New Program to Help Willing Part D Plans Keep Premiums in Check

This week, the Centers for Medicare & Medicaid Services (CMS) announced a new project designed to help keep costs and premiums down for Medicare Part D prescription drug plans. The project will be voluntary and limited to standalone Part D plans—those that are not tied to Medicare Advantage (MA-PDs).

The Inflation Reduction Act (IRA) changed the Part D benefit, including by adding an out-of-pocket cap of $2,000 in 2025, restructuring the coverage phases, and shifting some Medicare cost liabilities onto plans and drug manufacturers. These and other changes may increase costs and risk for plans. As a result, many plans increased their annual bids, which are their estimates for how much they would need to charge in premiums for the coming year.

Importantly, because Congress could foresee that plans would want to increase premiums to offset any additional costs, the IRA already includes a mechanism to protect enrollees from significant premium spikes under the restructuring. That safeguard limits increases in the Part D base premium to 6% growth each year. The federal government is subsidizing the difference between the plan bid and this maximum increase. As a result, CMS expects the base premium will be $36.78 in 2025, $2.08 more than 2024.

Because this is an average, however, premiums for individual Part D plans can have more variation. This is where CMS’s new premium stabilization demonstration project comes in. It will allow participating standalone plans to reduce their financial risk. In exchange, the plans will have to keep these subsidized costs down.

The project is limited to standalone plans because MA-PDs already have mechanisms that allow them to lower their premiums. MA organizations can and do use rebate dollars to reduce premiums to make the plans more attractive to people with Medicare. Standalone Part D plans for people in Original Medicare do not have the same option.

This means the playing field between MA and Original Medicare, which is already uneven, would likely get worse without this project. Plans that choose not to participate may raise costs for beneficiaries in 2025.

While this project is new, it mirrors past CMS programs. As the CMS fact sheet explains, the agency has conducted this type of Medicare demonstration before, “to address transitional issues associated with the implementation of major changes… For example, in the early years of the Part D program, CMS implemented several demonstrations to test changes designed to limit fluctuations in basic premiums and to stabilize premium subsidies for low-income individuals.”

We welcome CMS’s move to keep the Part D marketplace stable and allow enrollees to benefit from the IRA’s major changes. We encourage all standalone plans to participate and protect beneficiaries from avoidable premium changes.

We also note that the IRA’s restructuring of Part D makes it especially important for all beneficiaries to assess their drug plans during this fall’s open enrollment period. This includes making sure the plan is affordable and that it covers all needed drugs.

People in MA should also assess their drug coverage as well as looking into other costs and checking to see if their providers are still participating in the plan.

As fall open enrollment approaches, enrollees should look for correspondence from their existing plans that will explain any changes. Medicare Rights will also put out additional information and reminders about why everyone with Medicare should assess their coverage and make sure they have access to the care they need.

Read the news release and fact sheet on the new premium stabilization demonstration project.

Read more about the IRA’s changes.

Read more about MA payments and rebates.