Federal health regulators are taking decisive action to protect beneficiaries as CMS proposes to improve accuracy of Medicare Advantage provider directories while instituting sweeping compensation limits on Pharmacy Benefit Managers (PBMs). The proposed rule released by the Centers for Medicare & Medicaid Services (CMS) aims to eliminate out-of-network financial surprises for enrollees and bring unprecedented transparency to drug pricing mechanisms.
Under the new regulatory framework, Medicare Advantage (MA) plan sponsors will face mandatory directory verification protocols, financial protections for patients who rely on inaccurate listings, and stringent audit rights over PBM service fees. The provisions implement key mandates of the Consolidated Appropriations Act of 2026, marking a significant shift toward administrative accountability.
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Mandating Directory Accuracy and Enrollee Financial Protections
Inaccurate provider directories—often referred to as “ghost networks” have long posed significant hurdles for Medicare beneficiaries. A recent study published in JAMA Health Forum revealed that even among commercial health plans, 56% of phone calls to listed mental health providers contained severe listing errors or inaccurate contact details.
To resolve these systemic discrepancies, the newly proposed standards require MA organizations to verify and update provider directory information at least every 90 days. Furthermore, plans must report their directory accuracy scores directly to CMS, with official public scoring displays scheduled to launch in 2029.
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Protecting Patients From Unexpected Out-of-Network Costs
A cornerstone enrollee protection within the proposal addresses unexpected medical bills. If a Medicare Advantage beneficiary relies on inaccurate directory information and inadvertently receives care from an out-of-network doctor or facility, the plan sponsor must ensure the patient pays no more than their standard in-network cost-sharing amount.
Additionally, beginning in 2028, the rule proposes to completely eliminate generic drug copayments for full-benefit Medicare-Medicaid dual-eligible enrollees living at or below the federal poverty line, improving medication adherence among vulnerable populations.
“The actions we are proposing today will give Medicare Advantage and Part D enrollees more reliable information, stronger financial protections and greater confidence in both programs,” stated CMS Administrator Mehmet Oz.
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Overhauling Pharmacy Benefit Manager (PBM) Compensation
Beyond directory oversight, the proposed regulation introduces structural reforms to Medicare Part D pharmacy benefit administration. CMS proposes that PBM compensation must strictly reflect Fair Market Value (FMV) for itemized services rendered, rather than being calculated as a percentage of underlying prescription drug list prices.
The agency defines FMV as the actual cost of providing an itemized service plus a reasonable commercial markup. Beginning with mandatory annual reporting on July 1, 2028, PBMs must disclose detailed data regarding:
- Drug Spending Breakdown: Complete accounting of net spending and manufacturer rebates.
- Compensation Transparency: Itemized reporting of fees collected from manufacturers and plan sponsors.
- Formulary Placement Rules: Full disclosure of financial arrangements dictating drug tier placements.
- Broker & Consultant Payments: Clear reporting of fees paid to third-party intermediaries.
Expanding Financial Audits and Market Competition
Under the new guidelines, Medicare Part D plan sponsors gain the explicit right to conduct annual financial audits of their PBM partners using independent auditors of their choice, without facing PBM-imposed restrictions or data limitations. Any improperly retained compensation identified during audits would ultimately be returned to CMS via enforcement mechanisms.
These federal measures align with broader industry movements toward transparent, fee-based pharmacy benefit models. Major market players including Optum Rx, Express Scripts, and CVS Caremark have already initiated transitions toward flat-fee structures and unbundled manufacturer compensation models in response to growing legislative scrutiny.
Public comments on the proposed rule remain open through December 15, setting the stage for final rulemaking in early 2027. As CMS proposes to improve accuracy of Medicare Advantage networks and reform drug supply chain economics, healthcare providers and plan sponsors must prepare for a new era of operational transparency.
Disclaimer The information provided in this article is for educational, journalistic, and informational purposes only and does not constitute formal financial, legal, or investment advice.
