This overview is excerpted from Manatt on Health, Manatt’s subscription service that provides in-depth insights and analysis focused on the legal, policy and market developments. For more information on how to subscribe to Manatt on Health, please reach out to Barret Jefferds.
The Centers for Medicare & Medicaid Services (CMS) released the Part D national average bid amount and Part D base beneficiary premiums for 2025. These figures set the premium costs and government subsidies for Medicare prescription drug coverage. The national average bid rose to $179.45 from $68.24 in 2024 and just $34.71 in 2023. This jump reveals significant growth in expected plan costs almost certainly attributable to the Inflation Reduction Act’s (IRA) benefit changes coming in 2025, which reallocate costs from beneficiaries and the government to the Part D plans. This increase in bids would have ordinarily increased the base beneficiary premium—a standardized amount used to calculate the Part D premium owed by beneficiaries. However, this year it increases only from $34.70 to $36.78 per month—the result of the IRA’s cap on annual increases to the base beneficiary premium, which holds inflation of the figure to six percent per year and uses CMS subsidies to fund the remainder. Absent the cap, the base beneficiary premium would have risen to $55.98.
Along with the announcement of bids, CMS has also announced the “Part D Premium Stabilization Demonstration,” an action that appears geared towards reducing premiums in the standalone prescription drug plan (PDP) market (which serves Medicare beneficiaries who do not enroll in a Medicare Advantage plan). Plans who participate in the demonstration would enjoy three main benefits, each apparently intended to reduce premium increases in standalone PDPs. First, the base beneficiary premium in participating plans would be reduced by $15. Second, the year-over-year increase in plan premium (the sum of the Part D basic and Part D supplemental premiums) from 2024 to 2025 would be capped at $35. And third, CMS would narrow the risk corridors that protect PDP sponsors from excessive losses—the two upper thresholds of costs at which CMS begins to assume losses, and then assumes a greater proportion of losses, would narrow from 5 and 10 percent above the plan’s bid to only 2.5 and 5 percent. Additionally, CMS would assume 90 percent of any losses above the 5 percent threshold, rather than the 80 percent it currently bears.
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