Have you heard about the big Medicare changes that just came out? In early April 2024, the Biden administration made some significant updates to several healthcare programs, especially Medicare Advantage and Part D prescription drug coverage. The goal is to make these programs work better for everyone.
The changes are pretty comprehensive— they are touching everything from Medicare Advantage to prescription drug benefits, and even programs like PACE that help the elderly get all-inclusive care. It’s essentially wrapping up some proposals from December 2022. These changes will take place over time, starting in 2024 and continuing to 2030.
What is particularly interesting is what they are focusing on. They want to make sure insurance companies are playing fair and following the rules, while also encouraging healthy competition between plans. A big part of this is making mental health care more accessible and ensuring everyone has equal access to coverage, regardless of their background. They are also taking a fresh look at those extra benefits that plans can offer.
The final rule focuses on four key areas: strengthening protections for beneficiaries, expanding access to mental health providers, ensuring equal coverage across different populations, and enhancing extra benefits available through Medicare Advantage (MA) plans. These changes aim to improve healthcare delivery and access for Medicare recipients.
Contract Year (CY) 2024 Final Rule Refresher
The CMS 4201-F rule, also known as the 2024 Medicare Advantage and Part D Final Rule, aligned MA plans more closely with traditional Medicare’s coverage policies. Plans must follow Medicare’s medical necessity rules and can only use prior authorization to verify necessity, not as a barrier to care. CMS focused especially on improving behavioral-health and post-acute care access, addressing areas where providers frequently face insurance obstacles to delivering patient care.
Let’s look at the key changes from last year’s 2024 rule and the impacts on hospitals and healthcare systems.
Prior Authorizations
The final rule makes significant changes to prior-authorization requirements for Medicare Advantage plans. Plans can now only use prior authorization to verify diagnoses and confirm medical necessity, removing unnecessary barriers to care. When members switch MA plans, there is a mandatory 90-day transition period where the new plan can’t require prior authorization for ongoing treatments. To ensure proper oversight, plans must create Utilization Management Committees that annually review policies for alignment with traditional Medicare guidelines. The rule also addresses treatment continuity by requiring prior-authorization approvals to cover the full course of treatment, with duration determined by medical necessity, coverage criteria, patient history, and provider recommendations.
Two-Midnight Rule
Prior to 2024, Medicare Advantage plans frequently bypassed the two-midnight rule through contractual agreements and internal policies, resulting in increased claim denials and utilization management conflicts. The 2024 CMS rule changed this landscape by mandating MA plans follow the two-midnight rule as traditional Medicare does. This 2013 rule determines hospital-stay classification as observation or inpatient care.
Under the new requirements, MA plans must adhere to CMS Conditions of Participation for hospital status determinations and can’t rely solely on screening criteria like InterQual or MCG. While plans can still deny inpatient status for medical necessity reasons, they can’t create their own observation-period definitions.
For hospitals, strong daily documentation of illness severity and service intensity remains essential. The rule aims to streamline status determinations, reduce patient financial burden, expedite appropriate care transitions, and ensure fair hospital reimbursement. CMS will continue monitoring coverage criteria to identify areas needing clearer standards.
Sepsis
Medicare Advantage plans must follow traditional Medicare guidelines, including using Sepsis-2 criteria and the sepsis-care bundle for diagnosis. However, many MA insurers continue denying sepsis diagnoses based on Sepsis-2 criteria, insisting on Sepsis-3 standards instead.
The CMS-4201-F rule requires MA plans to follow Medicare’s coding policies and standardized codes. Yet insurers persist in denying claims even after appeals and peer-to-peer reviews. Medical directors acknowledge understanding the appeals but say they must strictly follow company guidelines, even when they recognize sepsis as a clinical diagnosis and understand Sepsis-3’s limitations. Their authority to deny claims based on company policy overrides their clinical judgment and expertise.
Up Next? CMS Proposes Key Medicare Advantage Changes for 2026
With CMS, you can always count on change. Looking to 2026, the agency has proposed significant updates to Medicare Advantage (MA) and prescription drug programs. The proposed ruling includes coverage expansion for anti-obesity medications, tighter controls on insurers’ internal coverage criteria, new safeguards on AI use to prevent inequitable care access, updated medical loss ratio reporting requirements, and enhanced oversight of vertically integrated insurers.
Building on these core changes, CMS is also focusing on improved provider directory accessibility, aligning behavioral health cost-sharing with traditional Medicare, increasing oversight of marketing materials, enhancing prior-authorization reporting, and implementing new regulations for supplemental benefit debit cards.
The proposal incorporates Inflation Reduction Act provisions as well, including Medicare Part D out-of-pocket cost caps and new requirements for generic drug and biosimilar coverage. With Medicare Advantage now serving most Medicare beneficiaries, CMS is doubling its commitment to fair healthcare access and stronger patient protections.
What will the 2026 final rule look like? We’ll find out after CMS reviews all comments submitted through January 27, 2025. Until then, you can read more via the CMS fact sheet here.
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