data on dual eligibles, and Commissioner Dennis Heaphy emphasized showing LTSS as a value-based investment and raised concerns about fraud. Commissioner Carolyn Ingram asked about undocumented immigrants—staff noted only emergency coverage is allowed—and flagged tribal rural issues. Commissioners also raised concerns about documentation, outdated data, and payment accuracy.

CHILDREN AND YOUTH WITH SPECIAL HEALTH CARE NEEDS (CYSHCN): TRANSITIONS OF CARE

The next session focused on the challenges and policy recommendations for improving the transition from pediatric to adult care for youth with special health care needs, nearly half of whom are covered by Medicaid. It highlighted gaps in federal guidance, inconsistent state practices, limited data collection, and weak interagency coordination. The presentation included four recommendations for the June 2025 Report to Congress:

• Require all states to develop a transition strategy including individualized care plans
• Direct CMS to issue guidance on existing authorities for funding transition-related services
• Require states to collect and report data on transition service use and outcomes
• Mandate that inter-agency agreements between Medicaid and Title V agencies specify roles in supporting transitions. These efforts aim to enhance continuity of care, improve outcomes, and better support youth and families through a complex healthcare shift.

TIMELY ACCESS HCBS: LEVEL OF CARE DETERMINATIONS AND PERSON-CENTERED SERVICE PLANNING PROCESSES

The following session examined how states manage two essential components of HCBS access for Medicaid beneficiaries: determining eligibility through Level of Care (LOC) assessments and developing individualized Person-Centered Service Plans (PCSPs). LOC determinations assess whether an individual meets the institutional level of care required to qualify for HCBS, and are conducted by various entities, including Medicaid agencies, other state departments, contractors, and managed care organizations. While 32 states have set timelines for conducting assessments (ranging from 2 to 45 days), and 17 states must be timely, culturally appropriate, and led by the individual to the extent possible, with most states requiring development within 30–45 days and annual reviews. States commonly allow professionals such as case managers or nurses to develop the plans, and many have adopted e-signatures to streamline the process.

Insights from interviews with officials in seven states conducted in 2024 revealed a general understanding of federal requirements and widespread agreement on the value of virtual options in certain scenarios, though in-person meetings remain preferred. Many states integrate LOC assessments and PCSP development into the same meeting, which shortens timelines and improves coordination. Officials emphasized that meeting timeframes depend on both staffing and cooperation from healthcare providers. They also noted that while states understand the flexibilities available to them, continued support from CMS—particularly around workforce capacity and streamlining documentation—could further enhance service delivery.

Commissioners discussed the Medicaid eligibility process for HCBS, focusing on the separate timelines for functional and financial eligibility. Commissioner Patti Killingsworth noted the process does not have to be linear, as many states wait to complete steps until eligibility seems likely. Commissioner Michael Nardone questioned delays in financial eligibility and stressed the need for real-world examples to understand what happens during that time. Commissioner Dennis Heaphy highlighted the distinction between eligibility and service planning and emphasized the role of environment in assessing disability. In response to his question, staff explained that assessments are typically conducted by caseworkers, nurses, or contracted professionals, depending on the state.

ACCESS TO MOUD IN MEDICAID

The next presentation provided an overview of Medicaid’s role in improving access to effective treatments like methadone, buprenorphine, and naltrexone. While coverage has expanded due to policy changes— such as telehealth flexibilities and the removal of prescribing restrictions—utilization remains inconsistent across states and demographic groups, with younger adults and non-White beneficiaries less likely to receive treatment. One-third of U.S. counties lack Medicaid-serving MOUD providers, and stigma, limited provider capacity, and utilization management strategies like prior authorization and dosage caps continue to present major barriers.

During the discussion, commissioners raised several issues for future exploration. Commissioner Jennifer Gerstorff emphasized the need to frame OUD as a chronic medical condition rather than a personal weakness and expressed interest in longitudinal studies on treatment success by MOUD type. Commissioner Doug Brown flagged data gaps on extended-release products and physician reimbursement concerns that may limit their use. Commissioners Carolyn Ingram and John McCarthy questioned why Medicaid spending and payment rates for MOUD were not included and suggested examining these in the future. Commissioner Sonja Bjork requested more analysis of access in rural areas, while Commissioner Michael Nardone asked for a deeper dive into state-level variation and whether payment rates play a role. Commissioner Gerstorff also asked whether the report could explore cost savings from expanded access. Staff noted these are important considerations for future MACPAC work.

UNDERSTANDING THE PACE MODEL

The next session reviewed how PACE delivers integrated Medicare and Medicaid services. As of March 2025, over 82,000 people were enrolled across 33 states and D.C., with most being dually eligible. Enrollment is often delayed by lengthy eligibility and application processes, and services are coordinated through interdisciplinary teams at PACE centers. While PACE offers comprehensive benefits, some advocates noted limited home-based services. Oversight involves both federal and state audits and reporting. In FY 2023, Medicaid spent $3.9 billion on PACE, with states setting payment rates as a percentage of expected costs outside the program. MACPAC staff will continue to analyze the model and seek commissioner input for future work.

During the discussion, Commissioners shared mixed perspectives on the PACE model’s value and potential for expansion. Commissioner Patti Killingsworth praised its integrated approach to care but raised concerns about cost-effectiveness, noting the small enrollment of 82,000 and high per-person spending of $48,000. She questioned whether the program’s success was due to administrative f lexibility rather than broader applicability. Commissioner Dennis Heaphy asked what makes the PACE population unique and expressed concern about possible “cherry-picking” or forced transitions to nursing homes. Commissioner Michael Nardone emphasized the strong services for dual eligibles and suggested exploring trends in Medicaid-only PACE participants, including their age and Medicare eligibility status.

Commissioner Carolyn Ingram raised concerns about conflict of interest in the eligibility determination process, where the provider decides who is safe to live in the community, and noted a lack of federal quality standards. She also questioned how rates are set and called for recommendations that address integrated care requirements. Commissioner Heidi Allen pushed back, arguing that while PACE is not for everyone, it is a successful model worth scaling, and comparisons to other programs—like hospital readmission rates—may not be fair. Overall, Commissioners agreed further exploration is needed around cost, accountability, and future recommendations.

SELF-DIRECTION FOR MEDICAID HCBS

The final session of the day was presented by Sanmi Koyejo, PhD, Associate Professor, Stanford University Department of Computer Science and Principal Investigator, Stanford Trustworthy AI Research, Heather McComas, PharmD, Director of Administrative Simplification Initiatives, American Medical Association, and Wayne Turner, JD, Senior Attorney, National Health Law Program. They explored the promises and risks of using AI in Medicaid, particularly around prior authorization and care management. Ms. McComas emphasized that while AI will not fix prior authorization, it could reduce paperwork and clinician burden if applied properly—but warned of risks like treatment abandonment, impersonal care, and biased algorithms. Mr. Turner and Dr. Koyejo echoed concerns that AI, if built on biased or flawed data, could worsen access by wrongly denying care, especially for people with chronic conditions. They stressed the importance of transparency, testing, and ensuring individuals are treated with personalized consideration.

They also highlighted the regulatory challenges, especially with third-party entities using opaque AI tools. Ms. McComas noted cybersecurity and HIPAA concerns, particularly with smaller providers and underrepresented patient groups. Mr. Turner and Dr. Koyejo discussed potential Medicaid-specific uses, such as determining hours of private duty nursing or automating simpler protocols. During the broader Commission conversation, members raised questions about best practices for reducing denial rates, ensuring equitable outcomes, and how AI could trigger external reviews if denial thresholds are exceeded. There were also concerns about AI access in rural areas, the skillsets policymakers need, and the need for rules that ensure human oversight in clinical decisions. Overall, the group emphasized balancing innovation with transparency, equity, and patient-centered care.

On April 7, 2025, the Centers for Medicare and Medicaid (CMS) released its final Calendar Year (CY) 2026 Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies (the CY 2026 Rate Announcement). The Press Release can be found here. The fact sheet can be found here. The final Part D Redesign program instructions can be found here. (No changes were made to the redesign program, but CMS answered comments on pages 3-20). Below you will find a summary of major provisions.

MEDICARE ADVANTAGE PROVISIONS

Payment Updates

The Advanced Notice proposes to increase MA payments by 5.06%, a large update from the 3.7% last year, or $25 billion, from CY 2025-2026. This takes into account a growth rate of 9.04%, a negative adjustment for fee-for-service (FFS) normalization of -3.01%, a -0.69% decline for changes in star ratings, and other changes. The growth rate is based off Medicare FFS per capita costs as estimated by the Office of the Actuary.

In 2024, CMS initiated a three-year, phased-in approach for removing the medical education costs (related to services MA enrollees receive) from the historical and projected expenditures supporting the FFS costs that are included in the growth rate calculations. For 2026, CMS will complete the phasein of the technical adjustment by applying 100% of the adjustment for MA-related medical education costs.

Risk Adjustment Model Updates

In this notice, CMS finalized their 3-year phase-in of a new risk adjustment model. For CY2026, CMS will be calculating Hierarchical Condition Category (HCC risk) scores only through the new model. This update includes restructured condition categories using ICD-10 with updates for the underlying data years (this year, using data from 2022 and 2023). They have also updated the denominator year to determine the average per capita predicted expenditures. The overall impact of this new risk score model is -3.01%. CMS published a list of risk adjustment coefficients and predicted ratio tables for all factors starting on page 123 of the final notice.

The update will be different for Programs of All-Inclusive Care for the Elderly (PACE). CMS does not have complete encounter data for PACE and, as such, has not tied their risk score update to the standard MA risk score update. CMS hopes to have more encounter data starting from service dates in 2025 that they will be able to use in the future. For now, CMS is proposing to use a blend of the PACE HCC model and the MA HCC model over the next 5 years. While CMS did receive some comments asking for a longer timeline, CMS indicated they will be staying with the 5-year phase in.

CMS will also continue to consider frailty scores for the PACE population and certain D-SNPs (Fully Integrated Dual Eligible Special Needs Plans [FIDE SNPs]) when calculating payments.

PART D PLAN UPDATES

Standard Benefit Revisions

Below are the changes to the newly defined standard Part D drug benefit for CY 2026:

• Annual deductible. The enrollee pays 100 percent of their gross covered prescription drug costs (GCPDC) until the deductible of $615 for CY 2025 ($590 in 2025) is met.
• Initial coverage. The enrollee pays 25 percent coinsurance for covered Part D drugs. The sponsor typically pays 65 percent of the cost of applicable drugs and 75 percent of the cost of all other covered Part D drugs. The manufacturer, through the Discount Program, typically covers 10 percent of the cost of applicable drugs. In the initial coverage phase, CMS will pay a 10 percent subsidy for selected drugs during a price applicability period. This phase ends when the enrollee has reached the annual out-of-pocket (OOP) spending threshold of $2,100 for CY 2026 ($2,000 in 2025).
• Catastrophic. The enrollee pays no cost sharing for covered Part D drugs. Part D plan sponsors typically pay 60 percent of the costs of all covered Part D drugs. The manufacturer pays a discount, typically equal to 20 percent, for applicable drugs. CMS pays a reinsurance subsidy equal to 20 percent of the costs of applicable drugs, and equivalent to 40 percent of the costs of all other covered Part D drugs that are not applicable drugs. In the catastrophic phase, CMS will provide 40 percent reinsurance for selected drugs during a price applicability period.

Part D Risk Adjustment

CMS is proposing updates to the Part D risk adjustment model to reflect the Inflation Reduction Act’s (IRA’s) changes to the Part D benefit for CY 2026 – the continued implementation of the Manufacturer Discount Program and the updated OOP threshold ($2100 this year, compared to $2000 last year), as well as the new Medicare Drug Price Negotiation Program – as well as calibrating the model using more recent data years (2022 diagnoses and 2023 costs). These updates to the Part D risk adjustment model are designed to help plan sponsors develop accurate bids for CY 2026.

For the risk adjustment models for Part D (RxHCC), CMS is proposing the following changes (more details can be found starting on page 123 of the notice):

• Adjusting the annual OOP thresholds for pre-IRA data years to estimate what the threshold would have been in the prior year if the IRA were in place at the time. (P. 94 of the proposed notice – no changes in final)
• Increasing manufacturer discounts for specified manufacturers and specified small manufacturers according to the phase-in schedules under sections 1860D-14C(g)(4)(B) and (C) of the IRA. (P. 95 of the proposed notice – no changes in final)
• Adjusting gross drug costs to account for the Maximum Fair Prices (MFPs) of the selected drugs for 2026 as part of the Medicare Drug Price Negotiation Program. (P. 79)
• Updating the underlying data used in the model calibration to more recent years, specifically using diagnoses from 2022 FFS claims and MA encounter data records and gross drug costs from 2023 PDEs (the RxHCC model being proposed solely for PACE organizations will continue to use 2018 diagnoses and 2019 costs) (P. 97 of the proposed notice – no changes in final)
• Updating the denominator year from 2022 to 2023 (the RxHCC model being proposed solely for PACE organization will continue to use a 2020 denominator) (P. 98 of the proposed notice – no changes in f inal). As in MA, the PACE-only model is being phased out over time.
• For the risk sharing corridors, CMS examined plan risk sharing amounts and found significant variation year to year and among plan sponsors, so CMS is choosing to keep the risk sharing corridors unchanged. So, the risk percentages for the first and second thresholds remain at +/- 5 percent and +/-10 percent of the target amount, respectively, for CY 2026. The payment adjustments for the first and second corridors are 50 percent and 80 percent, respectively.

MA and Part D Star Ratings

Star Ratings updates include providing the list of eligible disasters for adjustment, non-substantive measure specification updates, and the list of measures included in the Part C and D improvement measures and Categorical Adjustment Index for the 2026 Star Ratings. CMS is adding one new measure to the 2026 Star Ratings – Kidney Health Evaluation for Patients with Diabetes. There are also two measures (Improving or Maintaining Physical Health and Improving or Maintaining Mental Health) returning to the 2026 Star Ratings after substantive specification changes. The list of total star ratings measures begins on page 112 of the advanced notice.

For 2026 star ratings, the deadlines for plans to review their complaints tracking model (CTM) data is May 30, 2025, and to June 30, 2025, to request a review of 2024 appeals data. (March 31, 2026, to review CTM data for 2027 Star Ratings)

CMS is also adjusting star ratings in 2026 for plans in disaster areas. For those contracts with at least 25 percent of enrollees in a FEMA-designated Individual Assistance area in 2024, contracts will receive the higher of either their current ratings or the prior year ratings.

See page 104 of the rule for a list of individual counties. The final notice also added Los Angeles county and the state of California to this list due to their recent wildfires.