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1 1 (January 30, 2025)

handle is hein.crs/goveshj0001 and id is 1 raw text is: ;& ~nforming the aegislative debate sic 1914 January 30, 2025 Medicare Part D Premium Stabilization Demonstration Introduction Medicare Part D is a voluntary federal program that provides outpatient prescription drug coverage to 54 million beneficiaries. Premiums for Part D plans are influenced by various factors, including plan costs, federal subsidies, and beneficiary enrollment choices. The Inflation Reduction Act (IRA; P.L. 117-169) redesigned the Part D benefit to lower out-of-pocket prescription drug costs. In response to the IRA and other contributing factors, the Centers for Medicare & Medicaid Services (CMS) announced a new Part D Premium Stabilization Demonstration (the demonstration) in July 2024, intended to reduce premiums and plan sponsors' liability. This In Focus provides an overview of the demonstration, its impact on premiums, CMS's statutory authority to create the demonstration, and considerations for Congress. Overview of the Med care Part D Benefit Medicare Part D coverage is provided by private health payers (plan sponsors) that contract with CMS to offer stand-alone prescription drug plans (PDPs) or Medicare Advantage (MA) plans with drug coverage (MA-PDs). Each calendar year, CMS releases guidance detailing the standard Part D benefit, which includes specifications on annual deductibles, enrollee cost-sharing, and an out-of- pocket maximum. Plan sponsors submit annual bids to CMS that project the cost of providing either the standard benefit or an actuarial equivalent in a given region. If the actual plan costs differ from the projected costs, the plan's responsibility for any upside or downside risk is outlined through specified risk corridors. In addition to the annual deductibles and coinsurance defined in the standard benefit, many Medicare Part D enrollees pay a plan-specific monthly premium. This monthly premium is calculated by CMS and is derived from the plan costs in annual bids. CMS derives the base beneficiary premium (BBP) as 25,5% of the National Average Monthly Bid Amount (NAMBA), adjusted for government reinsurance subsidies. Reinsurance subsidies are paid to plans on behalf of an enrollee to offset costs exceeding a certain threshold. Premiums may vary widely between MA-PDs and PDPs, with MA-PDs generally offering lower premiums because MA plans are required to use any MA rebates they earn to lower patient cost-sharing, Factors infuendng Medicare Part D Premiums n 2025 Congress made a number of changes to the Medicare Part D standard benefit via the IRA. Prior to the enactment of the IRA, the Part D standard benefit contained four phases: a deductible phase, an initial coverage phase, a coverage gap (doughnut hole), and a catastrophic phase. Enrollees and their plans were responsible for some degree of cost-sharing in each phase, but Medicare paid 80% of the costs via reinsurance once a beneficiary reached the catastrophic phase. The IRA redesigned the Part D standard benefit by eliminating the coverage gap phase, reducing enrollee cost sharing in the catastrophic phase, lowering the catastrophic threshold, and reducing Medicare reinsurance in the catastrophic phase to a maximum of 40% of total costs. These reductions in enrollee out-of-pocket costs and Medicare reinsurance payments, as well as other IRA measures (such as the $35 cap on co-pays for insulin and the new Medicare Prescription Payment Plan), shift the upfront cost of providing the standard Part D benefit to plan sponsors while reducing out-of-pocket expenses for enrollees. To limit the amount of the increased cost to plan sponsors that is passed on to Medicare enrollees through premium increases, the IRA included a premium stabilization provision which capped the annual BBP growth at 6%. The cap is enforced through increased Medicare subsidies paid directly to plan sponsors. In addition to the IRA, other factors also impact PDPs. CMS has altered the Part D risk-adjustment model it uses to set payments to reflect the Part D redesign and separate PDP and MA-PD scoring, which will differentially affect payment amounts to plans. Another influence on plan premiums is increased spending on high-cost drugs such as GLP-I agonists which drive up overall plan costs and impact premium calculations. CMS selected three GLP-1 drugs (Ozempic, Wegovy, and Rybelsus) for negotiation under the Medicare Drug Price Negotiation Program. Negotiated prices for those drugs are not scheduled to go into effect until CY2027. An ongoing decline in number of PDPs since 2014, with a decrease of 26% in plan offerings between 2024 and 2025 alone, has made the PDP market more vulnerable to large enrollment shifts when plan availability or benefits change, particularly for certain low- income subsidy eligible individuals who are automatically enrolled in PDPs based on regional benchmarks, Premium Stabi ization Demonstration On July 29,2024, CMS released the Part D Bid information for 2025 and announced a further stabilization measure: the Voluntary Part D Premium Stabilization Demonstration for PDPs using its authority in Section 402(a)(1)(A) of the Social Security Act. After reviewing CY2025 bids, CMS found a 179% increase in NAMBA relative to 2024, raising concerns about PDP enrollment market disruptions. The voluntary three-year demonstration, which is scheduled to begin in CY2025, has three components to lower Part D premiums: (1) participating PDPs will have a $15 direct subsidy applied to the BBP used in their plan-specific

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