WASHINGTON, D.C. — Medicare beneficiaries will see changes in how health and drug plans are rated, priced, and administered under a new federal rule aimed at simplifying choices and reducing costs starting in 2027.
What This Means for You
- Medicare plans will be rated more on health outcomes, less on paperwork
- Prescription drug costs will be restructured with lower out-of-pocket limits
- Some regulations and reporting requirements for plans are being removed
The final rule, issued by the Centers for Medicare & Medicaid Services, updates Medicare Advantage, prescription drug coverage, and cost plan programs for the 2027 contract year.
Changes to Plan Ratings
Medicare’s Star Ratings system, which helps beneficiaries compare plan quality, is being revised to focus more on clinical outcomes and patient experience.
In practical terms, CMS is removing 11 measures that focused on administrative processes or showed little difference between plans, making comparisons less useful.
A new measure will track depression screening and follow-up care, while existing measures such as diabetes eye exams will remain.
CMS also decided not to implement a previously proposed reward tied to health equity performance, instead continuing an existing reward system that encourages consistent performance across all patients.
Prescription Drug Cost Overhaul
The rule finalizes changes to Medicare Part D, the program that covers prescription drugs, that were originally created under the Inflation Reduction Act.
The updates eliminate the “coverage gap,” often referred to as the “donut hole,” and replace it with a simplified benefit structure that lowers annual out-of-pocket costs.
Patients who reach the catastrophic coverage phase—meaning very high drug spending—will no longer face additional cost-sharing requirements.
Additional technical updates adjust how out-of-pocket costs are calculated and how certain high-cost drugs are categorized and reimbursed.
Supplemental Benefits and Restrictions
The rule clarifies that cannabis-related products that are illegal under federal or state law cannot be offered as supplemental benefits for chronically ill enrollees.
CMS is also requiring Medicare Advantage plans to clearly publish eligibility rules for certain supplemental benefits and to improve how those benefits are delivered through debit cards.
In practical terms, debit cards must now be electronically linked to approved services and verified at the point of sale to prevent misuse.
Regulatory Rollbacks
The rule removes several existing requirements for insurers and plans, including:
- Eliminating mid-year notices about unused supplemental benefits
- Removing certain health equity reporting and committee requirements
- Reducing disclosure requirements for certain account-based plans
- Easing restrictions on how beneficiaries communicate with agents and brokers
Officials said these changes are intended to reduce administrative burden and lower costs.
Broader Context
The rule also incorporates ongoing policy changes affecting people enrolled in both Medicare and Medicaid, as well as potential future updates to marketing oversight and plan operations, based on feedback received during the rulemaking process.
Next Steps
The changes will take effect for the 2027 Medicare plan year.
The full rule is available at: https://www.federalregister.gov/public-inspection/2026-06600/medicare-program-contract-year-2027-and-certain-contract-year-2026-policy-and-technical-changes-to.
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