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quartile (including Baltimore City and Baltimore County) and adjusting payments to plans downward relative to FFS will further exacerbate the already challenging financial environment for MA plans operating in Maryland. Response: We appreciate the concerns raised by the commenters. The methodological change will result in more accurate projections of FFS per capita costs for Maryland, in order to adhere to the statutory requirements under sections 1851(i)(3), 1852(a)(1)(B)(i)-(iv), 1853(c)(1)(D)(i), 1853(k)(4)-(5), and 1853(n)(2)(F)-(G) of the Act. In the CY 2025 Rate Announcement, CMS finalized the methodology change for DGME and IME carve-outs to use data from the MAC and Maryland’s Heath Services Cost Review Commission (HSCRC) for hospitals participating in the Maryland TCOC Model. The CY 2025 Advance Notice (page 41) stated that CMS would explore the use of KAC data provided by the MAC to the HSCRC to develop a KAC carve-out adjustment specifically for Maryland hospitals. However, this data was not available to be used for the CY 2025 and prior years’ ratebook development. For the CY 2026 ratebook, CMS is finalizing the proposal to use KAC data provided by the MAC to the HSCRC to develop a KAC carve-out adjustment specifically for Maryland hospitals with a kidney transplant program. Even with these changes, MA rates in Maryland continue to be among the highest in the country compared to the average MA rates of other states. Comment: Several commenters recommended CMS not finalize the proposed methodology change for 2026 and delay implementation or phase in the implementation of the KAC adjustment methodological change, to mitigate the impact on enrollees and allow health plans operating in Maryland additional time to analyze the impacts of this change, consider alternatives, and adjust to this additional revenue impact. Commenters stated that sufficient lead time to prepare for this type of change allows for better bid planning, thereby easing potential enrollee impact. A commenter urged CMS to also discontinue the adjustments to the DGME and IME carve-outs to limit the disruption caused to an already suboptimal Maryland MA market. Response: CMS is finalizing the methodology change for KAC carve-outs and will continue to use the methodology finalized in the CY 2025 Rate Announcement for the DGME and IME carve-outs, as proposed in the CY 2026 Advance Notice. The change in the data source and methodology for calculating the MA rates in Maryland will more accurately reflect FFS per capita costs and will result in developing more accurate estimates of the FFS per capita costs for the payment year that are the basis for MA rates as required by the statute. We estimate the preliminary impact of this change on MA rates in Maryland and neighboring states, based on last year’s CY 2025 MA rates, to be relatively minor. Section G. IME Phase Out Maryland TCOC Model