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CMS strives to stabilize 2025 Medicare Part D premiums.

Category: Annual Medicare plan changes
Published: Aug, 06 2024 03:08:23
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At this time of year, Medicare usually releases the agency’s projected Basic or average total Medicare Part D premium providing Medicare beneficiaries with an insight into how Medicare plan premiums may change year-to-year.

However, for the first time since 2006, the Centers for Medicare and Medicaid Services (CMS) did not release the projected basic Medicare Part D premium for 2025.

Instead, on July 29th, CMS introduced the Voluntary Part D Premium Stabilization Demonstration explaining that:
"[2025 Medicare Part D] premium information will be impacted by participation in the [Voluntary Part D Premium Stabilization Demonstration for stand-alone Medicare Part D plans]. Therefore, CMS must wait until [stand-alone Part D] 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, [CMS] will release final Part D premiums at the individual plan level in [late] 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."
As summarized in the accompanying-CMS Fact Sheet, stand-alone Medicare Part D PDPs (not MAPDs) participating in the new Voluntary Part D Premium Stabilization Demonstration will:
  • Receive a uniform reduction of $15 to the base beneficiary premium (used to calculate the plan-specific basic premium) for all participating stand-alone PDPs. 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.

  • Agree to a year-over-year increase limit of $35 to be imposed on a plan’s total Part D premium, meaning any plan-specific total Part D premium would not be permitted to increase more than $35 from CY 2024.

  • Receive greater government risk sharing for potential plan losses.

What we do know about 2025 Medicare drug plan premiums:
  • 2025 National Average Monthly Bid amount - 280% increase

    The 2025 national average monthly Medicare Part D bid amount (NAMBA) increased 280% to $179.45 from the 2024 national average monthly bid of $64.28.  As noted by CMS, "[t]he national average monthly bid amount is [an enrollee] weighted average of the standardized bid amounts for each stand-alone prescription drug plan (PDP) and MA plan with prescription drug coverage (MA-PD)".

    With regard to the 280% increase in the 2025 NAMBA, CMS noted:
“[T]he [national average monthly 2025 Medicare Part D bid amount (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.” [emphasis added]

CMS went on to further explain:

"This [280% NAMBA] 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."

As a comparison to last year, in July 2023, CMS calculated the 2024 average monthly Medicare Part D bid amount as $64.28 - an 85% increase over the 2023 average monthly bid of $34.71.

  • The 2025 Base Medicare Part D premium - held at 6% increase

    The Part D Base Beneficiary Premium (BBP) is calculated every year by CMS using, in part, the Part D national average monthly premium bid which is weighted by Medicare plan enrollment.  The 2025 Medicare Part D Base premium (used to calculate late-enrollment penalties and the basic Part D premiums) was held to a 6% increase from 2024 by the Inflation Reduction Act (IRA) resulting in a base premium of $36.78.

    Without the IRA’s 6% limitation on increases, the 2025 Base Part D premium would have been $55.98.

    As a comparison, the 2024 Base Premium was also limited to a 6% increase resulting in a base premium of: $34.70 and without the IRA 6% increase limitation the Base premium would have been: $39.35.

    The following chart shows how the National Average Monthly Part D bid amount (NAMBA) has changed in comparison with the Medicare Part D Base Beneficiary Premium (BBP) from 2006 to 2025 and how the BBP would have increase in 2024 and 2025 if the value was not capped by the IRA at a 6% increase.
Changes to Medicare Part D national average Part D plan bids to BBP - since 2006 - with 6% IRA premium cap adjustment


Question:  Does the Base Beneficiary Premium predict Part D plan-specific basic Medicare Part D plan premiums?

Not exactly.  As noted by CMS, the "plan-specific basic premium can be higher or lower than the base beneficiary premium depending on if the plan’s bid is higher or lower than the national average bid."

"[T]he plan-specific basic Part D premium is calculated as the sum of the base beneficiary premium and the difference between the plan’s monthly bid and the national average monthly bid amount. Thus, the plan-specific basic premium can be higher or lower than the base beneficiary premium, depending on if the plan’s bid is higher or lower than the national average monthly bid amount. These plan-specific basic premiums across all plans that submit bids are then averaged together to calculate the average basic Part D premium."

The following chart shows how the estimated monthly Basic Part D premium (excluding 2025) has changed in comparison with the Medicare Part D Base Beneficiary Premium and how the BBP would have increase in 2024 and 2025 if the BBP value was not capped at a 6% increase.

Changes to Medicare Part D premiums since 2006


Question:  How have projected average basic Medicare Part D premiums changed since 2006?

The following are Medicare's annual projected "basic" Medicare Part D premiums weighted by enrollment.

The actual annual average basic Medicare Part D premium reported by Medicare may be slightly higher or lower than the projected premium depending on actual Medicare plan enrollment for the year.

For example, in 2022, the annual CMS press release entitled, "CMS Releases 2023 Projected Medicare Basic Part D Average Premium".
CMS noted that "the average basic monthly premium for standard [2023] Medicare Part D coverage is projected to be approximately $31.50 . . .. This expected amount is a decrease of 1.8%" from the actual 2022 basic premium of $32.08.  The calculated 2022 Basic Part D premium, based on June 2021 plan enrollment, was $33.

Below is a list of the past CMS' estimates of basic Medicare Part D premiums with links to a brief analysis of the annual prediction.


Question:  If CMS had released the 2025 basic Part D premium projection, would the projection show whether I will pay more of less for my 2025 Medicare Part D plan?

Not exactly.  The average basic premium estimated by CMS suggests that, during the annual Open Enrollment Period (October 15 to December 7), you should be able to find a stand-alone Medicare prescription drug plan (PDP) or Medicare Advantage plan that includes prescription drug coverage (MAPD) next year with about the same or slightly lower monthly premium as your current year's Medicare drug plan.

As we learn more about the actual 2025 stand-alone Medicare Part D plans, we will add graphics showing how the projected Base and Basic premiums vary from the actual Part D premiums (weighted and unweighted by September 2024 plan enrollment).


Question:  When can I see the 2025 Medicare Part D and Medicare Advantage plans?

Starting in October, people with Medicare Part D can begin to research their Medicare health and prescription plan options. During the annual Open Enrollment Period (AEP) that begins October 15th and ends December 7, 2024, beneficiaries can switch Medicare plans by enrolling in their newly selected plan.  If you are not sure where to begin with the annual plan review process, you can start by calling a Medicare representative at 1-800-MEDICARE for more information.


Question:  Will my 2024 Medicare Part D plan inform me about 2025 plan changes?

Yes.  Everyone enrolled in a Medicare Part D or Medicare Advantage plan should review their Medicare plan's Annual Notice of Change letter (ANOC) that will be mailed in late-September.  Even if your Medicare Part D plan premium remains stable (or decrease) – this does not mean that your 2025 Medicare plan’s drug coverage costs will decrease.  Your Medicare drug plan's prescription coverage - which drugs are covered and at what cost - usually changes every year, even if your monthly Medicare plan premium remains the same or decreases slightly.

Finally, Medicare Part D plan members should review their Medicare plan's 2025 Evidence of Coverage (EOC) document mailed to them in early-October - or made available electronically for download.  The EOC is a 140+ page document that includes detailed information about the Medicare plan's coverage.

Bottom Line:  Medicare Part D plans change each year, so please be prepared to review your 2025 Medicare plan options starting in early October.


References include:

CMS Ratebooks and Supporting Data: "Annual Release of Part D National Average Monthly Bid Amount and Other Part C & D Bid Information"
https://www.cms.gov/files/document/july-29-2024-parts-c-d-announcement.pdf

CMS News Release:  "CMS Releases Preliminary 2025 Medicare Part D Bid Information and Announces Premium Stabilization Demonstration"
https://www.cms.gov/newsroom/news-alert/cms-releases-preliminary-2025-medicare-part-d-bid  -information-and-announces-premium-stabilization

Fact Sheet: "CMS Releases 2025 Medicare Part D Bid Information and Announces Premium Stabilization Demonstration"
https://www.cms.gov/newsroom/fact-sheets/cms-releases-2025-medicare-part-d-bid-information-  and-announces-premium-stabilization-demonstration

"What to Know About Medicare Part D Premiums"
https://www.kff.org/medicare/issue-brief/what-to-know-about-medicare-part-d-premiums/





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