The Inflation Reduction Act of 2022 includes several provisions to lower prescription drug costs for people with Medicare and reduce drug spending by the federal government, including several changes to the Part D benefit. These changes, including a new $2,000 cap on out-of-pocket drug spending, will help to lower out-of-pocket costs for Part D enrollees but could also make it harder for some Part D plan sponsors to offer low-priced coverage, particularly sponsors of stand-alone prescription drug plans (PDPs).
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In anticipation of potential premium increases by Part D sponsors to cover higher costs associated with a more generous Part D drug benefit, the Inflation Reduction Act included a provision designed to help limit annual premium increases. Specifically, the law caps growth in the base beneficiary premium to no more than 6% above the prior year’s amount, though it is important to note that the base premium is not the same as the individual plan-level premiums charged by Part D sponsors and paid by Part D enrollees. In addition, the Centers for Medicare & Medicaid Services (CMS) made changes to the Part D payment methodology for 2025 to better reflect expected increases in plan liability for the redesigned Part D benefit, with the goal of enhancing market stability. CMS has also announced a new voluntary demonstration to provide additional premium stabilization and enhanced protection against the risk of losses to stand-alone PDPs (see details below).
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These FAQs published Aug. 1, 2024 by the Kaiser Family Foundation provide context for understanding Medicare Part D premiums in 2025 and changes in recent years. While the impact of the Part D benefit redesign changes on the 2025 Part D market is unknown at this time, premiums for individual Part D plans are likely to continue to vary and annual plan-level premium increases may be higher or lower than 6% for 2025, as they were for 2024. The fall open enrollment period will present all Part D enrollees with the opportunity to evaluate their coverage and determine whether there are lower-cost plan options that meet their needs.
