CMS Releases 2025 Medicare Part D Bid Information and Announces Premium Stabilization Demonst

[Northeast Agent]

CMS Releases 2025 Medicare Part D Bid Information and Announces Premium Stabilization Demonstration | CMS

Today, the Centers for Medicare & Medicaid Services (CMS) is releasing preliminary technical Medicare Part D bid information for contract year 2025 to help Part D plan sponsors finalize their Part D and Medicare Advantage (MA) offerings and prepare for Medicare Open Enrollment. Additionally, CMS...

www.cms.gov

The IRA made the most significant changes to the Part D benefit since the Part D program was established in 2006. Given the significant changes to the benefit, the IRA includes protections that constrain the average level of premium increases across the Part D market by limiting year-over-year increases in the base beneficiary premium for CY 2024 through CY 2029 to no more than about $2 per month. However, CMS has observed more variation in the stand-alone PDP bids submitted by plan sponsors as compared to MA-PD plans for 2025. The variation in PDP bids and resulting premium changes could create disruptive enrollment shifts in the PDP market during the initial implementation of the IRA benefit improvements. CMS believes that additional premium stability in the PDP market may improve the predictability of PDP offerings available to enrollees and improve the efficiency of the transition for both people with Medicare and Part D plan sponsors.

 

[DonP]

I saw that . I think the carrier bids on pdp’s were crazy high and this might bring them down some . Put this has zip to do with mapd parts D’s . Cms said they can reduce extra benefits ti be more competitive

 

[Duaine]

Overall, these changes mean that the government subsidy to Part D plans is shifting from largely being reconciled on the back end based on beneficiary costs (i.e., reinsurance payments) to a larger risk-adjusted government Part D subsidy payment upfront. By design, plans will have more liability requiring them to better manage costs within that upfront payment amount. The IRA also provides a premium stabilization mechanism to limit the average premium increases for people enrolled in Part D to about $2 per month on average. Due to both of these changes, a higher percentage of the plan bid amounts (i.e., plans’ estimates of expected costs for an average enrollee) will be paid by the government subsidy to plans, and thus changes to plan bid amounts do not reflect potential premium changes to enrollees.

National Average Monthly Bid Amount & Government Subsidy

The national average monthly bid amount (NAMBA) is an enrollment-weighted average of all applicable Part D plan bids for basic Part D benefits, with weights based on the number of enrollees in each plan. The calculation is based on the number of Part D eligible individuals enrolled in a plan in a given month, divided by the total number of Part D eligible individuals enrolled in all Part D plans during that month. It is used to calculate the government subsidy to plans. In 2025, the NAMBA will be $179.45. As described further in the Frequently Asked Questions below, the NAMBA in 2025 looks different than in recent years because of the Part D benefit design changes. Importantly, the amount of increase in the NAMBA does not mean that Part D premiums will increase by a similar amount. A significant portion of the NAMBA increase represents funds moving from reinsurance payments to upfront payments in the form of the government subsidy to plans. The preliminary estimated average government subsidy to plans will be $142.67 in 2025.

1. Why isn’t CMS releasing preliminary premium information like CMS usually does in July?
   Plan premium information will be impacted by participation in the voluntary demonstration. Therefore, CMS must wait until plans inform CMS of their intent to participate in the demonstration by August 5, 2024. CMS will then work to calculate preliminary average premiums.
   Once offerings are finalized, we will release final Part D premiums at the individual plan level in September, consistent with past years, via the 2025 MA and Part landscape after Part D sponsors have completed all steps necessary to finalize their 2025 bids
2. Why did the national average monthly bid amount (NAMBA) increase? How does that impact the government subsidy?
   The national average bid amount increased from $64.28 in 2024 to $179.45 in 2025. This increase is in line with expectations due to the redesign of the program that encourages better cost management of the Part D benefit by Part D sponsors through a larger risk-adjusted government Part D subsidy payment upfront rather than cost reconciliation on the back end based on beneficiary costs (i.e., reinsurance payments). Importantly, the amount of increase in the NAMBA does not mean that Part D premiums will increase by a similar amount. A significant portion of the NAMBA increase represents funds moving from reinsurance payments to upfront payments in the form of the government subsidy to plans. The preliminary estimated average subsidy to plans in 2025 is $142.67.

 

[just-a-client]

Yes, that is the shift in how CMS will be paying for drugs that CMS is repeating here. If the intended audience of this announcement is plan sponsors, it suggests the sponsors don't entirely understand how it works? That is, that the reinsurance payments are being reduced but the government will still be paying for those drugs through the regular payments up front, in the direct subsidies they pay based on plan bids. The difference - which they don't state here - is that plans weren't responsible for reinsurance underestimates, but are now at risk for losses if they underestimate drug costs in their bids. That additional risk (which has been referred to as increased "plan liability," or increased plan "accountability") was supposed to result in increased utilization management to control costs. (It's been misinterpreted with alarm to mean that the shifts in the program were going to be handled entirely by higher premiums. That can't have been the case - Medicare has always paid around 75% of Part D costs, but there were overruns due to how reinsurance worked that the changes are supposed to address.)

There is more detail in this PDF describing the 3-year demonstration project to stabilize the transition and lower premiums:

https://www.cms.gov/files/document/july-29-2024-parts-c-d-announcement.pdf

One takeway I think is that the premiums of ongoing plans that participate (or plans crosswalked from other plans) won't go up by more than $35.00. That's a big percentage change from Value Script's $0.00 to $.50 plans, but still would leave it among plans reasonably priced in 2024. (I think of anything less than $40 as pretty good for standalone PDP.)

 

[somarco]

Basically, strap yourself in, the ride is about to get bumpy . . .

 

[Chazm]

Basically, strap yourself in, the ride is about to get bumpy . . .

From what I gather, it’s gonna be less bumpy than we were anticipating. No?

 

[somarco]

From what I gather, it’s gonna be less bumpy than we were anticipating. No?

My Magic 8 ball says . . . reply hazy, try again later . . .

 

[Yagents]

Hmmmm, I wonder if this has anything to do with upcoming election?

Republicans challenge CMS premium stabilization program legality

Updated: Thursday, August 8 at 12:20 p.m. ET | Republicans, deeming the Inflation Reduction Act as the culprit for rising premiums, are questioning CMS' new premium stabilization program.

www.fiercehealthcare.com

The new program will reduce the base beneficiary premium by $15 for all participating stand-alone prescription drug plans, in some cases decreasing Part D premiums to $0.

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The program will last for three years, though the program could be modified after one year.

 

[Duaine]

 

[Truce]

It does seem like a Part D panic.

Not sure what they expected carriers to do with rates in repsonse to 3x higher % of RX costs shifted to insurers, but it's almost August and CMS just had an "oh no" moment.

"The IRA is designed to limit yearly premium increases from contract year 2024 to 2029. Because Part D and prescription drug plans can result in plan price variation for beneficiaries, CMS is creating the Part D Premium Stabilization Demonstration to “improve premium stability for participating stand-alone prescription drug plans,” according to a news release.

This should result in a smoother rollout in how the IRA requires Medicare to support Part D prescription plans. The program will test whether even more financial requirements would improve the Part D program, a senior CMS official said Monday afternoon."

That's a healthy word salad. I suppose they don't want $0 premium MAPD plans to have an annoying $2 or a $13 monthly premium based on drugs, so this solves that for a year.

And they don't want angry sticker shock for stand alone plans to result in dropped policies by healthy people, get a smaller, sicker pool enjoying the $2K max, so this delays that. Doesn't solve it.

You would have to be pretty dense not to see this coming, and the line I put in bold above should let you know it isn't done yet.