The Rules Are Changing: What CMS’s 2026 Update Means for DME Utilization Management
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Tomorrow Health
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Utilization Management (UM) has long been a foundational tool for Medicare Advantage (MA) plans to determine medical necessity, reduce unnecessary costs, and manage or benefit expenditures. But CMS is introducing a more defined and enforceable framework for internal coverage criteria— one that requires payors to rethink how they apply processes for management of durable medical equipment costs. These changes are not simply regulatory updates; they present operational and strategic implications that payors must address now.
A Quick Recap: The Foundation for Change
The groundwork began in 2015 with CMS’s Final Rule 6050-F, which established prior authorization as a condition of payment for certain DME items. These items, identified through high rates of waste, fraud, abuse, or improper use, are maintained on an annually updated DME Master List, and may require:
- Prior authorization
- Face-to-face encounter
- Written orders prior to delivery
This Master List serves as a reference point for Traditional Medicare and has helped guide UM policy across FFS and MA settings.
The 2024 Update: Rule 4205-F and a Shift in Coverage Authority
In 2024, CMS finalized Rule 4205-F for Contract Year 2025. This rule clarified that Medicare Advantage plans must follow NCDs and LCDs when Medicare has already established coverage criteria. Internal coverage criteria should be used only in limited cases where CMS policy lacks clarity.
However, audits revealed inconsistencies. Some MA plans were relying heavily on internal or third-party criteria, even when Medicare guidance was available. In response, CMS is taking further steps.
What’s Proposed for 2026: A New Standard for Internal Criteria
The upcoming CMS rule, expected later this year, proposes a formal definition of internal coverage criteria:
“Any policies, measures, tools, or guidelines, whether developed by an MA organization or a third party, that are not expressly stated in applicable statutes, regulations, NCDs, LCDs, or CMS manuals, and are adopted or relied upon for medical necessity determinations at § 422.101(c)(1).”
The proposed rule also clarifies that:
- Discretionary coverage is allowed when NCDs/LCDs explicitly permit it
- Internal criteria must be based on clinical benefit, not cost avoidance
- Policies must be made publicly accessible, clearly labeled, and footnoted with supporting evidence
Why This Matters for Payors Managing DME
DME represents just 1.35% of Medicare spending, but carries outsized risk. Improper use, fulfillment delays, and unclear medical necessity protocols all contribute to:
- Audit exposure due to inconsistent application of coverage criteria
- Provider abrasion from vague documentation or prior auth requirements
- Delayed discharges, rework, or unnecessary denials that harm CAHPS, LOS, and STAR ratings
- Member dissatisfaction, especially among high-need, home-based populations
Many plans have historically underinvested in DME management because of its small percentage of spend. But today, it’s one of the most vulnerable categories for operational risk.
How Your Plan Can Prepare for 2026
1. Operationalize NCDs and LCDs at the Point of Order
Rather than relying on back-end reviews or manual interpretation, plans should integrate CMS criteria into the order intake process. This reduces administrative burden, eliminates guesswork, and produces cleaner, serviceable orders for faster fulfillment.
2. Automate Internal Criteria Reviews with Clinical Justification
If internal criteria are used, they must be evidence-based and traceable. Automation can help ensure that criteria are applied consistently and reviewed with supporting documentation. This approach supports audit readiness and clinical transparency.
3. Build Transparent Member-Facing Policy Documentation
Plans will be required to publish internal coverage criteria online without requiring login credentials. Policies must be clearly labeled and include cited evidence. Getting ahead of this requirement is essential to reduce appeals and member confusion.
4. Provide near real-time visibility into order status and prior authorization
As part of the broader push to improve transparency, reduce delays, and streamline the administrative burden of prior authorization, Health Plans, especially those governed by CMS, will need to comply with new rules that mandate near real-time prior authorization status for patients and providers.
Why Tomorrow Health?
Tomorrow Health supports health plans in building compliant, scalable, and clinically aligned DME workflows. We help payors:
- Validate coverage criteria at the time of order
- Make prior authorization less burdensome by using CMS-defined clinical rules at the time of order entry
- Expeditiously route to high-performing suppliers
- Get DME into the home more quickly without the typical delays of traditional prior authorization processes
- Track order fulfillment in real time
- Communicate directly with patients for higher member satisfaction
- Document internal criteria for regulatory review
Our platform supports MA plans in reducing operational drag, improving member outcomes, and staying aligned with CMS regulations, without overburdening care teams.
As CMS finalizes its new rule for 2026, health plans must modernize how they apply utilization management in DME. This is no longer a back-office compliance issue, it’s a member experience, provider satisfaction, and cost containment issue.
The question is not whether you need to evolve your DME UM strategy; it’s how soon you can.
Want to see how leading plans are preparing? Let’s talk.
Reach out at partnerships@tomorrowhealth.com or visit www.tomorrowhealth.com to learn more.
