The voluntary program for stand-alone prescription drug plans aims to promote stability and address variation in Medicare Part D.
The Centers for Medicare & Medicaid Services (CMS) this week announced a voluntary demonstration program to improve premium stability for stand-alone prescription drug plans. The demonstration will support implementation of the redesigned Part D benefit in 2025.
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The redesign under the Inflation Reduction Act changes how Medicare pays Part D prescription drug plans, giving 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.
CMS said in the announcement that 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. The Part D Premium Stabilization Demonstration aims to help with the transition to the redesigned Part D benefit and address this variation. The voluntary 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, creating more gradual enrollment changes, and allowing participating Part D sponsors to accumulate the experience necessary for bidding in future years.
- Enable people with Medicare prescription drug coverage to make enrollment decisions best suited to their prescription drug needs.
- Test 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.
Although the demonstration is voluntary, CMS said it encourages all stand-alone Part D plan sponsors offering Part D prescription drug plans to participate in the program to provide stability across the entire Part D market.
CMS provided more details about the demonstration in a fact sheet. The program consists of three elements:
- CMS will apply a uniform reduction of $15 to the base beneficiary premium (used to calculate the plan-specific basic premium) for all participating stand-alone prescription drug plans. If the reduction would result in a plan’s total Part D premium (that is, the sum of the Part D basic and Part D supplemental premiums) being below $0, the plan’s basic Part D premium will be reduced to the point where the plan’s total Part D premium equals $0.
- To target variation, a year-over-year increase limit of $35 will be imposed on a plan’s total Part D premium, which means any plan-specific total Part D premium would not be permitted to increase more than $35 from CY 2024. If applicable, the year-over-year limit will be applied after the reduction in the base beneficiary premium and applies to the total plan premium.
- Finally, there will be a change to the risk corridors to provide for greater government risk sharing for potential plan losses.
The demonstration is designed for one year as described above and at least two subsequent demonstration years, with parameters to be adjusted to reflect market conditions and variation in those years. Sponsors that participate in 2025 will have the opportunity to participate in the demonstration in subsequent demonstration years. However, if a Part D sponsor rejects this protection for beneficiaries and does not participate in the demonstration in 2025, they will not be permitted to participate in subsequent demonstration years.
To take part in the program, stand-alone Part D plan sponsors must communicate their intention to participate in the demonstration by August 5, and plan sponsors have until August 7 to complete Medicare Advantage rebate reallocation. Plans also have from August 9 until August 13 to inform CMS of their intent to participate in the voluntary de minimis program, which is related to the low-income subsidy program.