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A7. Part C Normalization The normalization factors serve to offset the trend in risk scores and maintain a 1.0 average FFS risk score for the CMS-HCC models. For CY 2026, for all CMS-HCC risk adjustment models, CMS is calculating the normalization factors using a five-year multiple linear regression methodology and average historical FFS risk scores from 2020-2024. Since normalization is applied to risk scores to maintain the same average risk score year-over-year, the economic impact of normalization is zero. Section B. Changes in the Payment Methodology for Medicare Part D for CY 2026 B1. Annual Percentage Increase for Part D Parameters The methodology for updating other Part D parameters for CY 2026 generally remains unchanged from that used for CY 2025. However, statutory changes may result in potential payment impacts for CY 2026. At this time, the impact on the Medicare Trust Fund is uncertain since the impact of such parameter updates is generally dependent on the behavior and bid assumptions of Part D plan sponsors. B2. Part D Risk Adjustment Model For CY 2026, we are implementing RxHCC risk adjustment models with updates that include revisions to reflect the statutory changes in the Part D benefit structure for CY 2026. CMS is using a model calibrated on 2022 diagnoses and 2023 expenditures for non-PACE organizations and a model that continues to be calibrated on 2018 diagnoses and 2019 expenditures for PACE organizations. In order to calculate risk scores for payment, the dollar coefficients must be denominated to create relative factors. The denominator is the average predicted per capita expenditure predicted by the payment model for a given year. To calculate the denominator, we use the recalibrated model and diagnosis data for Medicare beneficiaries enrolled in both MA- PD plans and PDPs, which results in an average risk score of 1.0 for the enrolled Part D population in the denominator year. Recalibration of the RxHCC model can result in changes in risk scores for individual beneficiaries and for plan level risk scores; however, the average risk score in the denominator year remains 1.0, and the application of the normalization factor functions to maintain the 1.0 in the payment year. Since the average risk score is 1.0 under the existing model and the recalibrated model, the economic impact of the recalibrated model is zero. B3. Part D Normalization The normalization factors serve to offset the trend in risk scores and maintain a 1.0 average risk score across the Part D program (MA-PD plans and PDPs) for the RxHCC model. For CY 2026, CMS is calculating separate MA-PD and PDP normalization factors for the RxHCC model (2022/2023 calibration) being finalized for MA (and partially for PACE organizations) using the