Demonstration Will Promote Stability and Address Variation in Medicare Part D
Today, the Centers for Medicare & Medicaid Services (CMS) is releasing preliminary technical Medicare Part D bid information for contract year 2025, to help Part D plan sponsors finalize their Part D and Medicare Advantage (MA) offerings and prepare for Medicare Open Enrollment. For 2025, the base beneficiary premium is expected to increase by $2.08 for people with Medicare Part D, ensuring affordable choices in a robust market. Additionally, CMS is announcing a voluntary demonstration to support implementation of the redesigned Part D benefit and improve stability and address variation for people with Medicare Part D in 2025.
Thanks to the Biden-Harris Administration’s Inflation Reduction Act (IRA), also known as the prescription drug law, people with Medicare prescription drug coverage (Part D) in 2025 will have the most comprehensive benefits since the program was launched in 2006. In 2025, all people enrolled in Part D will have their annual out-of-pocket prescription drug costs capped at $2,000 per year. Additionally, the Medicare Prescription Payment Plan, which will be offered by all Part D plans starting next year, will allow people with Medicare Part D coverage the option to spread the costs of their prescription drugs over the calendar year.
This is yet another way the Biden-Harris Administration is taking action to ease the burden of out-of-pocket prescription drug costs. These new benefits build on the previously implemented IRA provisions, such as the $35 cap on cost-sharing for a month’s supply of covered insulin, $0 cost-sharing for eligible vaccines covered under Part D, such as the shingles vaccine, and more financial assistance in paying for drug costs by expanding eligibility for the Extra Help Program. Together, these improvements to the Medicare Part D program are lowering costs and helping people with Medicare save money.
As part of the more comprehensive Part D benefit for people with Medicare, the IRA also redesigns how Medicare pays Part D prescription drug plans beginning in 2025. The new program design gives plans more responsibility to manage the drug costs of their enrollees and shifts government payments that previously would have been paid as reinsurance to a risk-adjusted subsidy payment upfront. Given the significant changes to the benefit, the IRA includes protections that limit year-over-year increases in the base beneficiary premium for CY 2024 through CY 2029.
As past experience has shown, changes in the Medicare Part D program can generate variation in plan bids, and stand-alone prescription drug plan bids show greater variation in this transition. In prior transition periods, CMS has implemented demonstration programs to support stability and address variation. Consistent with past practice, to help with the transition of the redesigned Part D benefit and address this variation, CMS is announcing a voluntary demonstration program to improve premium stability for stand-alone prescription drug plans. The Part D Premium Stabilization Demonstration will test whether additional policy changes stabilize year-over-year changes in premiums for participating stand-alone prescription drug plans, leading to more predictable options for people with Medicare Part D coverage during the initial implementation of the IRA benefit improvements, creating more gradual enrollment changes, and allowing participating Part D sponsors to accumulate the experience necessary for bidding in future years.
The Part D Premium Stabilization Demonstration will enable people with Medicare prescription drug coverage to make enrollment decisions best suited to their prescription drug needs. The demonstration also tests whether additional premium stabilization and more financial protection for stand-alone Part D plan sponsors improve the efficiency and economy of the Part D program during this temporary period of transition. Given the meaningful protection offered to consumers, this voluntary demonstration is structured to encourage all stand-alone Part D plan sponsors offering Part D prescription drug plans to participate to provide stability across the entire Part D market. This demonstration is consistent with previous CMS Part D demonstrations that have been utilized when there have been significant changes introduced into the program.
Stand-alone Part D plan sponsors will be able to communicate their intention to participate in the demonstration between July 29 and August 5, 2024, and plan sponsors will have from July 29 until August 7, 2024, to complete Medicare Advantage rebate reallocation. Plans also have from August 9 until August 13, 2024, to inform CMS of their intent to participate in the voluntary de minimis program, which is related to the low-income subsidy program. The preliminary average premiums will be released later this summer. CMS will release the 2025 landscape in September, as done in past years, once all offerings are finalized.
For more information on the Part D national average monthly bid amount, the Part D regional low-income premium subsidy amounts, the de minimis amount, the Medicare Advantage employer group waiver plan regional payment rates, and the Medicare Advantage regional preferred provider organization benchmarks, visit: https://www.cms.gov/medicare/payment/medicare-advantage-rates-statistics/ratebooks-supporting-data/2025.
CMS continues to encourage people with Medicare to consider all their prescription drug coverage options, especially since the improvements under the prescription drug law could mean that there are plans that better meet their needs than their current plan. Medicare Open Enrollment will run from October 15 to December 7, 2024, and additional resources will be available for people with Medicare during that time on Medicare.gov and through 1-800-MEDICARE. People with Medicare can also contact their local State Health Insurance Assistance Program (SHIP) at shiphelp.org or call 1-877-839-2675 to get free personalized health insurance counseling.
For a fact sheet on the demonstration and other materials released today, please visit: https://www.cms.gov/newsroom/fact-sheets/cms-releases-2025-medicare-part-d-bid-information-and-announces-premium-stabilization-demonstration
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