The Inflation Reduction Act, signed into law on August 16, 2022, brought about significant reforms to Medicare Part D, marking a pivotal moment in the ongoing efforts to address rising healthcare costs. As prescription drug prices continue to escalate, the new legislation seeks to alleviate the financial burden on Medicare beneficiaries, particularly those facing high drug costs. These reforms are designed to make prescription medications more affordable and improve the overall sustainability of Medicare.
While the full impact of these changes will unfold gradually over time, many of the most notable provisions are set to take effect in 2025. This timeline gave healthcare and insurance executives ample time to plan and adapt their strategies to align with the evolving landscape of Medicare coverage, with a focus on ensuring that beneficiaries are better supported in managing their healthcare expenses.
Medicare Part D is the federal program that helps cover the cost of prescription drugs for people on Medicare. It is a highly effective program that continues to evolve. Some of the changes coming to the Medicare Part D program as part of the Inflation Reduction Act include:
- Part D Manufacturer Discount Program – CMS established the Part D manufacturer discount program as part of the Inflation Reduction Act and it went into effect on January 1, 2025. This program replaced the Coverage Gap Discount Program, which was sunset at the same time.
- A cap on annual out-of-pocket expenses for prescription drugs – the legislation places a max of $2,000 on annual out-of-pocket costs for seniors on Medicare
- An increase in the cost share to be paid by Part D plans as well as the drug manufacturers – to be applied to dollars above the cap
- A reduction in Medicare’s share of the total drug expense – shifting costs from the government to the Part D plans and the drug manufacturers
- An increase in National Average Monthly Bid Amount (NAMBA), the average monthly cost of a Medicare Part D prescription drug plan, as set by CMS – in an effort to encourage better cost management, the NAMBA has been increased from $64.28 in 2024 to $179.45 in 2025
- Medicare Prescription Payment Plan – for the first time, effective in 2025, all Medicare Part D plans — including both standalone Medicare prescription drug plans and Medicare Advantage plans with prescription drug coverage — must offer enrollees the option to pay out-of-pocket prescription drug costs in the form of capped monthly installment payments instead of all at once at the pharmacy.[1]
- Additional drug price negotiations – 15 drugs have been identified for price negotiations in 2025 including popular medications such as Eliquis, Jardiance, Farxiga and others.[2]
In addition to the changes identified above, the Inflation Reduction Act has a proposed rule for the CY 2026 Program Instructions to hold Medicare Advantage and Part D plans accountable for the quality of their coverage. This includes a redefinition of the statute for Medicare Part D to cover popular anti-obesity medications. The Draft CY 2026 Program Instructions include policies previously updated or modified from CY 2025 Program Instructions and new policies for CY 2026. CMS is voluntarily soliciting comments on the Draft CY 2026 Program Instructions.
Overall, 2025 is a period of change for the Medicare Part D program and health plans will need to be proactive in their preparations for the future. This planning should not only be related to the impacts of the Inflation Reduction Act, but they should revolve around all business requirements and government regulations as well.
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References
[1] https://www.cms.gov/inflation-reduction-act-and-medicare/part-d-improvements/medicare-prescription-payment-plan
[2] https://www.cms.gov/inflation-reduction-act-and-medicare/medicare-drug-price-negotiation