Medicare Part D Prescription Drug Benefit

Changes from December 18, 2020 to November 14, 2023

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Medicare Part D Prescription Drug Benefit
~~December 18, 2020~~November 14, 2023
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA; The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA;
P.L. 108-173) established a voluntary, outpatient prescription drug benefit under P.L. 108-173) established a voluntary, outpatient prescription drug benefit under
Suzanne M. Kirchhoff
Medicare Part D, effective January 1, 2006. Medicare Part D provides coverage through Medicare Part D, effective January 1, 2006. Medicare Part D provides coverage through
Analyst in Health Care Analyst in Health Care
private prescription drug plans (PDPs) that offer only drug coverage, or through private prescription drug plans (PDPs) that offer only drug coverage, or through
Financing Financing
Medicare Advantage (MA) prescription drug (MA-PD) plans that offer coverage as part Medicare Advantage (MA) prescription drug (MA-PD) plans that offer coverage as part

of broader, managed care plans. Private drug plans participating in Part D bear some of broader, managed care plans. Private drug plans participating in Part D bear some

financial risk, although federal subsidies cover most program costs in an effort to financial risk, although federal subsidies cover most program costs in an effort to
encourage participation and keep benefits affordable. encourage participation and keep benefits affordable.
At a minimum, Medicare drug plans must offer a legislatively specified “standard” package of benefits or At a minimum, Medicare drug plans must offer a legislatively specified “standard” package of benefits or
alternative coverage that is alternative coverage that is ~~actuarial y~~actuarially equivalent to a standard plan. Plans also may offer enhanced benefits. equivalent to a standard plan. Plans also may offer enhanced benefits.
Although Although al all plans must meet certain minimum requirements, there can be significant differences among offerings plans must meet certain minimum requirements, there can be significant differences among offerings
in terms of benefit design, specific drugs included in formularies (i.e., lists of covered drugs), cost sharing for in terms of benefit design, specific drugs included in formularies (i.e., lists of covered drugs), cost sharing for
particular drugs, or the level of monthly premiums. particular drugs, or the level of monthly premiums.
In general, beneficiaries can enroll in a plan, or change plan enrollment, when they first become eligible for In general, beneficiaries can enroll in a plan, or change plan enrollment, when they first become eligible for
Medicare or during open enrollment periods each October 15 through December 7. Beneficiaries also have some Medicare or during open enrollment periods each October 15 through December 7. Beneficiaries also have some
options to change enrollment during a plan year due to special circumstances. Because sponsors are options to change enrollment during a plan year due to special circumstances. Because sponsors are ~~al owed~~allowed to to
change plan offerings from year to year, beneficiaries change plan offerings from year to year, beneficiaries ~~annual y~~annually face the need for careful review of their choices to face the need for careful review of their choices to
select the plans that best meet their needs. select the plans that best meet their needs.
A key element of the Part D program is enhanced coverage for low A key element of the Part D program is enhanced coverage for low -income individuals. Medicare beneficiaries -income individuals. Medicare beneficiaries
with incomes up to 150% of the federal poverty level (FPL) and assets below set limits are eligiblewith incomes up to 150% of the federal poverty level (FPL) and assets below set limits are eligible for extra for extra
assistance with Medicare Part D premiums and cost sharing. Individuals enrolled in both Medicare and Medicaid assistance with Medicare Part D premiums and cost sharing. Individuals enrolled in both Medicare and Medicaid
(so-(so-~~cal ed~~called dual eligibles) and certain other low-income beneficiaries are ) and certain other low-income beneficiaries are ~~automatical y~~automatically enrolled in no-premium enrolled in no-premium
plans, which are Part D plans that have premiums at or below specified levels.plans, which are Part D plans that have premiums at or below specified levels.
~~Of the 61.3 mil ion Medicare beneficiaries in 2019 (the most recent data available) who were eligible for Part D,~~
~~45.4 mil ion (74% of beneficiaries~~ Of the 65 million Medicare beneficiaries in 2022 who were eligible for Part D, 49.8 million (about 77%) were enrolled in a Part D plan and another 1.) were enrolled in a Part D plan and another 1.~~4 mil ion~~3 million (about 2% (about 2% of
~~beneficiaries~~) had prescription drug coverage through a former employer that received a Part D subsidy for a ) had prescription drug coverage through a former employer that received a Part D subsidy for a
portion of the coverage. Of the remaining roughly portion of the coverage. Of the remaining roughly 2421% of Medicare beneficiaries, % of Medicare beneficiaries, ~~about half (12% of~~
~~beneficiaries)~~ nearly half had drug coverage as generous as Part D through another source, had drug coverage as generous as Part D through another source, ~~such as the Federal Employees~~
~~Health Benefits program, TRICARE, or private coverage; the other half (~~while about 12% of about 12% of all beneficiariesbeneficiaries) had either had either
less generous coverage than Part D or no drug coverage at less generous coverage than Part D or no drug coverage at al all. Total Part D expenditures were approximately $125.7 billion in 2022. Spending is expected to moderate in the next 10 years due in part to a redesign of the Part D benefit under the 2022 law known as the Inflation Reduction Act (IRA; P.L. 117-169). The 2022 IRA phases in a number of significant Part D changes from 2023 to 2025, including an annual out-of-pocket cap on Part D enrollee cost sharing, enhanced low-income subsidies, a $35 monthly cap on insulin cost sharing, and an annual limit on premium increases from 2024 to 2029. The law also imposes a penalty on drug manufacturers that takes the form of a rebate to Medicare if drug manufacturers raise prices of most Part D-covered drugs above an annual inflation measure. These rebates are deposited in the Federal Supplementary Medical Insurance Trust Fund that funds Part D. The law requires the Secretary of Health and Human Services (HHS) to negotiate the prices of certain single-source drugs with the highest total expenditures under Medicare Part D. .
~~Total Part D expenditures were approximately $97.6 bil ion in calendar year 2019. Medicare Part D has cost less~~
~~than original y forecasted, due in part to lower-than-predicted enrollment and increased use of less expensive~~
~~generic drugs. However, the Medicare Trustees project spending on Part D benefits wil accelerate over the next~~
~~10 years due to the expectation of further increases in the number of enrollees, costs associated with the~~
~~elimination of the out-of-pocket cost coverage gap in 2020, changes in the distribution of enrollees among~~
~~coverage categories, a slowing of the trend toward greater generic drug utilization, and an increase in the usage~~
~~and prices of specialty drugs.~~
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Overview
On January 1, On January 1, ~~2021~~2023, the Medicare outpatient prescription drug benefit (Medicare Part D) , the Medicare outpatient prescription drug benefit (Medicare Part D) ~~begins~~began
its its ~~16th~~18th year of operation. Congress created year of operation. Congress created the voluntary Part D program ~~Part D~~ in the Medicare Prescription Drug, in the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (MMA; P.L. 108-173), effective January 1, 2006. Improvement, and Modernization Act of 2003 (MMA; P.L. 108-173), effective January 1, 2006.
The law also made Part D the primary source of drug coverage for individuals covered under both The law also made Part D the primary source of drug coverage for individuals covered under both
Medicare and Medicaid (Medicare and Medicaid (~~so-cal ed~~also called dual eligibles). ). ~~Since the program’s enactment, Part D has~~
Part D has been modified by a series of statutesbeen modified by a series of statutes~~, including by the Patient Protection and Affordable Care Act~~
~~of 2010, as amended (ACA; P.L. 111-148; P.L. 111-152).1~~ since its enactment including, most recently, the 2022 budget reconciliation measure referred to as the Inflation Reduction Act of 2022 (IRA; P.L. 117-169). The IRA includes some of the most significant changes to the Part D benefit since the program was created, including an annual cap on enrollee out-of-pocket spending, beginning in 2024. (See “Standard Benefit” and “Appendix B. IRA Drug Price Negotiation in Part D.”)
Part D coverage is provided through stand-alone prescription drug plans (PDPs), which offer only Part D coverage is provided through stand-alone prescription drug plans (PDPs), which offer only
drug coverage, or through Medicare Advantage (MA) prescription drug (MA-PD) plans, which drug coverage, or through Medicare Advantage (MA) prescription drug (MA-PD) plans, which
offer drug coverage as part of a broaderoffer drug coverage as part of a broader, Medicare Part C managed care benefit Medicare Part C managed care benefit~~. Private drug~~
~~plans participating in Part D~~ that also includes medical services. Commercial insurers that offer Part D plans bear some financial risk, although federal subsidies cover most bear some financial risk, although federal subsidies cover most
program costs in an effort to encourage participation and keep program costs in an effort to encourage participation and keep benefits affordable. All Part D plans must meet certain minimum requirements, but there are significant variations among plans in terms of premiums and benefit design, including differences in drug formularies (i.e., lists of covered drugs) and cost sharing for particular drugs. Most Part D plans are individual products, but a number of employers and unions offer retirees Part D benefits through special employer group waiver plans (EGWPs). (See~~benefits affordable.~~
~~Medicare provides plan sponsors a monthly subsidy for each non-low income subsidy (LIS)~~
~~enrollee in a Part D plan that is equal to 74.5% of average, standard coverage. The average~~
~~subsidy takes two forms: direct subsidy payments, which are adjusted for health conditions, and~~
reinsurance payments for enrollees with the highest drug spending. In addition, Medicare pays
~~most of the cost sharing and premiums for LIS beneficiaries enrolled in PDP or MA-PD plans.~~
~~Monthly payments are based on forecasted costs in sponsors’ annual bids and are reconciled with~~
~~actual costs at the end of each plan year. Medicare also establishes risk corridors to limit a plan’s~~
~~overal losses or profits. (See “Plan Payments.”)~~
~~A growing number of employers and unions are offering retirees (and their eligible spouses and~~
~~dependents) Part D benefits through employer-group waiver plans (EGWPs). (See~~ “Employer
Group Waiver Plans.”) In addition, the MMA provides separate subsidies for employers that agree to provide retiree drug benefits outside of Medicare, as an incentive for employers to continue offering retiree health benefits. (See “Retiree Drug Subsidy.”) The Part D program provides additional subsidies to low-income enrollees~~Waiver Plans.”) In addition, rather than enrolling in a Part D plan, beneficiaries may be~~
~~enrolled in commercial retiree prescription drug plans offered by their former employers. The~~
~~MMA provides employer subsidies for retiree drug plans as an incentive to continue such plans.~~
~~(See “Retiree Drug Subsidy.”)~~
~~As of October 2020, 47.7 mil ion Medicare beneficiaries were enrolled in Part D plans. Of that~~
~~total, about 25.1 mil ion were in PDPs, about 22.1 mil ion were in MA-PD plans, and about~~
~~500,000 were in other types of plans.2~~
~~A major focus of the Part D program is providing subsidized coverage to qualified, low -income~~
~~beneficiaries~~. Individuals with incomes up to 150% of the federal poverty level (FPL) and limited . Individuals with incomes up to 150% of the federal poverty level (FPL) and limited
assets are eligible for a low-income subsidy (LIS)assets are eligible for a low-income subsidy (LIS)~~.3 The LIS~~ that reduces reduces ~~beneficiaries’~~their out-of-pocket spending by paying for all, or some, of the Part D monthly premium and annual deductible and that limits co-payments or coinsurance.1 An estimated 14.2 million beneficiaries received the LIS in 2023.2 1 The federal poverty guidelines, referred to as the federal poverty level, are issued annually by the Department of Health and Human Services (HHS) for administrative purposes such as determining eligibility for certain federal programs. See HHS, “Poverty Guidelines,” at https://aspe.hhs.gov/poverty-guidelines. 2 Centers for Medicare & Medicaid Services (CMS), The 2023 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, March 31, 2023, Table IV.B7, p. 147, available at https://www.cms.gov/oact/tr. (Hereinafter, 2023 Medicare Trustees Report.) Congressional Research Service 1 Medicare Part D Prescription Drug Benefit Monthly enrollment numbers are available for 2023.3 For 2023, a total of 801 PDPs were offered nationwide, a slight increase from 2022. On average, Medicare beneficiaries have 24 PDPs and 35 MA-PD plans to choose from in their geographic area.4 During the next several years, the Centers for Medicare & Medicaid Services (CMS) is to phase in wide-ranging changes to Part D, as required by the IRA. Effective in 2023, the IRA eliminated enrollee cost sharing for certain Part D vaccines and set a $35 cap on enrollee cost sharing for insulin.5 Effective in 2024, the IRA caps annual enrollee out-of-pocket spending at $8,000. In 2025, the IRA reduces the Part D out-of-pocket spending cap to $2,000 (and then adjusts the cap based on drug price inflation in subsequent years). The IRA also expands LIS subsidies (effective in 2024) and limits annual premium increases from 2025 to 2029, among other changes.6 This report provides information about the current Part D benefit structure and describes the IRA changes to the Part D standard benefit that are to be phased in through 2025. For a more detailed description of the IRA, including information about provisions (1) requiring the Secretary of the Department of Health and Human Services to negotiate prices for certain Part D drugs and (2) requiring that manufacturers pay mandatory rebates to CMS if they increase Part D drug prices faster than consumer inflation, see CRS Report R47396, Health Care Provisions of the Budget Reconciliation Measure P.L. 117-169.7 Eligibility for Medicare Part D In general, anyone who is entitled to Medicare Part A and/or enrolled in Part B is eligible to enroll in a Medicare Part D drug plan. In addition, an individual must be a U.S. citizen or qualified alien and must permanently reside within one of the 34 designated PDP regions in the United States; anyone who is living abroad or is incarcerated is not eligible.8 3 CMS, “Monthly Contract Summary Report,” August 2023, https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/mcradvpartdenroldata/monthly/contract-summary-2023-10. Figures are based on enrollment data for the Part D component of Medicare plans including Medicare Advantage prescription drug (MA-PD) plans, the PACE (Program of All-inclusive Care for the Elderly), 1876 Cost Plans, and certain employer/union only group plans (EGWPS). Figures are updated monthly and are the most recent available, so may vary from projected enrollment figures from other sources. As of October 2023, about 52 million Medicare beneficiaries were enrolled in Part D plans. Of that total, about 22.5 million were in prescription drug plans (PDPs), about 29 million were in MA-PD plans, and about 408,000 were in other types of plans 4 Juliette Cubanski and Anthony Damico, “Medicare Part D: A First Look at Prescription Drug Plans in 2023,” Kaiser Family Foundation, November 10, 2022, at https://www.kff.org/medicare/issue-brief/medicare-part-d-a-first-look-at-medicare-drug-plans-in-2023/. 5 See CRS In Focus IF12203, Selected Health Provisions of the Inflation Reduction Act. 6 The 2022 budget reconciliation measure referred to as the Inflation Reduction Act of 2022 (IRA; P.L. 117-169), requires the HHS Secretary to negotiate prices for high-spending drugs in Medicare Part D and in Medicare Part B, which covers physician-administered prescription products. The first negotiated prices take effect in 2026. For more information on price negotiation, see CRS Report R47396, Health Care Provisions of the Budget Reconciliation Measure P.L. 117-169. 7 The rebates are deposited in the Federal Supplementary Medical Insurance Trust Fund, which helps fund the Part D program. 8 In February 2015, CMS issued final rules for the Medicare Advantage and Part D programs for calendar year (CY) 2016. Under the rules, going forward, to be eligible for Medicare prescription drug benefits a potential enrollee had to be a U.S. citizen or qualified alien who is lawfully present in the United States. The rules also require involuntary disenrollment of individuals from Part D plans when they lose eligibility due to unlawful presence status. CMS, “CMS Finalizes Program Changes for Medicare Advantage and Prescription Drug Benefit Programs for Contract Year 2016,” February 6, 2015, at https://www.cms.gov/newsroom/fact-sheets/cms-finalizes-program-changes-medicare-advantage-and-prescription-drug-benefit-programs-contract. Congressional Research Service 2 link to page 8 link to page 9 link to page 31 Medicare Part D Prescription Drug Benefit For most people, joining Part D is voluntary, although Medicare-Medicaid dual-eligible beneficiaries are automatically ~~out-of-pocket~~

~~1 T he regulations governing the Part D program are set forth in 42 C.F.R. Part 423—Voluntary Medicare Prescription~~
~~Drug Benefit. T he Part D program has been amended in a series of laws including the ACA, the QI, T MA, and~~
~~Abstinence Programs Extension and Hurricane Katrina Unemployment Relief Act of 2005 ( P.L. 109-91); the Tax~~
~~Relief and Health Care Act of 2006 (T RHCA; P.L. 109-432), the Medicare Improvements for Patients and Providers~~
~~Act of 2008 (MIPPA; P.L. 110-275), the Comprehensive Addiction and Recovery Act of 2016 (CARA; P.L. 114-198),~~
~~the Medicare Access and CHIP Reauthorization Act (MACRA; P.L. 114-10), the Balanced Budget Act of 2018 (BBA~~
~~2018; P.L. 115-123) and the SUPPORT for Patients and Communities Act, (SUPPORT Act; P.L. 115-271).~~
~~2 CMS, “Monthly Contract Summary Report,” October 2020, at https://www.cms.gov/research-statistics-data-and-~~
~~systemsstatistics-trends-and-reportsmcradvpartdenroldatamonthly/contract-summary-2020-10. Figures are based on~~
~~enrollment data for the Part D component of Medicare plans including MA-PDs, the P ACE (Program of All-inclusive~~
~~Care for the Elderly), 1876 Cost Plans, and certain employer/union only group plans (EGWPS). Figures are updated~~
~~monthly and are the most recent available, so may vary from projected enrollment figures from other sources.~~
~~3 T he federal poverty guidelines, referred to as the federal poverty level, are issued annually by the Department of~~
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~~spending by paying for al , or some, of the Part D monthly premium and annual deductible, and~~
~~limiting co-payments or coinsurance. The LIS is progressive, meaning the lowest-income~~
~~beneficiaries receive the greatest assistance. An estimated 13.3 mil ion beneficiaries received the~~
~~LIS in 2020.4~~
~~The ACA made major changes to Part D in an effort to improve coverage and to make the~~
~~premium structure more progressive, including requiring higher-income beneficiaries to pay more~~
~~for coverage. Starting in 2011, the ACA required Part D enrollees with incomes above a certain~~
~~threshold to pay a monthly surcharge in addition to their regular plan premiums. (See “Premium~~
~~Surcharge for Higher-Income Enrollees.”)~~
~~In addition, the ACA phased out the Part D coverage gap (commonly referred to as the~~ ~~doughnut~~
~~hole) by requiring drug manufacturers to provide discounts for brand-name drugs purchased by~~
~~beneficiaries in the Part D coverage gap and gradual y phasing in Medicare subsidies to plans to~~
~~cover 75% of the cost of generic drugs and 25% of the cost of brand name drugs in the coverage~~
~~gap.5 (See “The Coverage Gap.”) The ACA provisions were further modified by subsequent laws,~~
~~including the Balanced Budget Act of 2018 (BBA 2018; P.L. 115-123), which, among other~~
~~things, accelerated the closing of the coverage gap, increased the required manufacturer discount,~~
~~and reduced the Medicare subsidy for brand-name drugs in the coverage gap. Although the~~
~~coverage gap was fully “closed” in 2020, it is stil referred to in this report for several reasons.~~
~~including (1) differences in the calculation of enrollee out-of-pocket spending in the coverage gap~~
~~as opposed to other portions of the benefit and (2) the application of manufacturer discounts for~~
~~coverage gap drugs.~~
~~Medicare Part D relies on participating private insurance plans to provide coverage and bear part~~
~~of the financial risk of the program. Al Part D plans must meet certain minimum requirements,~~
~~though there are significant variations among plans in terms of premiums and benefit design~~
~~including differences in drug formularies (i.e., lists of covered drugs), and cost sharing for~~
~~particular drugs. In 2021, a total of 996 PDPs are to be offered nationwide, a 5% increase from~~
~~2020. On average, Medicare beneficiaries are to have 30 PDPs and 27 MA-PD plans to choose~~
~~from in their geographic area.6~~
~~Eligibility~~
~~In general, anyone who is entitled to Medicare Part A and/or enrolled in Part B is eligible to enroll~~
~~in a Medicare Part D drug plan. In addition, an individual must be a U.S. citizen or qualified alien~~

~~Health and Human Services for administrative purposes such as determining eligibility for certain federal programs.~~
~~See “Poverty Guidelines,” at https://aspe.hhs.gov/poverty-guidelines.~~
~~4 CMS, “T he 2020 Annual Report of the Boards of T rustees of the Federal Hospital Insurance and Federal~~
~~Supplement ary Medical Insurance T rust Funds,” April 22, 2020, T able IV.B7, p. 140, at https://www.cms.gov/files/~~
~~document/2020-medicare-trustees-report.pdf. (Hereinafter, 2020 Medicare T rustees Report.)~~
~~5 T he coverage gap refers to the period when a Medicare beneficiary has exceeded a drug plan’s standard payment~~
~~threshold and faces higher out-of-pocket expenses until he or she reaches an annual catastrophic threshold. Once the~~
~~catastrophic threshold is reached, federal subsidies cover most prescription costs and enrollees pay a maximum of 5%~~
~~coinsurance.~~
~~6 Juliette Cubanski and Anthony Damico, “Medicare Part D: A First Look at Prescription Drug Plans in 2021,” Kaiser~~
~~Family Foundation, October 29, 2020, at https://www.kff.org/medicare/issue-brief/medicare-part -d-a-first-look-at-~~
~~medicare-prescription-drug-plans-in-2021/.~~
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~~and must permanently reside within one of the 34 designated PDP regions in the United States;~~
~~anyone who is living abroad or is incarcerated is not eligible.7~~
~~For most people, joining Part D is voluntary, although dual-eligible beneficiaries (see “Full-~~
~~Subsidy-Eligible Individuals“) are automatical y~~ enrolled. Medicare beneficiaries cannot be enrolled. Medicare beneficiaries cannot be
turned down for Part D coverage due to preexisting health conditions or high utilizationturned down for Part D coverage due to preexisting health conditions or high utilization of of
prescription drugs. prescription drugs.
Of the Of the ~~61.3 mil ion Medicare beneficiaries in 2019~~65 million Medicare beneficiaries who were eligible for Part D, who were eligible for Part D, ~~45.4 mil ion~~
~~about 74%~~in 2022, 49.8 million (about 77%) were enrolled in a Part D plan and another 1. were enrolled in a Part D plan and another 1.~~4 mil ion~~ 3 million (about 2%) had prescription (about 2%) had prescription
drug coverage through a former employer that received a Part D subsidy for a portion of the drug coverage through a former employer that received a Part D subsidy for a portion of the
coverage. Of the remaining roughly coverage. Of the remaining roughly 2421% of Medicare beneficiaries, % of Medicare beneficiaries, ~~about half (12% of~~
nearly 10% of total beneficiariesbeneficiaries) had drug coverage as generous as Part D through another source, such as the had drug coverage as generous as Part D through another source, such as the
Federal Employees Health Benefits programFederal Employees Health Benefits program~~, TRICARE~~ (FEHB), TRICARE coverage for the military, or private coverage; , or private coverage; ~~the other half~~
(about 12% of beneficiariesabout 12% of beneficiaries) had either less generous coverage than Part D or no drug coverage at had either less generous coverage than Part D or no drug coverage at
~~al .8 (Se~~eall.9 (See Table 1.)
Table 1. Total Medicare Beneficiaries with Prescription Drug Coverage, ~~2019~~2022
Number of Medicare
Beneficiaries
Percentage of Eligible
Description
(in millions)
Beneficiaries
Medicare Beneficiaries Eligible for Part D
~~61.3~~65.0
100.0%
Medicare Part D Medicare Part D
~~45.4~~
~~74.1~~49.8 77% %
Stand-Alone PDP
~~25.5~~
~~56.0~~23.3 47%
MA with Drug Coverage
~~20.0~~
~~44.0~~26.5 53%
Medicare Retiree Medicare Retiree Drug Subsidy (RDS) Drug Subsidy (RDS)
1. 1.4
3 2 2.3% %
Other Creditable Drug Coverage Other Creditable Drug Coverage
~~7.3~~
~~11.8~~6.5 10% %
Total Beneficiaries with Drug Coverage
~~55.5~~
~~88.2~~57.6 89%
Beneficiaries Without ~~Equivalent~~ Equivalent Coverage
7.34
~~11.8~~12%
Source: Based on Medicare Payment AdvisoryMedicare Payment Advisory ~~Commission~~ Commission (MedPAC), (MedPAC), “Report to Congress,Report to Congress, Medicare Payment Medicare Payment ~~Policy,”~~
~~March 2020, Tables 14-2 and 14-3~~Policy, March 2023, Table 12-1 and report text. Based on monthly Part D . Based on monthly Part D ~~enrol ment~~ enrollment data. data.
Notes: Totals may not add due to rounding. Totals may not add due to rounding.
Eligibility for Low-Income Assistance
Beneficiaries with limited incomes and resources may qualify for assistance with Beneficiaries with limited incomes and resources may qualify for assistance with ~~their~~ Part D Part D
premiums, cost sharing, and other out-of-pocket expenses. In premiums, cost sharing, and other out-of-pocket expenses. In ~~2020~~2023, a forecast estimated that 14.2 million Medicare beneficiaries are expected to receive~~, a forecast 13.3 mil ion~~
~~Medicare beneficiaries received~~ low-income subsidies ( low-income subsidies (~~LISs~~LIS). (See~~). (Se~~e Table 2 below.) below.)
~~There~~In addition to financial assistance, LIS beneficiaries have other added benefits, such as the right to change plans more frequently than other Part D enrollees. For 2023, there are two categories of LIS beneficiaries are two categories of LIS beneficiaries~~, based on income and assets~~: (1) those with the : (1) those with the
lowest income and assets who are eligible for the full LIS subsidy and (2) those with slightly lowest income and assets who are eligible for the full LIS subsidy and (2) those with slightly
higher income and higher income and assets who qualify for a partial LIS subsidy. Individuals may be automatically deemed eligible for the full LIS if they are dually eligible for Medicaid. The IRA requires that the two LIS categories be merged into one LIS classification starting in 2024. The new LIS program will provide the more generous benefits of the previous full subsidy LIS and will allow individuals to qualify based on the higher income and resource allowances previously used to determine the partial LIS. (See “Low-Income Subsidies.”) 9~~assets who qualify for a partial LIS subsidy. Individuals may be automatical y~~

~~7 In February 2015, CMS issued final rules for the Medicare Advantage and Part D programs for calendar year (CY)~~
~~2016. Under the rules, going forward, to be eligible for Medicare prescription drug benefits a potential enrollee must be~~
~~a U.S. citizen or qualified alien who is lawfully present in the United States. T he rules also require involuntary~~
~~disenrollment of individuals from Part D plans when they lose eligibility due to unlawful presence status. CMS, “ CMS~~
~~Finalizes Program Changes for Medicare Advantage and Prescription Drug Benefit Programs for Contract Year 2016 ,”~~
~~February 6, 2015, at https://www.cms.gov/newsroom/fact-sheets/cms-finalizes-program-changes-medicare-advantage-~~
~~and-prescription-drug-benefit -programs-contract.~~
8 Medicare Payment Advisory Commission (MedPAC), Medicare Payment Advisory Commission (MedPAC), Report to the Congress: Medicare Payment Policy,, March March ~~13,~~
~~2020~~15, 2023, Chapter , Chapter ~~14, T able 14-2, p. 414, at http://medpac.gov/docs/default-source/reports/mar20_medpac_ch14_sec.pdf?~~
~~sfvrsn=0~~12, Table 12-1, p. 394, https://www.medpac.gov/document/march-2023-report-to-the-congress-medicare-payment-policy/. .
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Medicare Part D Prescription Drug Benefit

~~deemed eligible for the full LIS if they are dual y eligible for Medicaid. In addition to financial~~
~~assistance, LIS beneficiaries have other added benefits, such as the right to change plans more~~
~~frequently than other Part D enrollees.~~
Table 2. Medicare Part D Low-Income Subsidy Enrollment
(in (in ~~mil ions~~millions) )
Medicaid,
Other, with
Full-Benefit
Other, with
Partial
Year
Dual Eligible
Full Subsidy
Subsidy
Total
2006 2006
5.7 5.7
2.3 2.3
0.2 0.2
8.3 8.3
2007 2007
5.9 5.9
3.0 3.0
0.3 0.3
9.2 9.2
2008 2008
6.3 6.3
3.2 3.2
0.3 0.3
9.7 9.7
2009 2009
6.4 6.4
3.3 3.3
0.3 0.3
10.0 10.0
~~2010~~
~~6.6~~
~~3.5~~2013 7.2 4.0
0.3 0.3
~~10.4~~
~~2011~~
~~6.6~~
~~3.7~~
~~0.3~~
~~10.6~~
~~2012~~
~~6.9~~
~~3.7~~
~~0.3~~
~~11.0~~
~~2013~~
~~7.2~~
~~4.0~~
~~0.3~~
~~11.5~~
~~2014~~
~~7.4~~
~~4.1~~
~~0.3~~
~~11.8~~
~~2015~~
~~7.5~~
~~4.2~~
~~0.3~~
~~12.1~~
~~2016~~
~~7.8~~
~~4.3~~
~~0.3~~
~~12.4~~
~~2017~~
~~8.0~~
~~4.5~~
~~0.3~~
~~12.7~~
~~2018~~
~~8.1~~
~~4.6~~
~~0.3~~
~~12.9~~
~~2019~~
~~8.2~~
~~4.6~~
~~0.3~~
~~13.1~~
~~2020~~
~~8.3~~
~~4.6~~
~~0.3~~
~~13.3~~
Source: 2016 and 2020 Medicare Trustees Reports, Table IV.B7.
~~Notes:~~ ~~Figures are for calendar years.~~ 11.5 2014 7.4 4.1 0.3 11.8 2015 7.6 4.2 0.3 12.1 2016 7.8 4.3 0.3 12.4 2017 8.0 4.4 0.3 12.7 2018 8.1 4.5 0.3 12.9 2019 8.2 4.5 0.3 13.1 2020 8.2 4.7 0.3 13.2 2021 8.3 4.7 0.3 13.2 2022 8.7 4.7 0.2 13.6 2023 9.1 4.8 0.2 14.2 Source: Centers for Medicare & Medicaid Services (CMS), The 2023 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, March 31, 2023, Table IV.B7, available at https://www.cms.gov/oact/tr Notes: Figures are for calendar years. Totals may not add due to rounding. Totals may not add due to rounding.
Full-Subsidy-Eligible Individuals
Certain groups of Medicare beneficiaries Certain groups of Medicare beneficiaries ~~automatical y~~automatically qualify and are qualify and are deemed eligible for the for the
full LIS.full LIS. ~~So-cal ed~~ The full-benefit dual eligibles who qualify for Medicaid benefits based on income who qualify for Medicaid benefits based on income
and assets are and assets are ~~automatical y deemed~~automatically eligible eligible for the full Part D LIS. Additionally, ~~for the full Medicare prescription drug LIS.~~
~~Additional y,~~ those who receive Medicare premium and/or cost-sharing assistance from Medicaid those who receive Medicare premium and/or cost-sharing assistance from Medicaid
through the Medicare Savings Program (MSP),through the Medicare Savings Program (MSP),910 plus those eligible for Supplemental Security plus those eligible for Supplemental Security
Income (SSI) cash assistance,Income (SSI) cash assistance,~~10 are automatical y~~11 are automatically deemed eligible deemed eligible for full LIS. These three for full LIS. These three

~~9 T he Medicare Savings Program includes the Qualified Medicare Beneficiary program (QMB), Specified Low-Income~~
~~Medicare Beneficiary program (SLMB), and Qualifying Individual program (QI). T hese~~categories include all eligible persons who (1) have incomes below 135% of the FPL, or $19,683 for an individual and $26,622 for a couple in 2023;12 and (2) have resources below $9,090 for an individual and $16,630 for a couple in 10 The Medicare Savings Program includes the Qualified Medicare Beneficiary program (QMB), Specified Low-Income Medicare Beneficiary program (SLMB), and Qualifying Individual program (QI). These programs help Medicare programs help Medicare
beneficiaries of modest means pay all or some of Medicare’sbeneficiaries of modest means pay all or some of Medicare’s ~~cost~~ cost-sharing amounts (i.e., premiums, deductibles,-sharing amounts (i.e., premiums, deductibles, and coand co -
-payments). payments). ~~T o~~To qualify, an individual qualify, an individual must be eligiblemust be eligible for Medicare and for Medicare and ~~must~~ meet certain meet certain annual income income limits. 11~~limits which change~~
~~annually.~~
10 Supplemental Security Supplemental Security Income (SSI)Income (SSI) is a federal income supplement program fundedis a federal income supplement program funded by general tax revenues (not by general tax revenues (not
SocialSocial Security taxes). It is designedSecurity taxes). It is designed to help aged, blind,to help aged, blind, and disabledand disabled people who have little or no income, and it people who have little or no income, and it
provides cash to meet basicprovides cash to meet basic needs for food, clothing, and shelter. needs for food, clothing, and shelter.
12 Social Security benefits, veterans’ benefits, public and private pensions, annuities, and in-kind support are counted as (continued...) Congressional Research Service Congressional Research Service

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~~categories include al eligible persons who (1) have incomes below 135% of the FPL, or $17,266~~
~~for an individual and $23,274 for a couple in 2020;11 and (2) have resources below $7,860 for an~~
~~individual and $11,800 for a couple in 2020.12~~2023.13 The limits are increased The limits are increased ~~annual y~~annually by the percentage by the percentage
increase in the Consumer Price Index for urban consumers (CPI-U) as of September of the increase in the Consumer Price Index for urban consumers (CPI-U) as of September of the
previous year.previous year.~~13 (Se~~e14 (See Figure 1..) CMS)
~~The Centers for Medicare & Medicaid Services (CMS)~~ deems individuals deems individuals ~~automatical y~~automatically eligible eligible
for the LIS effective as of the first day of the month that they attain qualifying status (e.g., for the LIS effective as of the first day of the month that they attain qualifying status (e.g.,
become eligiblebecome eligible for Medicaid or SSI). The end date is, at a minimum, through the end of the for Medicaid or SSI). The end date is, at a minimum, through the end of the
calendar year within which the individual becomes eligible. Beneficiaries who are deemed LIS-calendar year within which the individual becomes eligible. Beneficiaries who are deemed LIS-
~~eligible~~ eligible for any month during the period of July through December of one year are deemed for any month during the period of July through December of one year are deemed
~~eligible~~ eligible through the end of the following calendar year. CMS changes an individual’s deemed through the end of the following calendar year. CMS changes an individual’s deemed
status in mid-year only when such a change qualifies the beneficiary for status in mid-year only when such a change qualifies the beneficiary for ~~a reduced co-payment~~
~~obligation.~~
lower cost sharing. Eligibility Eligibility for the LIS is not always continuous from year to year. For example, LIS beneficiaries for the LIS is not always continuous from year to year. For example, LIS beneficiaries
who lose eligibilitywho lose eligibility for Medicaid or SSI during for Medicaid or SSI during ~~the~~a year are not year are not ~~automatical y~~automatically qualified to receive qualified to receive
the LIS the next year. Each September, CMS notifies such individuals that their LIS-deemed the LIS the next year. Each September, CMS notifies such individuals that their LIS-deemed
status status ~~wil~~ will end on December 31 of that year. Such individuals may reapply for the LIS, end on December 31 of that year. Such individuals may reapply for the LIS, ~~as they~~
~~may~~ and might qualify for the LIS through the application process. (Seequalify for the LIS through the application process. (See “LIS Enrollment.”)”)
At the end of each plan year, CMS reassigns LIS beneficiaries At the end of each plan year, CMS reassigns LIS beneficiaries ~~who are enrolled in~~to a new Part D Part D ~~plans~~plan if their Part D plan has if
~~their plan is~~ terminated. CMS also reassigns full LIS beneficiaries terminated. CMS also reassigns full LIS beneficiaries who are enrolled in PDPs if their plan enrolled in PDPs if their plan
raises its monthly raises its monthly ~~premium~~premiums to a level above to a level above ~~the~~a set LIS benchmark premium for the plan region. LIS benchmark premium for the plan region.14
15 (See (See “Reassignment of Certain LIS Beneficiaries.”) income”)

~~11 Social Security benefits, veterans’ benefits, public and private pensions, annuities, and in-kind support are counted as~~
~~income. T he 2020 income limits apply for LIS beneficiaries who seek benefits on or after January 1, 2020~~. HHS sets . HHS sets
separate poverty levels for Alaska and Hawaii.separate poverty levels for Alaska and Hawaii. ~~See SSA~~ See SSA Program Operations Manual, “Program Operations Manual, “ HI 03001.020 Eligibility for HI 03001.020 Eligibility for
Extra Help (Prescription Drug Low-Income Subsidy),”Extra Help (Prescription Drug Low-Income Subsidy),” at https://secure.ssa.gov/poms.nsf/lnx/0603001020. See also at https://secure.ssa.gov/poms.nsf/lnx/0603001020. See also
SSA,”HISSA,”HI 03001.005 Medicare Part D Extra Help (Low-Income Subsidy03001.005 Medicare Part D Extra Help (Low-Income Subsidy or LIS),” at https://secure.ssa.gov/poms.nsf/or LIS),” at https://secure.ssa.gov/poms.nsf/
lnx/0603001005; and SSA,lnx/0603001005; and SSA, “ “Understanding the Extra Help with Your Medicare Understanding the Extra Help with Your Medicare ~~P rescription~~Prescription Drug Plan,” at Drug Plan,” at
https://www.ssa.gov/pubs/EN-05-10508.pdf. https://www.ssa.gov/pubs/EN-05-10508.pdf.
HI 03001.020 Eligibility for Extra Help (Prescription Drug Low-Income Subsidy), https://secure.ssa.gov/poms.nsf/lnx/0603001020. 13 12 In addition, program resource limits provide for a $1,500 burial allowance. In addition, program resource limits provide for a $1,500 burial allowance. SSA,SSA, “HI 03030.025, Resource Limits for “HI 03030.025, Resource Limits for
SubsidySubsidy Eligibility,” at https://secure.ssa.gov/poms.nsf/lnx/0603030025.Eligibility,” at https://secure.ssa.gov/poms.nsf/lnx/0603030025.
13 14 42 C.F.R. §423.773(b)(2). 42 C.F.R. §423.773(b)(2). ~~T he~~The CPI-U, published by the U.S. CPI-U, published by the U.S. Department of Labor, is a measureDepartment of Labor, is a measure of consumer of consumer
inflation for urban consumers. inflation for urban consumers.
~~14 T he~~15 The low-income benchmark premium is the weighted low-income benchmark premium is the weighted average of monthly premiums for basic PDP plans, enhanced average of monthly premiums for basic PDP plans, enhanced
PDP plans, and MA-PD plans in a Part D region. CMS,PDP plans, and MA-PD plans in a Part D region. CMS, Medicare Part D Prescription Drug Manual, Chapter 13, , Chapter 13,
“Premium and Cost-Sharing Subsidies“Premium and Cost-Sharing Subsidies for Low-Income Individuals,”for Low-Income Individuals,” Section 50.2.1, Rev. October 1, 2018, at Section 50.2.1, Rev. October 1, 2018, at
https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Chapter-13-https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Chapter-13-
Premium-and-Cost-Sharing-Subsidies-for-Low-Income-Individuals-v09-14-2018.pdf. See also, Premium-and-Cost-Sharing-Subsidies-for-Low-Income-Individuals-v09-14-2018.pdf. See also, Medicare Part D
Prescription Drug Manual, Chapter 3, “, Chapter 3, “ Eligibility, Enrollment and DisenrollmentEligibility, Enrollment and Disenrollment ,” Section 40.1.4, Rev. August 12, ,” Section 40.1.4, Rev. August 12,
2020, at https://www.cms.gov/files/document/cy2021-pdp-enrollment-and-disenrollment-guidance.pdf. CMS2020, at https://www.cms.gov/files/document/cy2021-pdp-enrollment-and-disenrollment-guidance.pdf. CMS will will
attempt to reassign beneficiaries within the same organization wherever possible. If the organization does NOTattempt to reassign beneficiaries within the same organization wherever possible. If the organization does NOT offer offer
another qualifying PDP, CMS another qualifying PDP, CMS ~~will~~ would randomly reassign affected beneficiariesrandomly reassign affected beneficiaries to other PDP sponsors that have at least to other PDP sponsors that have at least
one qualifyingone qualifying PDP in that region. PDP in that region.
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Figure 1. Overview of ~~How Medicare Beneficiaries Qualify for~~2023 Low-Income Subsidy
(LIS)
Source: CRS table based on Social Security AdministrationCRS table based on Social Security Administration ~~(SSA) and CMS data.~~
~~Partial-Subsidy-Eligible Individuals~~
~~Other individuals with limited incomes and resources who do not automatical y qualify may~~
~~apply for the LIS and have their eligibility~~ (SSA) and CMS data. Note: Beginning in 2024 there will be one LIS category. The new LIS program will provide the more generous benefits of the previous full LIS subsidy and will allow individuals to qualify based on the higher income and resource allowances previously used to determine the partial LIS. Partial-Subsidy-Eligible Individuals Individuals with limited incomes and resources who do not automatically qualify for the LIS may apply and have their eligibility determined by either the Social Security determined by either the Social Security
Administration (SSA) or their state Medicaid agency. This group includes Administration (SSA) or their state Medicaid agency. This group includes al all other persons who other persons who
(1) are enrolled in a PDP plan or MA-PD plan; (2) have incomes below 150% of the FPL(1) are enrolled in a PDP plan or MA-PD plan; (2) have incomes below 150% of the FPL
~~($19,140~~, which is $21,870 for an individual and $ for an individual and $~~25,860~~29,580 for a couple in for a couple in ~~2020);~~2023;16 and (3) have assets below $ and (3) have assets below $~~13,110~~
~~for an individual and $26,160~~15,160 for an individual and $30,240 for a couple in for a couple in ~~202015~~2023 (increased in future years by the percentage (increased in future years by the percentage
increase in the CPI-U).increase in the CPI-U). 17 An individualAn individual who applies, and is determined eligiblewho applies, and is determined eligible for the LIS, for the LIS, is
~~al owed to~~can begin receiving benefits on the first day of the month in which the application was begin receiving benefits on the first day of the month in which the application was
submitted. In most cases, this means that LIS status is applied retroactively. For example, if an submitted. In most cases, this means that LIS status is applied retroactively. For example, if an
LIS beneficiary was enrolled in a Part D plan prior to a determination of LIS eligibility,LIS beneficiary was enrolled in a Part D plan prior to a determination of LIS eligibility, the Part the Part
~~D plan sponsor, general y the insurer that is offering the Part D benefit, must ensure that the~~
~~beneficiary is reimbursed for any premiums or cost sharing that should have been covered by the~~
~~subsidy. If a person was not already eligible for Medicare, the LIS subsidy takes effect on the first~~
~~day of the month when his or her Medicare eligibility begins.16~~

~~15 See SSA,~~ D plan sponsor must ensure that the 16 CMS, “2023 Medicare Part D Low-Income Subsidy (LIS) Income and Resource Standards,” October 25, 2022, https://www.cms.gov/files/document/lis-memo.pdf. 17 See SSA, “HI 03001.020 Eligibility for Extra Help (Prescription Drug Low-Income Subsidy),”“HI 03001.020 Eligibility for Extra Help (Prescription Drug Low-Income Subsidy),” at at
https://secure.ssa.gov/poms.nsf/lnx/0603001020; SSA,”HI 03001.005 Medicare Part D Extra Help (Low-Income https://secure.ssa.gov/poms.nsf/lnx/0603001020; SSA,”HI 03001.005 Medicare Part D Extra Help (Low-Income
SubsidySubsidy or LIS),” at https://secure.ssa.gov/poms.nsf/lnx/0603001005; and SSA,or LIS),” at https://secure.ssa.gov/poms.nsf/lnx/0603001005; and SSA, “ “HI 03030.025, Resource Limits for HI 03030.025, Resource Limits for
SubsidySubsidy Eligibility,” at https://secure.ssa.gov/poms.nsf/lnx/0603030025. See also SSA,Eligibility,” at https://secure.ssa.gov/poms.nsf/lnx/0603030025. See also SSA, “ “Understanding the Extra Help Understanding the Extra Help
with Your Medicare Prescription Drug Plan,” with Your Medicare Prescription Drug Plan,” ~~hat ttps~~at https://www.ssa.gov/pubs/EN-05-10508.pdf. ://www.ssa.gov/pubs/EN-05-10508.pdf.
~~16 CMS, Medicare Part D Prescription Drug Manual, Chapter 13, “Premium and Cost -Sharing Subsidies for Low-~~
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~~Initial LIS eligibility~~ Also see HHS, “Poverty Guidelines for 2023,” https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines. Congressional Research Service 6 Medicare Part D Prescription Drug Benefit beneficiary is reimbursed for any premiums or cost sharing that should have been covered by the subsidy. If a person was not already eligible for Medicare, the LIS subsidy takes effect on the first day of the month when his or her Medicare eligibility begins.18 Initial LIS eligibility determinations are for no longer than 12 months. If the SSA or a state determinations are for no longer than 12 months. If the SSA or a state
Medicaid agency later decides that an individualMedicaid agency later decides that an individual is no longer eligibleis no longer eligible for the LIS, that same entity for the LIS, that same entity
also decides when the LIS benefits end. The end date is always the last day of a calendar month, also decides when the LIS benefits end. The end date is always the last day of a calendar month,
though it may occur in any month of the year. though it may occur in any month of the year.
Changes in LIS Status
~~LIS determinations are also reviewed in the case of certain developments that could affect the~~
~~amount of the subsidy.~~ Throughout each plan year, CMS uses SSA data and state Throughout each plan year, CMS uses SSA data and state ~~Medicare~~
~~Modernization Act files of individuals dual y eligible for~~ files of individuals dually eligible for Medicare and Medicaid to initiate the Medicare and Medicaid to initiate the
LIS eligibilityLIS eligibility process for new recipientsprocess for new recipients, and and to look for look for ~~any~~ changes in LIS eligibilitychanges in LIS eligibility status for current LIS beneficiaries.19 Part D law allows forbearance in some instances. For example, in the case of a death, ~~status for~~
~~current, low-income beneficiaries.17~~
~~The ACA created new rules for LIS redeterminations subsequent to the death of a spouse.~~
~~Beginning in 2011,~~ the surviving spouse of an LIS-eligible couple receives a grace period for the surviving spouse of an LIS-eligible couple receives a grace period for ~~the~~
~~determination or~~a redetermination of benefits.20 Medicare Part D Enrollment Periods A Medicare beneficiary who is signing up for Part D for the first time may do so in one of three specified enrollment periods,21 depending on the individual’s circumstances: • Initial Enrollment Period for Part D; • Annual Open Enrollment Period (or Annual Coordinated Election Period, AEP); or • Special Enrollment Period (SEP). Individuals who qualify for the LIS may enroll at any time. Initial Enrollment Period The initial enrollment period is the time during which an individual is first eligible to enroll in a Part D plan.22 Beneficiaries not yet enrolled in Medicare may join a drug plan at any time during their seven-month initial Medicare enrollment period. The Part D initial enrollment period is the same as the initial enrollment period for Medicare Part B.23 Coverage for new enrollees begins on 18 CMS, Medicare Part D Prescription Drug Manual, Chapter 13, “Premium and Cost-Sharing Subsidies for Low-Income Individuals,” Rev. October 1, 2018, at ~~redetermination of benefits.18 For example, after the death of her spouse, a~~
~~widow would fil out and send a Part D redetermination form to CMS. After CMS reviews the~~
~~document,~~
~~ if the information indicates that the widow qualifies for a more generous subsidy~~
~~or has a more favorable resources level for purposes of LIS calculations, the~~
~~change would take effect in the month following the month when the~~
~~redetermination report was received;~~
~~ if the information indicates no change in status, the widow would not be sent a~~
~~redetermination form the following year (with some exceptions); and~~
~~ if the information indicates a need to reduce the LIS, or provides a less favorable~~
~~resources level, the redetermination would be postponed.~~
~~Enrollment in Part D~~
~~Enrollment Periods~~
~~A Medicare beneficiary who is signing up for Part D for the first time may do so in one of three~~
~~different enrollment periods,19 depending on the individual’s circumstances:~~

~~Income Individuals,” Rev. October 1, 2018, at~~ https://www.cms.gov/Medicare/Prescription-Drug-Coverage/https://www.cms.gov/Medicare/Prescription-Drug-Coverage/
PrescriptionDrugCovContra/Downloads/Chapter-13-Premium-and-Cost-Sharing-Subsidies-for-Low-Income-PrescriptionDrugCovContra/Downloads/Chapter-13-Premium-and-Cost-Sharing-Subsidies-for-Low-Income-
Individuals-v09-14-2018.pdf. Individuals-v09-14-2018.pdf.
1719 CMS CMS Informational Bulletin, “Annual Redetermination of Medicare Part D Low-Income SubsidyInformational Bulletin, “Annual Redetermination of Medicare Part D Low-Income Subsidy Deemed Status Deemed Status
(Re-deeming),” July(Re-deeming),” July 25, 2017, 25, 2017, available at https://www.at https://www.~~medicaid.gov/federal-policy-guidance/downloads/cib072517.pdf.~~
~~18 T he~~hhs.gov/guidance/document/annual-re-determination-medicare-part-d-low-income-subsidy-deemed-status-re-deeming-0. 20 The extension is for one year from the date upon which the couple’s next scheduled extension is for one year from the date upon which the couple’s next scheduled redetermination would have redetermination would have
occurred. CMS,occurred. CMS, Medicare Part D Prescription Drug Manual, Chapter 13, “, Chapter 13, “ Premium and CostPremium and Cost -Sharing Subsidies-Sharing Subsidies for for
Low-Income Individuals,”Low-Income Individuals,” Section 40, Rev. October 1, 2018, at https://www.cms.gov/Medicare/Prescription-Drug-Section 40, Rev. October 1, 2018, at https://www.cms.gov/Medicare/Prescription-Drug-
Coverage/PrescriptionDrugCovContra/Downloads/Chapter-13-Premium-and-CostCoverage/PrescriptionDrugCovContra/Downloads/Chapter-13-Premium-and-Cost -Sharing-Subsidies-for-Low-Income--Sharing-Subsidies-for-Low-Income-
Individuals-v09-14-2018.pdf. Individuals-v09-14-2018.pdf.
1921 CMS, CMS, “Understanding Medicare“Understanding Medicare Part C & D Enrollment Periods,” Part C & D Enrollment Periods,” January 2023, at https://www.medicare.gov/Pubs/pdf/11219-at https://www.medicare.gov/Pubs/pdf/11219-
~~Understanding-Medicare-Part-C-D.pdf.~~
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~~link to page 14~~ ~~Medicare Part D Prescription Drug Benefit~~

~~ Initial Enrollment Period for Part D;~~
~~ Annual Open Enrollment Period (or Annual Coordinated Election Period, AEP);~~
or
~~ Special Enrollment Period (SEP).~~
~~Individuals who qualify for LIS may enroll at any time.~~
~~Initial Enrollment Period~~
~~The initial enrollment period is the time during which an individual is first eligible to enroll in a~~
~~Part D plan.20 Beneficiaries not yet enrolled in Medicare may join a drug plan at any time during~~
~~their seven-month initial Medicare enrollment period. The Part D initial enrollment period is the~~
~~same as the initial enrollment period for Medicare Part B.21 Coverage for new enrollees begins on~~Understanding-Medicare-Part-C-D.pdf. 22 CMS, Medicare & You 2023, Section 1, at https://www.medicare.gov/pub/medicare-you-handbook. 23 CRS Report R40082, Medicare Part B: Enrollment and Premiums. Congressional Research Service 7 link to page 13 Medicare Part D Prescription Drug Benefit
the first day of the month following the month of enrollment, but no earlier than the first month the first day of the month following the month of enrollment, but no earlier than the first month
they are entitled to Medicare. they are entitled to Medicare.
Individuals who become eligible for Medicare but have Individuals who become eligible for Medicare but have creditable coverage, which is prescription , which is prescription
drug coverage that CMS estimates drug coverage that CMS estimates ~~wil~~ will provide at least the same level of benefits as provide at least the same level of benefits as ~~Medicare’s~~the Part D
standard prescription drug standard prescription drug ~~package~~benefit, may choose not to sign up for Part D during , may choose not to sign up for Part D during ~~the~~their initial initial
enrollment period. Sources of possible creditable coverage include some employer-based enrollment period. Sources of possible creditable coverage include some employer-based
prescription drug coverage, including prescription drug coverage, including ~~the Federal Employees Health Benefits Program~~FEHB; qualified ; qualified
State Pharmaceutical Assistance programs (SPAPs); and military-related coverage (e.g., VA, State Pharmaceutical Assistance programs (SPAPs); and military-related coverage (e.g., VA,
TRICARE). However, these individuals could TRICARE). However, these individuals could face a late enrollment ~~face a~~ penalty if they let their creditable penalty if they let their creditable ~~c overage~~
coverage lapse before enrolling in Part D. (See lapse before enrolling in Part D. (See “Late Enrollment Penalty.”) ”)
Annual Open Enrollment Period
In general, an individual In general, an individual who does not sign up for Part D during his or her initialwho does not sign up for Part D during his or her initial enrollment enrollment
period may enroll only during the annual open enrollment period, held from October 15 to period may enroll only during the annual open enrollment period, held from October 15 to
December 7 each year. Coverage then begins the following January 1. Beneficiaries already December 7 each year. Coverage then begins the following January 1. Beneficiaries already
enrolled inenrolled in a Part D Part D ~~plan~~ may change may change ~~their~~ plans during the annual open enrollment period. plans during the annual open enrollment period.
Beneficiaries may Beneficiaries may ~~wish~~want to change plans for a variety of reasons, including changes in their health to change plans for a variety of reasons, including changes in their health
status and prescription drug needs or in response to status and prescription drug needs or in response to ~~modifications by their plans. General y,~~
plan modifications. Generally, sponsors make changes to plan benefits effective at the sponsors make changes to plan benefits effective at the ~~beginning~~start of each calendar year. After the of each calendar year. After the
open enrollment period closes, most beneficiaries are locked into their Part D plans for the open enrollment period closes, most beneficiaries are locked into their Part D plans for the
upcoming benefit year.upcoming benefit year.
Special Enrollment Periods
There are limited occasions There are limited occasions ~~besides~~outside the annual open enrollment period when an individual the annual open enrollment period when an individual may may
enroll in, or disenroll from, a Part D plan or switch from one Part D plan to another. enroll in, or disenroll from, a Part D plan or switch from one Part D plan to another. ~~These special~~
In general, special enrollment periods (SEPs) are open to individuals who (1) move to a new geographic area,enrollment periods (SEPs) are open to individuals who (1) move to a new geographic area,22
24 (2) involuntarily lose creditable coverage, (3) receive inadequate information about their (2) involuntarily lose creditable coverage, (3) receive inadequate information about their

~~20 CMS, Medicare & You 2021, Section 7, at https://www.medicare.gov/pub/medicare-you-handbook.~~
~~21 CRS Report R40082, Medicare Part B: Enrollment and Premiums.~~
~~22 T his includes being released from jail or out of an institution.~~
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creditable coverage status, (4) are subject to a federal error, or (5) are enrolled in a PDP that has creditable coverage status, (4) are subject to a federal error, or (5) are enrolled in a PDP that has
failed or has been terminated.failed or has been terminated.23
25 Late Enrollment Penalty
A A Part D late enrollment penalty is assessed on persons who go without creditable drug coverage for 63 late enrollment penalty is assessed on persons who go without creditable drug coverage for 63
continuous days or more after the close of their initial enrollment period, and then sign up for continuous days or more after the close of their initial enrollment period, and then sign up for
Part D. The penalty is intended to encourage wider enrollment and prevent adverse selection, Part D. The penalty is intended to encourage wider enrollment and prevent adverse selection,
which can occur when healthy people put off buying insurance while those with a real or which can occur when healthy people put off buying insurance while those with a real or
perceived need immediately enroll. If Part D enrollees are mainly those who are perceived need immediately enroll. If Part D enrollees are mainly those who are il ill or have higher or have higher
prescription drug spending, per capita program costs can rise. Higher premiums and/or cost prescription drug spending, per capita program costs can rise. Higher premiums and/or cost
sharing, in turn, may cause other enrollees (presumably healthier, less costly ones) to end sharing, in turn, may cause other enrollees (presumably healthier, less costly ones) to end
coverage. Over time, if more persons drop out, program costs could become prohibitive.coverage. Over time, if more persons drop out, program costs could become prohibitive. 24 This includes being released from jail or out of an institution. 25 CMS, “Understanding Medicare Part C & D Enrollment Periods,” January 2023, at https://www.medicare.gov/Pubs/pdf/11219-Understanding-Medicare-Part-C-D.pdf. The publication includes other examples of SEPs. See also CMS, Medicare Prescription Drug Benefit Manual, Chapter 3, “Eligibility, Enrollment and Disenrollment,” Section 30.3, Rev. August 12, 2020, at https://www.cms.gov/files/document/cy2021-pdp-enrollment-and-disenrollment-guidance.pdf. Congressional Research Service 8 link to page 41 link to page 41 Medicare Part D Prescription Drug Benefit The Part D late enrollment
~~The Part D late~~ penalty is based on the number of months an individual does not have creditable penalty is based on the number of months an individual does not have creditable
coverage and is applied to premiums on a monthly basis thereafter.coverage and is applied to premiums on a monthly basis thereafter.2426 The penalty is calculated by The penalty is calculated by
~~multiplying~~ multiplying 1% of the national base premium ($1% of the national base premium ($~~33.06 for 2021)25~~32.74 per month for 2023)27 by the number of full months an by the number of full months an
~~individual~~ individual has been eligiblehas been eligible but has gone without coverage. The final amount is rounded to the but has gone without coverage. The final amount is rounded to the
nearest $0.10. For example, if a beneficiary was eligible for Part D in June nearest $0.10. For example, if a beneficiary was eligible for Part D in June ~~2018~~2020 but did not sign but did not sign
up until the up until the ~~2021~~2023 open enrollment period, (with coverage effective January open enrollment period, (with coverage effective January ~~2021~~2023), and did not ), and did not
have creditable coverage during the 30-month interim period, the have creditable coverage during the 30-month interim period, the ~~individual~~ individual would pay an would pay an
additional $9.additional $9.9080 per month. per month.2628
The late The late enrollment penalty is applied permanently to Part D premiums. Because the national base premium penalty is applied permanently to Part D premiums. Because the national base premium
is recalculated is recalculated ~~annual y~~annually, and the penalty is based on the base premium, the penalty amount , and the penalty is based on the base premium, the penalty amount ~~wil~~
would increase in subsequent years if the base premium rises. increase in subsequent years if the base premium rises. ~~Dual-eligible and other~~Generally, LIS beneficiaries LIS beneficiaries
are not subject to the late enrollment penalty. are not subject to the late enrollment penalty.
Plan Selection
Sponsors Sponsors ~~can~~may alter a plan benefit package at the beginning of a new program year, including alter a plan benefit package at the beginning of a new program year, including
changing the mix of drugs in a formulary and/or modifying required cost sharing for certain changing the mix of drugs in a formulary and/or modifying required cost sharing for certain
drugs. Sponsors must mail an Annual Notice of Change (ANOC) to plan enrolleesdrugs. Sponsors must mail an Annual Notice of Change (ANOC) to plan enrollees ~~each year~~, to , to
be delivered by September 30. The document describes any modifications to the plan’s be delivered by September 30. The document describes any modifications to the plan’s
premiums, drug coverage, cost sharing, and other features for the coming benefit year. The premiums, drug coverage, cost sharing, and other features for the coming benefit year. The
delivery deadline is designed to ensure that beneficiaries have at least two weeks to review the delivery deadline is designed to ensure that beneficiaries have at least two weeks to review the
information prior to information prior to October 15, the first day of the annual enrollment period. ~~October 15, the first day of the annual enrollment period.~~

~~23 CMS, “Understanding Medicare Part C & D Enrollment Periods,” at https://www.medicare.gov/Pubs/pdf/11219-~~
~~Understanding-Medicare-Part-C-D.pdf. T he publication includes other examples of SEPs. See also CMS,~~ ~~Medicare~~
~~Prescription Drug Benefit Manual, Chapter 3, “ Eligibility, Enrollment and Disenrollment ,” Section 30.3, Rev. August~~
~~12, 2020, at https://www.cms.gov/files/document/cy2021-pdp-enrollment -and-disenrollment-guidance.pdf.~~
~~24 T he late enrollment penalty is calculated based on the national base beneficiary premium, not the premium of the~~
~~enrollee’s plan. T herefore, the penalty is billed to applicable enrollees even if the plan’s Part D basic premium is $0.~~
~~25 CMS, “Annual Release of Part D National Average Bid Amount and other Part C & D Bid Information,” July 20,~~
~~2020, at https://www.cms.gov/files/document/2021-announcement.pdf.~~
~~26 CMS, “Part D Late Enrollment Penalty?,” at http://www.medicare.gov/part-d/costs/penalty/part-d-late-enrollment-~~
~~penalty.html. (T o calculate, 1% × 30 months equals 0.30, and $33.06 × 0.30 equals $9.918. T he amount is then rounded~~
~~to $9.90.)~~
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Sponsors are required to send plan enrollees other enrollment-related materials and information Sponsors are required to send plan enrollees other enrollment-related materials and information
such as the Summary of Benefits and Evidence of Coverage documents.such as the Summary of Benefits and Evidence of Coverage documents.2729 These documents offer These documents offer
information about a plan’s formulary, general utilizationinformation about a plan’s formulary, general utilization management and pricing policies, management and pricing policies,
information on beneficiary rights, and other information. information on beneficiary rights, and other information.
Each year, Medicare beneficiaries Each year, Medicare beneficiaries ~~face the need~~have an opportunity to review the cost of their current drug and health to review the cost of their current drug and health
plans, (if in plans, (if in MAMedicare Advantage) including premiums, co-payments, and deductibles, and compare the cost and ) including premiums, co-payments, and deductibles, and compare the cost and
coverage to other plans in their area. coverage to other plans in their area. ~~Additional y,~~ Additionally, beneficiaries can examine whether plans have beneficiaries can examine whether plans have
price tiers that increase or decrease price tiers that increase or decrease ~~the price of~~cost sharing for the drugs they use, whether the plans offer the drugs they use, whether the plans offer
preferred pharmacy options, and whatpreferred pharmacy options, and what~~, if any,~~ utilization management requirements the plans utilization management requirements the plans
impose for drugs, such as prior authorizationimpose for drugs, such as prior authorization ~~or step therapy. (Se~~e . (See “Drug Utilization Management
~~Programs.”)~~
~~CMS posts information on its open enrollment web page to help beneficiaries compare Part D~~
~~plan information.28 Beneficiaries, and persons assisting them, can also use the Medicare drug plan~~
~~finder to search for information on individual drugs.29 After a beneficiary enters information into~~
~~the plan finder regarding medications being used, the dosages, and the pharmacy he or she plans~~
~~to use, the plan finder displays Part D plans in the area that cover those particular drugs.30 The~~
~~plan finder also provides information on quality ratings to make it easier to compare plans based~~
~~on cost, quality, and performance ratings.31 CMS wil send notices to beneficiaries in low-quality~~
~~plans encouraging them to look at other, higher rated plans. (See “Low-Quality Plans.”)~~
~~Information on plan availability and characteristics can be obtained from a number of additional~~
~~sources, including the Medicare toll-free information number (1-800-MEDICARE), State Health~~
~~Insurance Assistance Programs (SHIPs),32 and other local organizations.~~
~~Low-Quality Plans~~
~~CMS uses a star-rating system to assess the quality of Part D plans. MA-PD plan sponsors are~~
~~rated on up to 47 quality and performance measures, while PDP sponsors are assessed on up to 14~~

27Programs.”) 26 The late enrollment penalty is calculated based on the national base beneficiary premium, not the premium of the enrollee’s plan. Therefore, the penalty is billed to an applicable enrollee even if the enrollee is in a Part D plan with a $0 premium. 27 CMS, “Annual Release of Part D National Average Bid Amount and other Part C & D Bid Information,” July 29, 2022, at https://www.cms.gov/files/document/july-29-2022-parts-c-d-announcement-pdf.pdf. 28 CMS, “Part D Late Enrollment Penalty?,” at http://www.medicare.gov/part-d/costs/penalty/part-d-late-enrollment-penalty.html. (To calculate, 1% × 30 months equals 0.30, and $32.74 × 0.30 equals $9.822. The amount is then rounded to $9.80.) 29 Starting in 2019, the time frame for delivery of the annual Evidence of Coverage (EOC) information was moved to Starting in 2019, the time frame for delivery of the annual Evidence of Coverage (EOC) information was moved to
the first day of the Annual Election Period (AEP), the first day of the Annual Election Period (AEP), ~~rat her~~rather than fifteen days prior to that date. In addition, Part D plans than fifteen days prior to that date. In addition, Part D plans
~~are~~were allowed allowed to deliver more documents, includingto deliver more documents, including the EOC, by notifying enrollees that the documents have been posted the EOC, by notifying enrollees that the documents have been posted
on the Internet. Enrollees have the right to request hard copies. CMS,on the Internet. Enrollees have the right to request hard copies. CMS, “ “Medicare Program: Contract Year 2019 Policy Medicare Program: Contract Year 2019 Policy
~~and T echnical~~and Technical Changes to Medicare Advantage, Medicare Cost Plan, Medicare Fee Changes to Medicare Advantage, Medicare Cost Plan, Medicare Fee -for-Service, Medicare Prescription -for-Service, Medicare Prescription
~~Drug~~ Drug Benefit Programs, and PACE Program,” 83 Benefit Programs, and PACE Program,” 83 Federal Register, April 16, 2018, p. 16621; at https://www.gpo.gov/, April 16, 2018, p. 16621; at https://www.gpo.gov/
~~fdsys/pkg/FR-2018-04-16/pdf/2018-07179.pdf.~~
~~28 CMS, “Medicare Open Enrollment,” at http://www.cms.gov/Center/Special-T opic/Open-Enrollment-Center.html.~~
~~29 Medicare Plan Finder, at http://www.medicare.gov/find-a-plan/questions/home.aspx.~~
~~30 For example, a plan with the lowest premium and/or no deductible may end up not being the lowest -cost plan for the~~
~~beneficiary if the total cost sharing (including any deductible, co-payments, or coinsurance) for the beneficiary’s~~
~~specific drugs is more than under a different plan.~~
~~31 T he plans are rated on how well they perform in different categories, including (1) drug plan customer service, (e.g.,~~
~~how long members wait on hold and how frequently they meet deadlines for timely appeals); (2) member complaints~~
~~and number of beneficiaries staying with the same drug plan; (3) member satisfaction with drug plans; and (4) drug~~
~~pricing and patient safety, including how often drug plans update their prices and formulary information on the~~
~~Medicare website and how similar a drug plan’s estimated prices on the Medicare website are to prices members pay at~~
~~the pharmacy.~~
~~32 SHIPs are state-based programs that use community-based networks to provide Medicare beneficiaries with local~~
~~personalized assistance on a wide variety of Medicare and health insurance topics and receive federal funding for their~~
~~activities. See http://www.medicare.gov/contacts.~~
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~~measures.33 For each measure, plans~~fdsys/pkg/FR-2018-04-16/pdf/2018-07179.pdf. Congressional Research Service 9 Medicare Part D Prescription Drug Benefit CMS posts information on Medicare.gov to help beneficiaries compare Part D plan information. Beneficiaries, and persons assisting them, can also use the Medicare drug plan finder to search for information on individual drugs.30 After a beneficiary enters information into the plan finder regarding prescribed medications, the dosages, and specific pharmacy to be used, the plan finder displays applicable Part D plans in the area. The plan finder also provides information on quality ratings to make it easier to compare plans based on cost, quality, and performance ratings.31 CMS sends annual notices to beneficiaries in low-quality plans encouraging them to look at other, higher rated plans. (See “Low-Quality Plans.”) Information on plan availability and characteristics can be obtained from a number of additional sources, including the Medicare toll-free information number (1-800-MEDICARE), State Health Insurance Assistance Programs (SHIPs),32 and other local organizations. Low-Quality Plans CMS uses a star-rating system to assess the quality of Part D plans. MA-PD plan sponsors are rated on up to 40 quality and performance measures, while PDP sponsors are assessed on up to 12 measures.33 Plans are ranked on a scale of one to five stars, with five stars are ranked on a scale of one to five stars, with five stars
considered considered ~~excel ent. By CMS practice,~~ excellent. Part D sponsors must provide star rating information to Part D sponsors must provide star rating information to
beneficiaries through a standard document beneficiaries through a standard document ~~that must be~~ distributed with enrollment information distributed with enrollment information
and prominently posted on plan websites.and prominently posted on plan websites.
CMS has determined that three stars is the lowest acceptable quality rating for a plan. Plans must CMS has determined that three stars is the lowest acceptable quality rating for a plan. Plans must
display a special icon if they have an aggregate star rating of 2.5 or lower for three years of data.display a special icon if they have an aggregate star rating of 2.5 or lower for three years of data.34
Plans with star ratings of less than three stars for three consecutive years may be terminated by Plans with star ratings of less than three stars for three consecutive years may be terminated by
CMS. In addition, CMS may disable the online enrollment function for plans with a lowCMS. In addition, CMS may disable the online enrollment function for plans with a low -rating -rating
iconicon, and beneficiaries and beneficiaries ~~wil be directed~~would have to contact the plan directly to contact the plan directly ~~to enroll in the low-performing~~
~~plan.35~~if they want to enroll.34 Plans that receive five-star ratings may display a special icon recognizing them as high- Plans that receive five-star ratings may display a special icon recognizing them as high-
performing plans. performing plans. All Part D enrollees Part D enrollees ~~are provided with~~qualify for a special enrollment period during which a special enrollment period during which
they can switchthey can switch from their current plan to a five-star plan, provided they meet other enrollment requirements.35 30 Medicare Plan Finder, at http://www.medicare.gov/find-a-plan/questions/home.aspx. 31 The plans are rated on how well they perform in different categories, including (1) drug plan customer service; (2) member complaints and number of beneficiaries staying with the same drug plan; (3) member satisfaction with drug plans; and (4) drug pricing and patient safety, including how often drug plans update their prices and formulary information on the Medicare website and how similar a drug plan’s estimated prices on the Medicare website are to prices members pay at the pharmacy. 32 SHIPs are state-based programs that use community-based networks to provide Medicare beneficiaries with local personalized assistance on a wide variety of Medicare and health insurance topics. SHIPs receive federal funding for their activities. See “Contact Medicare,” http://www.medicare.gov/contacts. 33 CMS, “Medicare 2023 Part C & D Star Ratings Technical Notes,” p. 4 ~~to a five-star plan, provided they meet other enrollment requirements.36~~
~~Plan Marketing~~
~~Plan sponsors are required to provide timely and accurate information in their marketing~~
~~materials.37 With the implementation of Part D in 2006, plans were required to submit all~~
~~marketing materials to CMS for review. Starting in 2019, a smal er share of annual plan materials~~
~~provided to enrollees and prospective enrollees have been subject to CMS prior review. Under~~
~~revised rules, CMS classifies activities and materials used to provide information to enrollees and~~
~~prospective enrollees as communications. Marketing is a subset of plan communications and is~~
~~defined, in part, as activities and the use of materials that are likely to lead a beneficiary to make~~
~~an enrollment decision.38 For example, communications materials issued by a plan sponsor that~~
~~simply describe a Part D sponsor organization but do not include information about a plan’s~~
~~benefit structure, costs, or star ratings are not marketing information and are not subject to prior~~
~~review. A brochure issued by a plan sponsor that touted the benefits of joining a specific Part D~~

~~33 CMS, “ Medicare 2021 Part C & D Star Ratings T echnical Notes,” p. 12~~. Available at https://www.cms.gov/. Available at https://www.cms.gov/
Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/PerformanceData. Only a portion of the Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/PerformanceData. Only a portion of the 47 quality quality
~~measures~~ measures for MA-PD plans are directly targeted at the administration of the prescription drug benefit. Other for MA-PD plans are directly targeted at the administration of the prescription drug benefit. Other ~~me asures~~
measures are targeted at other non-drug related health care quality and delivery performance. are targeted at other non-drug related health care quality and delivery performance.
34 34 ~~A contract receives a low performing icon as a result of its performance on Part C or Part D ratings. T he low~~
~~performing icon is calculated by evaluating the Part C and Part D summary ratings for the current year and the past two~~
~~years. If the contract had any combination of Part C or Part D summary ratings of 2.5 or lower in all three years of data,~~
~~it is marked with a low performing icon.~~
~~35 Beginning with plan year~~Beginning in 2016, CMS began 2016, CMS began to exercise its authority to terminate Part D plans that had received three to exercise its authority to terminate Part D plans that had received three
years of low ratings. CMSyears of low ratings. CMS ~~issues~~ issues contract nonrenewal notices for the affected plans each February, with an effective contract nonrenewal notices for the affected plans each February, with an effective
date of December 31 of the same year. Seedate of December 31 of the same year. See CMS,CMS, “ “Advance Notice of Methodological Changes for CalendarAdvance Notice of Methodological Changes for Calendar Year Year
(CY) 2017 for Medicare Advantage (MA) Capitation Rates, Part C and Part D Payment Policies and Call Letter(CY) 2017 for Medicare Advantage (MA) Capitation Rates, Part C and Part D Payment Policies and Call Letter ,” ,”
February 19, 2016, p.101, at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/February 19, 2016, p.101, at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/
~~Advance2017~~Advance2017.pdf. For definitions see 42 C.F.R. §423.186 and 42 C.F.R..pdf. For definitions see 42 C.F.R. §423.186 and 42 C.F.R. §423.509. §423.509.
3635 Medicare Part D Prescription Drug Manual, Chapter 3, “, Chapter 3, “ Eligibility, Enrollment and DisenrollmentEligibility, Enrollment and Disenrollment ,” Section 30.3.8, ,” Section 30.3.8,
subsection 12, Rev. Augustsubsection 12, Rev. August 12, 2020, at https://www.cms.gov/files/document/cy2021-pdp-enrollment-and-12, 2020, at https://www.cms.gov/files/document/cy2021-pdp-enrollment-and-
disenrollmentdisenrollment ~~-guidance.pdf.~~
~~37 CMS, “FY 2019 Medicare Communication and Marketing Guidelines,” Rev. September 5, 2018, at~~
~~https://www.cms.gov/Medicare/Health-Plans/ManagedCareMarketing/Downloads/CY2019-Medicare-~~
~~Communications-and-Marketing-Guidelines_Updated-090518.pdf.~~
~~38 CMS, “ Medicare Program: Contract Year 2019 Policy and T echnical Changes to Medicare Advantage, Medicare~~
~~Cost Plan, Medicare Fee-for-Service, Medicare Prescription Drug Benefit Programs, and PACE Program,” 83~~ ~~Federal~~
~~Register, April 16, 2018, p. 16624, at https://www.gpo.gov/fdsys/pkg/FR-2018-04-16/pdf/2018-07179.pdf. For~~
~~definitions see 42 C.F.R. §423.2260~~-guidance.pdf. .
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~~plan and spel ed out benefits and cost sharing would be considered marketing material and~~
~~subject to review.~~
~~In general, Medicare rules are designed to ensure that beneficiaries have complete and accurate~~
~~information when making decisions about drug plans~~Plan Marketing Plan sponsors must provide timely and accurate information in their marketing materials. For example, a plan that has received a . For example, a plan that has received a
four-star rating for one of the categories on which it is assessedfour-star rating for one of the categories on which it is assessed, but has an aggregate three-star but has an aggregate three-star
quality rating across quality rating across al all the CMS measuresthe CMS measures, cannot create promotional material stating that the cannot create promotional material stating that the
~~plan is a four-star plan. Plans must use standardized names and materials across their service~~
~~region and must receive prior agreement from plan enrollees to provide certain information in a~~
~~format other than a mailing.39~~plan is a four-star plan.36 Plans are not Plans are not ~~al owed~~allowed to market via unsolicited contacts, such as to market via unsolicited contacts, such as
door-to-door salesdoor-to-door sales~~. There are also~~, and also face limits on marketing and sales events. limits on marketing and sales events. Al All plan sponsors must plan sponsors must
have interpreters in their have interpreters in their ~~cal centers to translate for people who are not proficient in English.40~~
~~Plans are required to~~call centers.37 Plans must provide certain documents upon request or enrollment, such as a summary provide certain documents upon request or enrollment, such as a summary
of benefits, the plan formulary, and a directory of contracting pharmacies. Plan sponsors may of benefits, the plan formulary, and a directory of contracting pharmacies. Plan sponsors may
offer nominal gifts (worth $15 or lessoffer nominal gifts (worth $15 or less per item or $75 in the aggregate per person, per year) to potential enrollees, though they may not take the form ) to potential enrollees, though they may not take the form
of cash or rebates.of cash or rebates.4138 In 2022, CMS issued new rules increasing federal oversight of third-party marketing organizations, which are outside firms hired to drum up enrollees for Part D plan sponsors. CMS issued the rule to protect Medicare beneficiaries from what it termed “confusing and potentially misleading activities” by the marketing organizations.39
Enrollment Process
Beneficiaries can join a Part D plan in a variety of ways,Beneficiaries can join a Part D plan in a variety of ways,4240 including (1) including (1) ~~fil ing~~filling out a paper out a paper
application; (2) visiting a plan’s website and enrolling online; (3) using the Medicare online application; (2) visiting a plan’s website and enrolling online; (3) using the Medicare online
information site and enrollment center at http://www.medicare.gov;information site and enrollment center at http://www.medicare.gov;~~43 (4) cal ing~~41 (4) calling the company the company
offering the drug plan; or (5) offering the drug plan; or (5) ~~cal ing~~calling 1-800-MEDICARE. In general, a 1-800-MEDICARE. In general, a ~~PDP~~plan sponsor may not deny sponsor may not deny
a valid enrollment request from any Part D-eligible individuala valid enrollment request from any Part D-eligible individual residing in its service area. residing in its service area.
An individual An individual (or his/her legal representative) must complete an enrollment request, and include (or his/her legal representative) must complete an enrollment request, and include
~~al the~~all information required to process the enrollment. Upon receiving an enrollment request, a information required to process the enrollment. Upon receiving an enrollment request, a
~~PDP~~ plan sponsor must provide, within 10 calendar days, (1) a notice of acknowledgement of receipt sponsor must provide, within 10 calendar days, (1) a notice of acknowledgement of receipt
of the beneficiary’s application, (2) a request for more information in cases of incomplete of the beneficiary’s application, (2) a request for more information in cases of incomplete
applications, or (3) a notice that the application has been denied, along with an explanation applications, or (3) a notice that the application has been denied, along with an explanation ~~of the~~
~~reasons why.~~
~~Prior to the effective date of enrollment, under CMS rules, a plan sponsor must provide necessary~~
~~information about being a member of the PDP, including the PDP rules and the member’s rights~~
~~and responsibilities. In addition, the PDP sponsor must provide the following: a copy of the~~
~~completed enrollment form, if needed; a notice acknowledging receipt of the enrollment request~~
~~providing the expected effective date of enrollment; and proof of health insurance coverage so~~

~~39 CMS, “FY 2019 Medicare Communication and Marketing Guidelines,” Rev. September 5, 2018, at~~
as to why. 36 CMS, “Medicare Communications and Marketing Guidelines (MCMG,” February 9, 2022, https://www.cms.gov/Medicare/Health-Plans/ManagedCareMarketing/FinalPartCMarketingGuidelines. Plans may provide provider and/or pharmacy directories electronically without prior consent from an enrollee. Part D plans may (1) send enrollees the plan formulary in hard copy, which may be abridged, or (2) send a distinct and separate notice (in hard copy) describing where enrollees can find the formulary online and how enrollees can request a hard copy. 37 CMS call center requirements at 42 CFR § 422.111(h)(1)(iii) and § 423.128(d)(1)(iii) require that interpreter services be provided to non-English speaking and limited English proficient (LEP) individuals at no cost. 38 CMS, “Medicare Communications and Marketing Guidelines (MCMG),” February 9, 2022, https://www.cms.gov/https://www.cms.gov/Medicare/Health-Plans/ManagedCareMarketing/FinalPartCMarketingGuidelines. 39 CMS Fact Sheet, “CY 2023 Medicare Advantage and Part D Final Rule (CMS-4192-F),” April 29, 2022, https://www.cms.gov/newsroom/fact-sheets/cy-2023-medicare-advantage-and-part-d-final-rule-cms-4192-f. See also CMS, “Medicare Program: Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs; etc.,” May 9, 2022, https://www.regulations.gov/document/CMS-2022-0012-4335. In addition, under the new rule, Part D plans must provide a multi-language insert in the top 15 languages used in the United States, as well as in any additional non-English language that is the primary language of at least 5% of the individuals in a plan benefit area, informing individuals that interpreter services are available for free. 40 Medicare Part D Prescription Drug Manual, Chapter 3, “Eligibility, Enrollment and Disenrollment~~Medicare/Health-Plans/ManagedCareMarketing/Downloads/CY2019-Medicare-~~
~~Communications-and-Marketing-Guidelines_Updated-090518.pdf. See Section 100. Plans may provide provider and/or~~
~~pharmacy directories electronically without prior consent from an enrollee. Part D plans may (1) send enrollees the plan~~
~~formulary in hard copy, which may be abridged, or (2) send a distinct and separate notice (in hard copy) describing~~
~~where enrollees can find the formulary online and how enrollees can request a hard copy formulary.~~
~~40 Ibid, Section 80.1. T he interpreters should be available within eight minutes of reaching a call center.~~
~~41 Ibid, Section 40.4.~~
42 CMS, Medicare Prescription Drug Benefit Manual~~, Chapter 3, “Eligibility, Enrollment and Disenrollment~~ ,” Section ,” Section
~~40.1 and 40.4.1.,~~ 40.1, Rev. August 12, 2020, at https://www.cms.gov/files/document/cy2021-pdp-enrollment-and-Rev. August 12, 2020, at https://www.cms.gov/files/document/cy2021-pdp-enrollment-and-
~~disenrollment -~~disenrollment-guidance.pdf.guidance.pdf.
~~43 Medicare drug~~ 41 Drug plan participation in Medicare’s online enrollment center is voluntary, so not all plan participation in Medicare’s online enrollment center is voluntary, so not all ~~Medicare drug plans~~
~~will~~ Part D plans offer this option. offer this option.
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link to page link to page 4443 link to page link to page 4443 link to page link to page 1817 Medicare Part D Prescription Drug Benefit Prior to the effective date of enrollment, a plan sponsor must provide necessary information about being a member of the plan. In addition, the sponsor must provide: a copy of the completed enrollment form, if needed; a notice acknowledging receipt of the enrollment request providing the expected effective date of enrollment; and proof of health insurance coverage so ~~Medicare Part D Prescription Drug Benefit~~

that a beneficiary may begin using that a beneficiary may begin using ~~the~~ plan services as of the effective date. For plan services as of the effective date. For al all enrollment enrollment
requests, the requests, the ~~PDP~~plan sponsor must submit the information necessary for CMS to add sponsor must submit the information necessary for CMS to add ~~the~~a beneficiary beneficiary
to its records as an enrolleeto its records as an enrollee ~~of the PDP sponsor~~ within seven calendar days of receipt of the within seven calendar days of receipt of the
completed enrollment request. completed enrollment request.
LIS Enrollment
Special enrollment rules apply to Special enrollment rules apply to ~~low-income~~LIS individuals. individuals. ~~General y~~Generally, there is a two-step process , there is a two-step process
for low-income persons to gain Part D coverage. First, a determination must be made that they for low-income persons to gain Part D coverage. First, a determination must be made that they
qualify for qualify for the LIS~~the assistance~~; second, they must enroll, or be enrolled, in a specific Part D plan.; second, they must enroll, or be enrolled, in a specific Part D plan.4442
LIS enrollees LIS enrollees ~~had once been al owed~~were once allowed to change plans at any time during the plan year, unlike to change plans at any time during the plan year, unlike
other Part D enrollees who other Part D enrollees who ~~general y~~generally may switch plans only during the annual enrollment period may switch plans only during the annual enrollment period
~~at the end of the year~~. Since 2019, LIS enrollees have . Since 2019, LIS enrollees have ~~no longer been al owed an open-ended,~~
~~monthly SEP. Instead, LIS enrollees are al owed~~been allowed a SEP once per calendar quarter during the first a SEP once per calendar quarter during the first
nine months of the year and also are eligiblenine months of the year and also are eligible for SEPs (1) within three months after the start of for SEPs (1) within three months after the start of
coverage or notification that they have been enrolled by CMS or a state in a Part D plan and (2) coverage or notification that they have been enrolled by CMS or a state in a Part D plan and (2)
within three months after a change to their LIS or Medicaid status.within three months after a change to their LIS or Medicaid status.~~45 The rules also~~43 Federal regulations place limits on place limits on
SEPs for LIS enrollees who are identified by CMS as at risk of opioid abuse. (See SEPs for LIS enrollees who are identified by CMS as at risk of opioid abuse. (See “Part D Opioid
~~Overutilization~~ Overutilization Monitoring.”)
”) Auto-Enrollment
Full-benefit, dual-eligible Full-benefit, dual-eligible individuals who have not elected a Part D plan are individuals who have not elected a Part D plan are ~~automatical y~~automatically
enrolled into enrolled into ~~one~~a PDP by CMS. by CMS.4644 CMS first uses data provided by state Medicaid agencies to identify CMS first uses data provided by state Medicaid agencies to identify
full-benefit, dual-eligiblefull-benefit, dual-eligible individuals. CMS then identifies plan sponsors that offer at least one individuals. CMS then identifies plan sponsors that offer at least one
Part D plan in the region offering basic prescription drug coverage with a premium at or below Part D plan in the region offering basic prescription drug coverage with a premium at or below
the low-income premium subsidy amount. If more than one sponsor in a region meets the criteria, the low-income premium subsidy amount. If more than one sponsor in a region meets the criteria,
CMS auto-enrolls beneficiaries on a random basis among available PDP sponsors. CMS next CMS auto-enrolls beneficiaries on a random basis among available PDP sponsors. CMS next
identifies individualidentifies individual plans offered by the sponsor that include basic drug coverage with premiums plans offered by the sponsor that include basic drug coverage with premiums
at or below the low-income premium subsidy amount. The beneficiary is then randomly assigned at or below the low-income premium subsidy amount. The beneficiary is then randomly assigned
~~among the sponsor’s plans meeting the criteria.~~
~~If an individual is not eligible to enroll in a PDP because he or she is enrolled in a Medicare~~
~~Advantage plan (other than a MA private-fee-for-service plan [MA-PFFS] that does not offer Part~~
~~D, or a medical savings account [MSA] plan), CMS is to direct the MA organizations to facilitate~~
~~the enrollment of these individuals into an MA-PD plan offered by the same MA organization.~~
among the sponsor’s plans meeting the criteria. Some dual-eligibleSome dual-eligible beneficiaries may beneficiaries may ~~find that they have been~~be auto-enrolled in a plan that auto-enrolled in a plan that ~~may~~
~~not best~~does not meet their needs. For this reason, they are provided with meet their needs. For this reason, they are provided with ~~more~~ opportunities to change opportunities to change
enrollment, with the new coverage effective the following month. (Seeenrollment, with the new coverage effective the following month. (See “LIS Enrollment.”) If an ”) If an

~~44 CMS,~~ enrollee selects a new plan with a premium above the low-income benchmark, however, he or she must pay the difference.45 42 CMS, Medicare Part D Prescription Drug Manual, Chapter 13, “Premium and Cost, Chapter 13, “Premium and Cost -Sharing Subsidies-Sharing Subsidies for Low-for Low-
Income Individuals,”Income Individuals,” Section 40, Rev. October 1, 2018, at https://www.cms.gov/Medicare/Prescription-Drug-Section 40, Rev. October 1, 2018, at https://www.cms.gov/Medicare/Prescription-Drug-
Coverage/PrescriptionDrugCovContra/Downloads/Chapter-13-Premium-and-CostCoverage/PrescriptionDrugCovContra/Downloads/Chapter-13-Premium-and-Cost -Sharing-Subsidies-for-Low-Income--Sharing-Subsidies-for-Low-Income-
Individuals-v09-14-2018.pdf. Individuals-v09-14-2018.pdf.
4543 CMS, CMS, “Medicare Program: Contract Year 2019 Policy and “Medicare Program: Contract Year 2019 Policy and ~~T echnical~~Technical Changes to Medicare Advantage, Medicare Changes to Medicare Advantage, Medicare
Cost Plan, Medicare Fee-for-Service, Medicare Prescription Drug Benefit Programs, and PACE Program,” 83 Cost Plan, Medicare Fee-for-Service, Medicare Prescription Drug Benefit Programs, and PACE Program,” 83 Federal
Register, April 16, 2018, p. 16514, at https://www.gpo.gov/fdsys/pkg/FR-2018-04-16/pdf/2018-07179.pdf. , April 16, 2018, p. 16514, at https://www.gpo.gov/fdsys/pkg/FR-2018-04-16/pdf/2018-07179.pdf.
46 44 Full-benefit duals Full-benefit duals who live in another country, live in one of the five U.S. territories, are inmates in a correctional who live in another country, live in one of the five U.S. territories, are inmates in a correctional
facility, have already enrolled in a Part D plan, or have opted out of autofacility, have already enrolled in a Part D plan, or have opted out of auto -enrollment into a Part D plan, are excepted -enrollment into a Part D plan, are excepted
from this process. from this process.
45 CMS, Medicare Prescription Drug Manual, “Chapter 3 - Eligibility, Enrollment and Disenrollment,” Section 40.1.4, (continued...) Congressional Research Service Congressional Research Service

1312

link to page link to page 2621 Medicare Part D Prescription Drug Benefit

~~enrollee selects a plan with a premium above the low-income benchmark, however, he or she is~~
~~required to pay the difference.~~
Facilitated Enrollment
CMS established a process labeled “facilitated enrollment” for enrollees in Medicare Savings CMS established a process labeled “facilitated enrollment” for enrollees in Medicare Savings
programs (MSPs), SSI enrollees, and persons who applied for and were approved for programs (MSPs), SSI enrollees, and persons who applied for and were approved for ~~low -income~~
~~subsidy assistance~~the LIS. The basic features applicable to auto-enrollment for dual eligibles. The basic features applicable to auto-enrollment for dual eligibles (i.e., (i.e.,
identification of eligibilityidentification of eligibility through SSA and/or Medicaid data, random assignment to plans with through SSA and/or Medicaid data, random assignment to plans with
premiums below the low-income benchmark, and assignment of MA enrollees to the lowest-cost premiums below the low-income benchmark, and assignment of MA enrollees to the lowest-cost
MA-PD plan offered by the MA organization) are the same for facilitated enrollment. MA-PD plan offered by the MA organization) are the same for facilitated enrollment.
Reassignment of Certain LIS Beneficiaries
Drug plans may increase premiums at the beginning of a plan year, in some cases raising them Drug plans may increase premiums at the beginning of a plan year, in some cases raising them
above the benchmark for LIS beneficiaries. When that is the case, CMS is to reassign full LIS above the benchmark for LIS beneficiaries. When that is the case, CMS is to reassign full LIS
recipients to different plans so they can continue to receive benefits without paying Part D recipients to different plans so they can continue to receive benefits without paying Part D
premiums (or continue paying only a minimal amount). CMS may also premiums (or continue paying only a minimal amount). CMS may also ~~automatical y~~automatically reassign reassign
LIS recipients if their current plan terminates operations. LIS beneficiaries who have voluntarily LIS recipients if their current plan terminates operations. LIS beneficiaries who have voluntarily
changed plans in previous years are not changed plans in previous years are not ~~automatical y~~automatically reassigned by CMS, even if their plans reassigned by CMS, even if their plans
charge premiums above the benchmark. LIS beneficiaries in MA-PD plans are charge premiums above the benchmark. LIS beneficiaries in MA-PD plans are ~~automatical y~~automatically
reassigned to PDPs if their current plan ceases operations or they are affected by a reduction in reassigned to PDPs if their current plan ceases operations or they are affected by a reduction in
the plan’s service area.the plan’s service area.
About About ~~433,473~~463,000 LIS beneficiaries were enrolled in benchmark PDPs in LIS beneficiaries were enrolled in benchmark PDPs in ~~2019~~2022 that did not qualify as that did not qualify as
benchmark plans in benchmark plans in ~~2020~~2023. CMS randomly reassigned . CMS randomly reassigned ~~100,334~~457,932 beneficiaries to different PDPs, and beneficiaries to different PDPs, and
~~333,139~~4,460 were assigned to the same plan despite a premium increase. Another were assigned to the same plan despite a premium increase. Another ~~700,499 mil ion~~517,183 LIS LIS
beneficiaries were not reassigned because they had previously switched plans voluntarily.beneficiaries were not reassigned because they had previously switched plans voluntarily.~~47 The~~
~~ACA made changes to Part D in an effort to reduce the need for automatic reassignment of LIS~~
~~beneficiaries. For instance, the law changed the methodology for calculating the benchmark~~
~~premium for some plans. In addition, PDPs with premiums above LIS-eligible levels no longer~~
~~have LIS beneficiaries reassigned if they voluntarily agree to waive a de minimis portion of the~~
~~premium above the benchmark. However, such plans would not qualify to receive other LIS~~
~~beneficiaries who are automatical y reassigned from their current plans.48~~
~~Part D Benefit Structure~~
~~The MMA set out a standard prescription drug benefit structure. Plan sponsors may, and often do,~~
46 Part D Benefit Structure The 2003 MMA set out a minimum drug benefit structure, known as the standard Part D benefit. Plan sponsors may, and usually do, offer different benefit designs and cost-sharing requirements, so long as they meet offer different benefit designs and cost-sharing requirements, so long as they meet ~~certain~~
~~specifications.~~ or exceed the standard benefit specifications. Under the standard benefitUnder the standard benefit ~~structure~~, with some exceptions, over the course of a , with some exceptions, over the course of a
year a beneficiary is responsible for paying (1) a monthly premium, (2) year a beneficiary is responsible for paying (1) a monthly premium, (2) ana capped, annual deductible, and annual deductible, and
(3) co-payments or coinsurance for drug purchases. (3) co-payments or coinsurance for drug purchases. ~~Additional y~~There MMA did not set an annual cap on enrollee out-of-pocket spending in the standard benefit, except for certain LIS enrollees. Additionally, under the MMA, for a certain portion in the , for a certain portion in the
annual benefit annual benefit ~~cal ed~~called the the coverage gap (also known as the (also known as the doughnut hole), ), ~~beneficiaries initial y~~
non-LIS beneficiaries initially faced 100% out-of-pocket costs. The Part D benefit has been reconfigured by Congress several times since the MMA was enacted. For example, the Patient Protection and Affordable Care Act of 2010 (ACA; P.L. 111-148, as amended) “closed” the coverage gap, in the sense that enrollees in 2023 pay 25% rather than 100% of drug costs in this portion of the benefit. The ACA also required drug manufacturers that participate in Part D to provide a discount on certain drugs purchased in the coverage gap. (See “The Coverage Gap.”) Rev. August 12, 2020, available at https://www.cms.gov/medicare/eligibility-and-enrollment/medicarepresdrugeligenrol. 46 Data on 2023 reassignment are available at https://www.cms.gov/Medicare/Eligibility-and-Enrollment/LowIncSubMedicarePresCov/Reassignment.html. Congressional Research Service 13 link to page 65 link to page 20 link to page 21 Medicare Part D Prescription Drug Benefit The 2022 IRA makes significant changes to the Medicare Part D standard benefit, including capping annual enrollee out-of-pocket spending. The new provisions are to be implemented gradually through 2025. The following sections of the report first discuss the 2023 Part D standard benefit, including several IRA changes that took effect in 2023, followed by a detailed discussion of additional changes to the standard benefit to be implemented in 2024 and in 2025.47 For information on the drug price negotiation provisions of the IRA, see Appendix B. Qualified Drug Coverage Part D plan designs may vary, but all PDPs and MA-PD plans must offer at least a minimum package of benefits. This minimum benefit, referred to as qualified prescription drug coverage, may include either a standard package of prescription drug coverage established under law (the standard benefit) or an alternative package that is actuarially equivalent.48 Plans may also offer enhanced coverage that exceeds the value of standard coverage. Premiums for these enhanced plans are generally higher than for standard plans. Actual costs to Part D beneficiaries vary from plan to plan depending on the benefit structure and coverage offered, the costs and amount of drugs they use, and the level of any additional assistance, such as through the LIS. Standard Prescription Drug Coverage For 2023, under the standard Part D benefit, a beneficiary first pays a deductible ($505). After the deductible has been met, the beneficiary is responsible for 25% of the cost of prescription drugs (with the plan covering the remaining 75%) up to the initial coverage limit ($4,660).49 (See Figure 2.) To reach the $4,660 initial coverage limit in a 2023 standard plan, a beneficiary would pay the $505 deductible plus $1,038.75 in prescription costs, for total true out-of-pocket spending (TrOOP) of $1,543.75. The plan would pay the remaining $3,116. After the initial coverage threshold has been reached, a beneficiary enters the coverage gap or “doughnut hole” where he or she remains until accumulating $7,400 in total TrOOP in 2023 (for those not receiving the LIS) and reaches the catastrophic threshold.50 Total drug spending needed by a non-LIS beneficiary to move through the deductible, the initial coverage limit, and the coverage gap to the catastrophic threshold is about $11,206.28,51 with a portion paid by the beneficiary, a portion covered by the plan, and a portion offset by manufacturer discounts in the coverage gap. (See “The Coverage Gap.”) 47 See CRS In Focus IF12203, Selected Health Provisions of the Inflation Reduction Act. The IRA also requires the HHS Secretary to negotiate the price of certain Part D drugs, and requires pharmaceutical manufacturers to pay rebates to CMS if they increase the price of Part D drugs above an allowable rate of annual inflation. 48 Social Security Act, §1860D-2. 49 The 2023 thresholds were published in the 2023 Call Letter. CMS, “Announcement of Calendar Year (CY) 2023 Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment,” April 4, 2022, p. 68, at https://www.cms.gov/files/document/2023-announcement.pdf. The standard plan annual deductible, initial coverage limit, out-of-pocket threshold, and beneficiary cost sharing are adjusted annually under a set formula. See 42 C.F.R. §423.104(d). The standard plan deductible is the maximum deductible that can be charged for Part D plans. 50 LIS beneficiaries do not face a coverage gap, per say, because they have set, lower cost sharing throughout the benefit. The more generous Medicare LIS drug cost-sharing subsidies count as TrOOP. For LIS enrollees, total drug spending needed to generate sufficient TrOOP to reach the catastrophic threshold in 2023 is $10,516.25. For non-LIS beneficiaries (who may count the manufacturer discount as TrOOP) the total amount of spending needed to reach the threshold in 2023 is about $$11,206.28. 51 Total spending per beneficiary will vary depending on plan design and purchases of brand-name vs. generic drugs. CMS thresholds are based on average spending data across all plans. Congressional Research Service 14 link to page 33 link to page 42 Medicare Part D Prescription Drug Benefit Figure 2. 2023 Standard Medicare Prescription Drug Benefit Source: Figure created by CRS based on data from CMS, “Announcement of Calendar Year (CY) 2023 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter,” Attachments IV and V. Note: Beneficiaries above the catastrophic threshold pay the greater of a $4.15 co-payment for generic drugs and a $10.35 co-payment for brand-name drugs or 5% cost sharing in 2023. LIS beneficiaries pay less out of pocket than other beneficiaries. For example, full-benefit dual eligibles pay no deductible, minimal cost sharing in the coverage gap, and no cost sharing above the catastrophic threshold. (See Table 5.) Actual spending per beneficiary will vary depending on plan design and use of brand-name vs. generic drugs. After the catastrophic threshold has been reached, under the standard benefit an enrollee pays the greater of a nominal set co-payment for drugs or 5% coinsurance.52 Medicare subsidizes 80% of each plan’s costs for catastrophic coverage, known as Part D reinsurance, and plan sponsors are liable for 15% of costs. CMS uses a set formula to update annual Part D coverage parameters, including the standard deductible, initial coverage limit, and amount of beneficiary TrOOP required to reach the catastrophic threshold.53 Annual percentage increases are based on average per-capita spending for covered outpatient drugs for Medicare beneficiaries during the 12-month period ending in July of the previous year. Actuarially Equivalent and Enhanced Plans Plan sponsors have a number of options when designing pricing and benefits. Insurers may offer basic plans that provide the same level of coverage as the Part D standard plan, but may modify certain parameters such as reducing the maximum $505 deductible, while also imposing cost-sharing requirements that are higher than 25%. For example, nearly all plans use a tiered cost-sharing structure, where beneficiaries have a lower co-payment for generic drugs, and higher cost sharing for more expensive brand-name drugs. (See “Tiered Formularies.”) Insurers may also offer enhanced coverage that exceeds the value of defined standard coverage. Enhanced coverage includes basic coverage and supplemental benefits such as reductions in cost 52 Nominal cost sharing is defined as the greater of (1) a co-payment of $4.15 in 2023 for a generic drug or preferred multiple source drug and $10.35 for other drugs, or (2) 5% coinsurance. 53 Social Security Act, §1860D-2. Congressional Research Service 15 Medicare Part D Prescription Drug Benefit sharing. A PDP sponsor may not offer an enhanced plan unless it also offers a standard or actuarially equivalent plan in the same region. The requirement is designed to ensure that Medicare beneficiaries have options for lower-cost plans. MA-PDs are more likely to offer enhanced benefits than PDPs, because MA-PD sponsors are allowed to use some of their Medicare payments to enrich Part D benefits. In 2022, 54% of Part D enrollees in PDPs were in plans offering enhanced benefits and 46% were in plans that were actuarially equivalent to the standard benefit.54 Some 1% of enrollees in MA-PD plans were in plans that offered basic benefits; the other 99% were in enhanced plans. The Coverage Gap One unique feature of the Medicare Part D drug benefit is the coverage gap (also referred to as the doughnut hole)—the period in which Part D enrollees initially were required to pay 100% of total drug costs until they reached the catastrophic threshold. Congress included the coverage gap in the benefit structure when the MMA was enacted in 2003 because the cost of continuous coverage would have exceeded budget limitations regarding total spending on the new program. As originally enacted, Part D provided a basic level of coverage for all beneficiaries, and extra protection for those with the highest drug costs (above the catastrophic limit). Part D enrollees who did not receive a low-income subsidy generally paid the full cost of drugs while in the coverage gap. The ACA, as amended,55 gradually phased out the coverage gap between 2011 and 2020, meaning that by 2020 enrollees in standard plans had a 25% cost share from the time they meet a standard plan deductible until they reached the catastrophic threshold, after which cost sharing was a maximum of 5%. (Congress included provisions in BBA 2018 that closed the Part D coverage gap for brand-name drugs in 2019, a year earlier than required by the ACA.56) The ACA closed the coverage gap two ways. • For brand-name and biologic drugs, the ACA required manufacturers participating in Part D to pay a mandatory discount on drugs purchased in the coverage gap, while phasing in a 25% Medicare/Part D plan subsidy. (The ACA’s original manufacturer discount of 50% was increased to 70% in the BBA 2018 and expanded to cover biosimilars.) Medicare/Part D plans now provide a 5% subsidy in the coverage gap, and enrollees pay 25% coinsurance. • For generic drugs, the ACA gradually increased the Medicare subsidy to 75% and set enrollee cost sharing at 25%. There is no generic manufacturer discount. Even though the coverage gap has been closed (in the sense that the Part D standard benefit has 25% cost sharing from the deductible to the catastrophic threshold), for 2023 and 2024 the coverage gap is still an important part of the benefit structure for purposes of (1) calculating mandatory manufacturer discounts for certain drugs; and (2) determining the required level of enrollee cost sharing and out-of-pocket spending in that portion of the benefit.57 Some enrollees 54 MedPAC, (MedPAC), Report to the Congress: Medicare Payment Policy, March 2023, Chapter 12, Table 12-2, p. 396, at https://www.medpac.gov/document/march-2023-report-to-the-congress-medicare-payment-policy/. 55 §3301 of the ACA created the coverage gap manufacturer discount program. §1101 of the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152 ) added the phase-in of government subsidies to close the coverage gap by 2020. 56 Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123), §53116. 57 Non-LIS beneficiaries are allowed count manufacturer on brand-name drugs in the coverage gap as their own out-of-pocket spending. See “Phase Out of the Coverage Gap.” Congressional Research Service 16 Medicare Part D Prescription Drug Benefit may actually pay higher cost sharing in the coverage gap than in some other phases of the benefit due to rules governing cost sharing by Part D plans. (See textbox below.) Supplemental Cost Sharing in the Coverage Gap Part D plan sponsors may offer plans with supplemental coverage, such as lower deductibles or cost sharing than in the standard benefit. Under Part D law and regulation, if a plan sponsor offers a supplemental benefit in the coverage gap (such as a low, set co-payment rather than 25% coinsurance) the “the applicable beneficiary shall not be provided a discounted price for an applicable drug under this section until after such supplemental benefits have been applied with respect to the applicable drug.” For example, if a sponsor offered a plan with a $10 co-payment on a $100 drug in the coverage gap, the plan sponsor’s liability would be calculated as ($100 - $10), or $90. The manufacturer discount would be applied to the $10 co-payment ($10 x 0.70 = $7). The enrollee would pay the remaining share ($100 – ($90 + $7) = $3). If the plan sponsor did not offer an enhanced benefit, the manufacturer discount would be 70% of the negotiated price of $100 ($100 x 0.70 = $70). The enrollee would pay 25% coinsurance on the $100 negotiated price ($100 x 0.25 = $25), and the plan sponsor would be liable for the remaining $5 ($100 - ($70 + $25). The policy can act as a disincentive for plan sponsors to offer supplemental cost sharing in the coverage gap. Source: SSA §1860D-14(A)(c)(2) and CRS analysis. True Out-of-Pocket Costs Before catastrophic protection begins, Part D enrollees must incur a certain level of out-of-pocket spending. TrOOP are costs that are incurred by a beneficiary or are counted by CMS as incurred by a beneficiary, including a plan deductible, cost sharing up to the initial coverage limit, and the cost sharing for drugs while in the coverage gap. Enrollee spending for Part D covered drugs is treated as TrOOP58 if paid by an enrollee (including through a Medical Savings Account, Health Savings Account or Flexible Spending Account); paid by family members or friends; paid by a Qualified State Pharmacy Assistance Program; covered by the LIS; paid by most charities; covered by a drug manufacturer discount under the Medicare Coverage Gap Discount Program; covered by the Indian Health Service;59 or paid by an AIDS Drug Assistance Program.60 58 CMS, ~~faced 100% out-of-pocket costs. However, provisions in subsequent legislation resulted in closure~~
~~of the coverage gap as of 2020. (See “The Coverage Gap.”)~~

~~47 Data on 2019 Reassignment for 2020 PDPs are available at https://www.cms.gov/Medicare/Eligibility-and-~~
~~Enrollment/LowIncSubMedicarePresCov/Reassignment.html.~~
~~48 CMS, Medicare Prescription Drug Benefit Manual, Chapter 3, “Eligibility, Enrollment and Disenrollment ,” Section~~
~~40.1.5, Rev. August 12, 2020, at https://www.cms.gov/files/document/cy2021-pdp-enrollment-and-disenrollment-~~
~~guidance.pdf. T he de minimis amount is announced annually along with plan benchmarks.~~
~~Congressional Research Service~~

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~~link to page 23 link to page 23 link to page 49~~

~~Medicare Part D Prescription Drug Benefit~~

~~Actual costs to Part D beneficiaries vary from plan to plan depending on the benefit structure and~~
~~coverage offered, the costs and amount of drugs they use, and the level of any additional~~
~~assistance such as through a low-income subsidy.~~
~~Premiums~~
~~The majority of beneficiaries enrolled in Part D pay monthly premiums for Part D coverage. On~~
~~average, beneficiary premiums represent about 25.5% of the cost of a standard Part D plan, as~~
~~determined through annual bids submitted by insurers. (See “Standard Prescription Drug~~
~~Coverage.”)49 The actual dollar amount of Part D premiums wil vary by plan.~~
~~Figure 2. Annual Part D Base Beneficiary Monthly Premium~~
~~In dol ars~~

Source: CMS, “Annual Release of Part D National Average Bid Amount and other Part C & D Bid Information.”
Notes: Amounts reflect 25.5% of the annual average of participating drug plan bids to provide basic Part D
~~benefits.~~

~~49 Base Part D premiums are based on annual sponsor bids for providing standard coverage. Bids do not include~~
~~expected reinsurance payments, which are direct Medicare subsidies for 80% of each plan’s costs above a set~~
~~catastrophic threshold. (See “ Reinsurance Subsidies.”) (However, plan sponsors provide estimates of projected~~
~~reinsurance subsidies, which are used by CMS to make monthly prospective payments to the plans.) In 2005 rules to~~
~~implement the Part D program, CMS noted that congressional intent was that average monthly premiums were to be~~
~~based on total estimated standard benefits, including benefits subject to reinsurance. T o ensure premiums cover a~~
~~portion of the cost of reinsurance, CMS adjusts th e base premium accordingly. T he base premium is a fraction, with a~~
~~numerator of 25.5% and a denominator equal to 100% of the average bid minus a percentage equal to (i) the total~~
~~reinsurance payments estimated to be paid to plans in the coverage year, divided by (ii) that amount plus the total~~
~~payments that CMS estimates will be paid to Part D plans based on the standardized bid amount during the year, taking~~
~~into account amounts paid by both CMS and plan enrollees. See CMS, “ Medicare Program: Medicare Prescription~~
~~Drug Benefit; Final Rule,” 70 Federal Register, 4303, January 28, 2005, at https://www.govinfo.gov/content/pkg/FR-~~
~~2005-01-28/pdf/05-1321.pdf.~~
~~Congressional Research Service~~

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~~link to page 20~~ ~~Medicare Part D Prescription Drug Benefit~~

~~As noted, beneficiary premiums are based on the average of bids submitted by participating~~
~~sponsors for standard benefits (the base beneficiary premium) each year and are adjusted to~~
~~reflect the difference between the standardized bid amount of the plan the beneficiary enrolls in~~
~~and the nationwide average bid. For 2021, the base beneficiary monthly premium, 25.5% of the~~
~~average adjusted bid amount, is $33.06.50 Base premiums from 2006 through 2021 are shown in~~
Figure 2.
~~Beneficiaries in plans with higher costs for standard coverage face higher-than-average~~
~~premiums, while enrollees in lower-cost plans pay lower-than-average premiums for such~~
~~coverage. (Plans that offer supplemental benefits may set higher premiums but do not receive~~
~~Medicare subsidies for the supplemental benefits.) Additional y, enrollees in MA-PD plans may~~
~~have lower premiums if their sponsors choose to buy down, or reduce, the Part D premium.51 The~~
~~monthly premium is applied evenly to al persons enrolled in a specific plan, except those who~~
~~are receiving low-income subsidies or are subject to a late enrollment penalty (LIS beneficiaries~~
~~have lower or zero premiums, and late enrollees pay a monthly penalty in addition to their plan~~
~~premium). There are special rules for employer-sponsored Part D plans. Beneficiaries may pay~~
~~plans directly or have premiums deducted from their Social Security benefits.52 Higher-income~~
~~beneficiaries pay a monthly premium surcharge.~~
~~Premium Surcharge for Higher-Income Enrollees~~
~~When Part D began in 2006, al beneficiaries enrolled in the same plan (except those receiving~~
~~the low-income subsidy) were subject to the same premium. Beginning in 2011, as required by~~
~~the ACA, Part D enrollees with higher incomes pay higher premiums. (The Part D high-income~~
~~requirements are similar to the income-based premium structure under Medicare Part B.)53 Part D~~
~~beneficiaries who have a modified adjusted gross income (MAGI)54 above set thresholds55 are~~
~~assessed a special surcharge, referred to as an income-related monthly adjustment amount~~
~~(IRMMA), in addition to their regular PDP or MA-PD plan premiums. According to the SSA,~~
~~fewer than 5% of Medicare enrollees are subject to the IRMMA.56~~

~~50 CMS, “Annual Release of Part D National Average Bid Amount and other Part C & D Bid Information,” July 20,~~
~~2020, at https://www.cms.gov/files/document/2021-announcement.pdf. Includes an adjustment for projected~~
~~reinsurance.~~
~~51 Medicare Advantage plans that earn a Part C rebate (by having estimated costs for providing benefits that are less~~
~~than the maximum possible Medicare payment) must spend that rebate on supplemental benefits, reduced cost sha ring~~
~~or reduced Part B or D premiums.~~
~~52 Social Security deductions are limited to $300 per month, the harm limit. SSA, HI 03001.001, “Description of the~~
~~Medicare Part D Prescription Drug Program,” at https://secure.ssa.gov/poms.nsf/lnx/0603001001.~~
~~53 See CRS Report R40082, Medicare Part B: Enrollment and Premiums.~~
~~54 T he definition of modified adjusted gross income (MAGI) used for the calculation is the total of adjusted gross~~
~~income and tax-exempt interest income. T he income data is based on the most recent tax information that the Internal~~
~~Revenue Service is able to provide the Social Security Administration. Generally, the tax information is from two years~~
~~prior to the year for which the premium is being determined but not more than three years prior. Social Security~~
~~Administration, “ Medicare Premiums: Rules for Higher-Income Beneficiaries,” at https://www.ssa.gov/benefits/~~
~~medicare/medicare-premiums.html. MAGI has more than one definition in federal tax law, with the definition varying~~
~~based on the program or provision utilizing the con cept. See CRS Report R43861,~~ ~~The Use of Modified Adjusted Gross~~
~~Incom e (MAGI) in Federal Health Program s~~.
~~55 T he income thresholds are the same as those used for calculating Medicare Part B premiums.~~
~~56 SSA, “Medicare Premiums: Rules for Higher-Income Beneficiaries,” at https://www.ssa.gov/benefits/medicare/~~
~~medicare-premiums.html.~~
~~Congressional Research Service~~

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~~link to page 22~~ ~~Medicare Part D Prescription Drug Benefit~~

~~The higher-income surcharge is calculated as the difference between the Medicare Part D base~~
~~beneficiary premium (which represents 25.5% of the average national bid amount) and 35%,~~
~~50%, 65%, 80%, or 85% of the national average cost for providing Part D benefits,57 excluding~~
~~federal reinsurance or subsidies. The surcharge is based on beneficiary income, with higher-~~
~~income beneficiaries facing a larger surcharge. Because individual plan premiums vary, the law~~
~~specifies that CMS calculate the Part D surcharge using the base premium, rather than each~~
~~beneficiary’s individual premium amount.58 (See Table 3.)~~
~~Table 3. 2021 Monthly Medicare Part D High-Income Surcharge~~
~~If Annual Income in 2019 Was~~

~~Married and File Separate~~
~~2021~~
~~File Individual Tax Return~~
~~File Joint Tax Return~~
~~Tax Returns~~
~~Payment Is~~
~~$88,000 or less~~
~~$176,000 or less~~
~~$88,000 or less~~
~~Plan Premium~~
~~Above $88,000 to $111,000~~
~~Above $176,000 to $222,000~~
~~Not applicable~~
~~$12.30 + Plan~~
~~Premium~~
~~Above $111,000 to $138,000~~
~~Above $222,000 to $276,000~~
~~Not applicable~~
~~$31.80 + Plan~~
~~Premium~~
~~Above $138,000 to $165,000~~
~~Above $276,000 to $330,000~~
~~Not applicable~~
~~$51.20 + Plan~~
~~Premium~~
~~Above $165,000 and less than Above $330,000 and less than Above $88,000 and less than~~
~~$70.70 + Plan~~
~~$500,000~~
~~$750,000~~
~~$412,000~~
~~Premium~~
~~$500,00 and above~~
~~$750,000 and above~~
~~$412,000 and above~~
~~$77.10 + Plan~~
~~Premium~~
Source: Medicare.gov, “Monthly Premium for Drug Plans.”
Notes: Income figures refer to modified adjusted gross income.
~~At the time the ACA was enacted, high-income Part D enrollees could be placed into one of four~~
~~high-income adjustment categories, depending on their level of income. Section 53114 of BBA~~
~~2018 added a fifth high-income category beginning in 2019 for individuals with annual income of~~
~~$500,000 or more or couples filing jointly with income of $750,000 or more. Enrollees with~~
~~income equal to or exceeding these thresholds pay premiums that cover 85% of the average per~~
~~capita cost of the Part D benefits (instead of 80%, as they would have prior to this change). The~~
~~threshold for couples filing jointly in this new income tier is calculated as 150% of the individual~~
~~income level rather than 200%, as in the other income tiers. The bottom four high-income~~
~~categories are adjusted annual y for inflation based on the CPI-U; however, the new top high-~~
~~income threshold wil be frozen through 2027 and then adjusted annual y for inflation starting in~~
~~2028.59~~
~~The surcharge is calculated using a statutory formula that multiplies the base Part D premium by~~
~~a set ratio.60 For 2021, the ratios are (35% − 25.5%)/25.5%; (50% − 25.5%)/25.5%; (65% −~~
~~25.5%)/25.5%, (80% − 25.5%)/25.5%, or (85%-25.5%)/25.5%. For example, for 2021 (with a~~

~~57 CMS, “ 2021 Part D Income-Related Monthly Premium Adjustment,” November 6, 2020, at https://www.cms.gov/~~
~~files/document/2021-part -d-income-related-monthly-premium-adjustment.pdf.~~
~~58 Social Security Act §1860D-13(a)(7). See also SSA, “Medicare Premiums: Rules for Higher-Income Beneficiaries,”~~
~~at https://www.ssa.gov/benefits/medicare/medicare-premiums.html.~~
~~59 T hese threshold changes also apply to Part B income-related monthly adjustments. See CRS Report R40082,~~
Medicare Part B: Enrollm ent and Prem ium s.
~~60 Social Security Act §1860D-13(a)(7).~~
~~Congressional Research Service~~

17

~~link to page 24~~ ~~Medicare Part D Prescription Drug Benefit~~

~~base premium of $33.06) the surcharge for an individual with a 2019 adjusted gross income~~
~~between $138,000 and $165,000 would be calculated as~~
~~IRMMA = $33.06 x ((65% − 25.5%)/25.5%)~~
~~IRMMA = $33.06 x 1.549~~
~~IRMMA = $51.21, rounded down to the nearest dime = $51.20.~~
~~Beneficiaries pay the surcharge directly to the federal government, rather than to Part D plans.~~
~~When applicable, IRMMA wil be withheld from an enrollee’s monthly Social Security check,~~
~~Railroad Retirement benefit, or federal pension payment, unless the benefit check is not sufficient~~
~~for the purpose.61 If a beneficiary is directly bil ed for IRMAA, he or she has the option of paying~~
~~through an electronic funds transfer or by other means.62~~
~~Qualified Drug Coverage~~
~~Part D plan designs may vary, but al PDPs and MA-PD plans must offer at least a minimum~~
~~package of benefits. This minimum benefit, referred to as qualified prescription drug coverage,~~
~~may include either a standard package of prescription drug coverage established by Medicare or~~
~~an alternative package that is actuarial y equivalent.63 Plans may also offer enhanced coverage~~
~~that exceeds the value of standard coverage. Premiums for these enhanced plans are general y~~
~~higher than for standard plans. MA organizations offering MA-coordinated care plans are~~
~~required to offer at least one plan for the service area that includes drug coverage. The drug~~
~~coverage can be either basic or enhanced.64~~
~~Standard Prescription Drug Coverage~~
~~Under the standard Part D benefit, a beneficiary first pays a deductible ($445 in 2021). After the~~
~~deductible has been met, the beneficiary is responsible for 25% of the cost of prescription drugs~~
~~(with the plan covering the remaining 75%) up to the initial coverage limit ($4,130 in 2021).65~~
~~(See Figure 3.)~~
~~To reach the initial coverage limit in a 2021 standard plan, a beneficiary would pay the $445~~
~~deductible plus $921.25 in prescription costs, for total out-of-pocket costs of $1,366.25. The plan~~
~~would pay the remaining $ 2,763.75~~
~~After the initial coverage threshold has been reached, a beneficiary enters the coverage gap or~~
~~“doughnut hole” where he or she remains until accumulating $6,550 in total out-of-pocket~~

~~61 In cases where an enrollee’s benefit payment check is not sufficient to have the IRMMA withheld, or if an enrollee is~~
~~not receiving such benefits, the beneficiary must be billed directly for the IRMMA. See 42 C.F.R. §423.293.~~
~~62 See CRS Report R43962, The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114 -10).~~
~~63 Social Security Act, §1860D-2.~~
~~64 CMS, Medicare Prescription Drug Benefit Manual, Chapter 5, “Benefits and Beneficiary Protection,” Section~~
~~20.4.4,~~ Medicare Prescription Drug Benefit Manual, Chapter 5, “Benefits and Beneficiary Protection,” Section 30, Rev. September 20, 2011, at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/Rev. September 20, 2011, at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/
~~Prescript ionDrugCovContra/~~PrescriptionDrugCovContra/Downloads/MemoPDBManualChapter5_093011.pdf. 59 Added by §3314 of the ACA. 60 Added by §3314 of the ACA. Congressional Research Service 17 Medicare Part D Prescription Drug Benefit Examples of TrOOP Spending Consider a non-LIS enrollee in a 2023 standard plan. To reach the initial coverage limit, the enrollee would need to incur TrOOP spending consisting of the $505 deductible plus 25% coinsurance or co-payments on total drug spending from the $505 deductible to the $4,660 initial coverage limit ($505 deductible + $1038.75 cost sharing = $1,543.75). While beneficiaries move into the coverage gap on the basis of plan plus enrollee spending, beneficiaries move out of the coverage gap and into the catastrophic portion of the benefit based solely on enrollee out-of-pocket spending (which includes the value of manufacturer discounts.) The beneficiary would now face $5,856.25 of additional out-of-pocket spending in the doughnut hole before he or she would reach the catastrophic threshold (a total of $7,400 in out-of-pocket spending). While in the coverage gap in 2023, a beneficiary would pay 25% of the cost of brand-name drugs, including any pharmacy dispensing fees. The manufacturer provides a 70% discount on the negotiated price of brand-name drugs and biologic and biosimilar products, which under law counts toward TrOOP. The federal government provides a subsidy of 5% of the cost of the brand-name drug, which would not count toward TrOOP. A beneficiary who purchases generic drugs in the coverage gap in 2023 would pay 25% of the cost of drugs, including pharmacy dispensing fees, which would count toward TrOOP. The federal government provides a 75% coverage subsidy that does not count toward TrOOP. In one example, the beneficiary buys a brand-name drug that has a negotiated price of $60 and a $2 pharmacy dispensing fee. The total cost is $62. The beneficiary will pay 25% of the cost of the drug and dispensing fee ($62 × 0.25 = $15.50). The manufacturer discount reduces the price of the drug by $42 (70% of the $60 negotiated price). In this case, TrOOP will be $57.50 (the $15.50 beneficiary price, including a portion of the dispensing fee, plus the $42 manufacturer discount). The remaining $4.50 ($3.00 cost of the drug and $1.50 of the dispensing fee) is borne by the plan and does not count toward TrOOP. In another example, the beneficiary buys a generic drug. The price for the generic drug is $20 and the dispensing fee is $2. The beneficiary will pay 25% of the cost of the generic drug plus the pharmacy fee ($22 × 0.25 = $5.50). The $5.50 will count as TrOOP. The government’s 75% coverage portion will not count as TrOOP. Source: CRS analysis of CMS, “Costs in the Coverage Gap,” at https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/costs-in-the-coverage-gap. Incurred costs do not include Part D premiums; costs for drugs not on a plan formulary; coverage by other insurance, including group health plans, workers’ compensation, Part D plans’ supplemental or enhanced benefits, or other third parties; or Patient Assistance Programs operating outside of Part D. Additionally, while manufacturer discounts count toward TrOOP, federal subsidies for brand-name or generic drugs in the coverage gap do not count.61 In 2021, 4.1 million Part D enrollees exceeded the out-of-pocket threshold and reached the catastrophic phase of the benefit.62 Medicare picks up a larger share of spending (80% reinsurance) for enrollees who reach the catastrophic threshold, and reinsurance accounted for 55% of 2021 Part D spending. Non-LIS enrollees were 36% of those reaching the catastrophic threshold in 2021, while LIS enrollees made up 64%. Although LIS enrollees were more likely to reach the catastrophic phase of the benefit, the LIS share of enrollees reaching the catastrophic threshold has declined from more than 80% in 2010 and earlier years. The change reflects more rapid growth in Part D enrollment by non-LIS individuals, as well as an increase in the average price of drugs used by the non-LIS population.63 61 For example, the Part D 70% manufacturer discount on brand-name, biologics, and biosmilar drugs in the coverage gap is counted as enrollee out of pocket spending, in addition to an enrollee’s 25% cost share. However, the Medicare 75% contribution to the cost of generic drugs in the coverage gap does not count against enrollee out-of-pocket spending. An individual using only generic drugs is likely to accumulate TrOOP more slowly than an individual taking brand-name drugs. In addition, Part D plan sponsors have the option of providing supplemental coverage in the coverage gap, which could affect enrollee TrOOP.” 62 MedPAC, July 2023 Data Book, Health Care Spending and the Medicare Program, Chart 10-19, at http://www.medpac.gov/-documents-/data-book. The data are the most recent available. 63 MedPAC, 2023 Report to Congress, Chapter 12, p. 404. Congressional Research Service 18 Medicare Part D Prescription Drug Benefit IRA Changes to the Medicare Part D Benefit in 2023 The IRA made several changes to the Part D standard benefit, effective in the 2023 plan year. Starting in 2023, • Part D plans may no longer apply a deductible, coinsurance, or other cost-sharing requirement for adult vaccinations recommended by the Centers for Disease Control and Prevention’s (CDC’s) Advisory Committee on Immunization Practices (ACIP) that are covered Part D drugs (e.g., shingles vaccine). • Part D deductibles no longer apply to covered insulin products,64 and there is a $35 monthly cap on insulin cost sharing.65 Part D Standard Benefit For 2024 In 2024, under the IRA, the defined standard benefit thresholds, the drug-inflation formula for updating the thresholds, and the manufacturer coverage gap discount program are unchanged. However, for 2024 and following plan years, enrollee out-of-pocket spending is capped at the catastrophic threshold, meaning enrollees have no cost sharing for prescriptions once they reach the annual threshold.66 Figure 3. 2024 Medicare Part D Standard Benefit Source: CRS and CMS 2024 Call Letter. 64 Under the 2022 IRA, a “covered insulin product” means an insulin product that is a covered Part D drug covered under the prescription drug plan or MA-PD plan that is approved under §505 of the Federal Food, Drug, and Cosmetic Act or licensed under §351 of the Public Health Service Act and marketed pursuant to such approval or licensure, including any covered insulin product that has been deemed to be licensed under §351 of the Public Health Service Act pursuant to §7002(e)(4) of the Biologics Price Competition and Innovation Act of 2009 and marketed pursuant to such section. 65 For more detailed information, see CRS Report R47396, Health Care Provisions of the Budget Reconciliation Measure P.L. 117-169. 66 Under SSA §1860D-2(b)(6) the dollar amounts of thresholds are adjusted based on the annual percentage increase in average per capita aggregate expenditures for covered Part D drugs in the United States for Part D eligible individuals, as determined by the Secretary for the 12-month period ending in July of the previous year. Congressional Research Service 19 link to page 20 link to page 31 link to page 31 Medicare Part D Prescription Drug Benefit In 2024 under the standard Part D benefit, a beneficiary pays a deductible ($545). (See Figure 2.) After the deductible is met, the beneficiary is responsible for 25% of the cost of prescription drugs (with the plan covering the remaining 75%) up to the initial coverage limit ($5,030).67 To reach the $5,030 initial coverage limit in a 2024 standard plan, a beneficiary would pay the $545 deductible plus $1,121.25 in prescription costs, for total out-of-pocket costs of $1,666.25. The plan would pay the remaining $3,363.75. After reaching the initial coverage threshold, a beneficiary enters the coverage gap, where he or she remains until accumulating $8,000 in TrOOP and reaching the catastrophic threshold.68 Total estimated drug spending needed by a non-LIS beneficiary to move through the deductible, initial coverage limit, and coverage gap to the catastrophic threshold in 2024 is estimated at $12,447.11.69 Once a beneficiary reaches the catastrophic threshold, he or she pays $0 cost sharing. The IRA makes a series of changes to the Part D standard benefit, effective in 2024, including the following: • For 2024, Medicare reinsurance continues to subsidize 80% of each plan’s costs for drugs dispensed to enrollees who exceed the catastrophic threshold. Part D plan sponsors are liable for 15% of costs, as in 2023, plus another 5% of costs that will no longer be borne by enrollees due to the new out-of-pocket spending cap.70 In total, plan sponsors will be liable for 20% of catastrophic drug costs. Starting in 2024, the two separate categories of LIS subsidy (full and partial) are to be merged into one new LIS category.71 (See “ • Low-Income Subsidies.”) • Beginning in 2024 and running through 2029, annual increases in the Part D base beneficiary premium are to be capped at a maximum of 6%. Currently, there is no annual cap on the base premium. (See “Premiums”) In addition to the IRA changes, a 2022 CMS regulation takes effect in 2024 that is forecasted to reduce enrollee cost sharing. Starting in 2024, Part D plans that impose fees on pharmacies as penalties for failing to meet contractual quality or other targets, or for the right to participate in certain programs, must apply the fees as a reduction to the price of a drug at the point of sale. 67 The thresholds for 2024 were published in the 2024 Call Letter. CMS, “Announcement of Calendar Year (CY) 2024 Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment,” March 31, 2023, p. 134. 68 For those receiving a LIS (who are not eligible for manufacturer discounts in the doughnut hole because they have set, lower cost sharing throughout the benefit), total spending needed to generate sufficient out-of-pocket spending to reach the catastrophic threshold is $11,477.39. 69 Total spending per beneficiary will vary depending on plan design and purchases of brand-name vs. generic drugs. CMS thresholds are based on average spending data across all plans. 70 CMS, “Announcement of Calendar Year (CY) 2024 Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies,” March 31, 2023, p. 134, https://www.cms.gov/medicare/health-plans/medicareadvtgspecratestats/announcements-and-documents/371979854/2024. 71 Under current law, certain groups of Medicare beneficiaries automatically qualify and are deemed eligible for the full LIS. Full-benefit dual eligibles who qualify for Medicaid benefits based on income and assets are automatically deemed eligible for the full LIS. Additionally, those who receive Medicare premium and/or cost-sharing assistance from Medicaid through the Medicare Savings Program, plus those eligible for Supplemental Security Income cash assistance, are automatically deemed eligible for full LIS. Others may qualify for the full LIS if they have income below 135% of the federal poverty level (FPL) and meet certain resource levels. Individuals may be eligible for the partial LIS if they have income below 150% of the FPL and meet slightly higher resource levels. Congressional Research Service 20 link to page 26 link to page 26 Medicare Part D Prescription Drug Benefit According to the 2023 Medicare Trustees Report, the change will reduce the point-of-sale drug cost by 7% during the next decade.72 (For more details, see “Payments to Pharmacies.”) Medicare Part D Standard Benefit in 2025 In 2025, the IRA requires a number of broad changes to the Part D standard benefit, including reducing the catastrophic threshold to $2,000; eliminating the coverage gap and existing manufacturer discount program; and implementing a new manufacturer discount program. (See Figure 4.) CMS has not released the specific dollar amounts of the benefit thresholds for 2025, but Figure 4 shows the outlines of the redesigned standard benefit. Figure 4. 2025 Medicare Part D Standard Benefit Source: CRS analysis of P.L. 117-169. The dollar threshold for the deductible had not been set by CMS when this report was prepared. Note: Phase-in for small manufacturers: For sales of drugs by specified manufacturers to LIS beneficiaries, or in cases where one Part D drug accounts for a significant share of a specified manufacturer’s revenues, the 2025 manufacturer discounts would be 1% both below and above the catastrophic threshold. Under the IRA, • Starting in 2025, there is no initial coverage limit or coverage gap. Under the redesigned standard benefit, enrollees pay average 25% cost sharing from the deductible to the catastrophic threshold and no cost sharing above the catastrophic threshold. • For the 2025 plan year, the amount of annual TrOOP required to reach the catastrophic threshold is reduced to $2,000 (by comparison, in 2024 an enrollee must have $8,000 in TrOOP to reach the catastrophic threshold). The $2,000 catastrophic threshold and plan deductible will be adjusted in subsequent years using the current law formula, which is based on Part D drug price inflation. 72 2023 Medicare Trustees Report, p. 149. Many enrollees pay coinsurance for drugs based on the negotiated price at the point of sale. Congressional Research Service 21 Medicare Part D Prescription Drug Benefit • Total enrollee drug spending needed to generate $2,000 in TrOOP under the reconfigured benefit will depend on factors including (1) the dollar amount of the deductible in each plan, (2) the specific drugs used by an enrollee, and (3) whether an enrollee has other sources of coverage that, beginning in 2024, are to count as TrOOP. • For 2025 and subsequent years, Part D enrollees may count as TrOOP reimbursement through other insurance, a group health plan, or certain other third-party payment arrangements. The IRA does not define certain other third- party arrangements, except to say they do not include Part D coverage. (Under the current law through 2024, the LIS subsidy, the manufacturer discount and other selected assistance, such as Ryan White AIDS Act, the Indian Health Service, and charitable assistance count as TrOOP. Most of those provisions continue,73 but the manufacturer discount will no longer count as TrOOP [see next bullet point].) • Starting in 2025, the current Part D manufacturer discount program ends and a new Part D manufacturer discount program takes effect. The new program provides a 10% discount on applicable drugs (brand-name drugs, biologics, and biosimilars) between the deductible and the catastrophic threshold and a 20% discount on applicable drugs above the catastrophic threshold. LIS beneficiaries, who were not covered under the previous manufacturer discount program, are eligible for the new manufacturer discount. • Starting in 2025, Medicare reinsurance to Part D plan sponsors for drug costs above the catastrophic threshold is reduced to 20% from 80% for brand-name drugs, biologics, and biosimilars and to 40% from 80% for generics. The new manufacturer discount program is to be phased in gradually for drugs produced by specified manufacturers when (1) the drugs are dispensed to LIS beneficiaries,or (2) one drug covered by a Part D manufacturer discount agreement makes up more than 80% of total spending for all of a specified manufacturer’s drugs under such agreements.74 In such cases, • For applicable drugs dispensed to enrollees who have exceeded the deductible but have not reached the catastrophic threshold, the 10% manufacturer discount is to be phased in as follows: for 2025, 1%; for 2026, 2%; for 2027, 5%; for 2028, 8%; and for 2029 and each subsequent year, 10%. 73 Under current law and regulations, enrollees may also count as TrOOP: costs incurred by another person of behalf of the enrollee (including charities, if they are not otherwise excluded); costs paid by Medicare on behalf of a LIS enrollee; costs paid by a State Pharmaceutical Assistance Program, the Indian Health Service, or the Ryan White AIDS program. CMS, Medicare Prescription Drug Benefit Manual, Chapter 5, “Benefits and Beneficiary Protection,” Section 30, Rev. September 20, 2011, at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/MemoPDBManualChapter5_093011.pdf. Single-source drugs that are subject to a HHS Secretary negotiated price under IRA will not be subject to the manufacturer discount. (The first negotiated prices take effect in 2026.) If a drug subject to a negotiated price is dispensed to a Part D enrollee who has not had sufficient spending to reach the catastrophic threshold, the HHS Secretary is to provide the Part D plan sponsor with a subsidy equal to 10% of the Part D plan’s negotiated drug price. 74 Specified manufacturers are defined as manufacturers of applicable drugs, for which in 2021 a Part D coverage gap discount agreement with HHS was in effect; total spending for all the manufacturer’s specified drugs covered by Part D discount agreement(s) was less than 1% of total Part D drug spending; and total spending for all the manufacturer’s specified drugs that were single-source drugs and biological products covered under Medicare Part B during such year represented less than 1% of total expenditures under Part B for all drugs or biological products during such year. Congressional Research Service 22 link to page 19 link to page 19 link to page 47 Medicare Part D Prescription Drug Benefit • For applicable drugs dispensed to enrollees who have incurred costs equal to or above the annual catastrophic threshold, the 20% manufacturer discount is to be phased in at for 2025, 1%; for 2026, 2%; for 2027, 5%; for 2028, 8%; for 2029, 10%; for 2030, 15%; and for 2031 and each subsequent year, 20%. Beginning in 2025, Part D enrollees may choose to spread out their prescription cost sharing by paying required coinsurance or co-payments in capped, monthly installments. Part D Premiums The majority of beneficiaries enrolled in Part D pay monthly premiums for Part D coverage. On average, beneficiary premiums represent about 25.5% of the cost of a standard Part D plan, as determined through annual bids submitted by insurers. (See “Standard Prescription Drug Coverage.”)75 The actual dollar amounts of Part D premiums vary by plan. Figure 5. Annual Part D Base Beneficiary Monthly Premium (in current dol ars) Source: CMS, “Annual Release of Part D National Average Bid Amount and other Part C & D Bid Information.” Notes: Amounts reflect 25.5% of the annual average of participating drug plan bids to provide basic Part D benefits. Beneficiary premiums are based on the weighted average of annual bids submitted by participating sponsors for standard benefits (the base beneficiary premium) and are adjusted to reflect the difference between the standardized bid amount of the plan the beneficiary enrolls in 75 Base Part D premiums are based on annual sponsor bids for providing standard coverage. Bids do not include expected reinsurance payments, which are direct Medicare subsidies for 80% of each plan’s costs above a set catastrophic threshold. (See “Reinsurance Subsidies.”) However, plan sponsors provide estimates of projected reinsurance subsidies, which are used by CMS to make monthly prospective payments to the plans. In 2005 rules to implement the Part D program, CMS noted that congressional intent was that average monthly premiums were to be based on total estimated standard benefits, including benefits subject to reinsurance. To ensure premiums cover a portion of the cost of reinsurance, CMS adjusts the base premium under a set formula. See CMS, “Medicare Program: Medicare Prescription Drug Benefit; Final Rule,” 70 Federal Register, 4303, January 28, 2005, at https://www.govinfo.gov/content/pkg/FR-2005-01-28/pdf/05-1321.pdf. Congressional Research Service 23 link to page 28 link to page 9 Medicare Part D Prescription Drug Benefit and the nationwide average bid. For 2023, the base beneficiary monthly premium, 25.5% of the average adjusted bid amount, is $32.74.76 Historic base premiums are shown in Figure 5. Beneficiaries in plans with higher costs for standard coverage face higher-than-average premiums, while enrollees in lower-cost plans pay lower-than-average premiums for such coverage. (Plans that offer supplemental benefits may set higher premiums but do not receive Medicare subsidies for the supplemental benefits.) Additionally, enrollees in MA-PD plans may have lower premiums if their sponsors choose to buy down, or reduce, the Part D premium.77 The monthly premium is applied evenly to all persons enrolled in a specific plan, except those who are receiving the LIS or are subject to a late enrollment penalty (LIS beneficiaries have lower or zero premiums, and late enrollees pay a monthly penalty in addition to their plan premium). There are special rules for employer-sponsored Part D plans. Beneficiaries may pay plans directly or have premiums deducted from their Social Security benefits.78 Premium Surcharge for Higher-Income Enrollees Since 2011, as required by the ACA, Part D enrollees with higher incomes have been required to pay higher premiums. (The Part D high-income requirements are similar to the income-based premium structure under Medicare Part B.)79 Part D beneficiaries with modified adjusted gross income (MAGI) above set thresholds are assessed a surcharge,80 referred to as an income-related monthly adjustment amount (IRMAA), in addition to their regular plan premiums. The higher-income surcharge is calculated as the difference between the Part D base beneficiary premium (which in 2023 represents 25.5% of the average national bid amount) and 35%, 50%, 65%, 80%, or 85% of the national average cost for providing Part D benefits,81 excluding federal reinsurance or subsidies. The surcharge is based on beneficiary income, with higher-income beneficiaries facing a larger surcharge. Because individual plan premiums vary, the law specifies that CMS calculate the Part D surcharge using the base premium, rather than each beneficiary’s individual plan premium amount.82 (See Table 2.) 76 CMS, “Annual Release of Part D National Average Bid Amount and other Part C & D Bid Information,” July 29, 2022, at https://www.cms.gov/files/document/july-29-2022-parts-c-d-announcement-pdf.pdf. 77 MA plans that earn a Part C rebate (by having estimated benefit costs below the maximum possible Medicare payment) must spend the rebate on supplemental benefits, reduced cost sharing or reduced Part B or D premiums. 78 Social Security deductions are limited to $300 per month, the harm limit. SSA, HI 03001.001, “Description of the Medicare Part D Prescription Drug Program,” at https://secure.ssa.gov/poms.nsf/lnx/0603001001. 79 See CRS Report R40082, Medicare Part B: Enrollment and Premiums. 80 The definition of modified adjusted gross income (MAGI) used for the calculation is the total of adjusted gross income and tax-exempt interest income. The income data is based on the most recent tax information that the Internal Revenue Service is able to provide the Social Security Administration. Generally, the tax information is from two years prior to the year for which the premium is being determined but not more than three years prior. Social Security Administration, “Medicare Premiums: Rules for Higher-Income Beneficiaries,” at https://www.ssa.gov/benefits/medicare/medicare-premiums.html. MAGI has more than one definition in federal tax law, with the definition varying based on the program or provision utilizing the concept. See CRS Report R43861, The Use of Modified Adjusted Gross Income (MAGI) in Federal Health Programs. The income thresholds are the same as those used for calculating Medicare Part B premiums. 81 CMS, “2023 Medicare Parts A & B Premiums and Deductibles 2023 Medicare Part D Income-Related Monthly Adjustment Amounts,” September 27, 2022, https://www.cms.gov/newsroom/fact-sheets/2023-medicare-parts-b-premiums-and-deductibles-2023-medicare-part-d-income-related-monthly. 82 Social Security Act §1860D-13(a)(7). See also SSA, “Medicare Premiums: Rules for Higher-Income Beneficiaries,” at https://www.ssa.gov/benefits/medicare/medicare-premiums.html. Congressional Research Service 24 Medicare Part D Prescription Drug Benefit Table 3. 2023 Monthly Medicare Part D High-Income Surcharge File Individual Tax Return File Joint Tax Return 2023 Payment Is $97,000 or less $194,000 or less Plan Premium Above $97,000 to $123,000 Above $194,000 to $246,000 $12.20 + Plan Premium Above $123,000 to $153,000 Above $246,000 to $306,000 $31.50 + Plan Premium Above $153,000 to $183,000 Above $306,000 to $366,000 $50.70 + Plan Premium Above $183,000 and less than Above $366,000 and less than $70.00 + Plan Premium $500,000 $750,000 $500,00 and above $750,000 and above $76.40 + Plan Premium Source: Medicare.gov, “Monthly Premium for Drug Plans.” Notes: Income figures refer to modified adjusted gross income. There is a separate IRMAA calculation for beneficiaries who are married and lived with their spouses at any time during a year, but filed separate tax returns. In such cases for 2023, • Individuals with MAGI between $97,000 and $403,000 pay $70.00 per month, plus a plan premium. • Individuals with MAGI greater than or equal to $403,000 pay $76.40 per month, plus a plan premium. Under the original ACA provisions, high-income Part D enrollees were placed into one of four IRMAA categories, depending on their income. The BBA 2018 added a fifth high-income category beginning in 2019 for individuals with annual income of $500,000 or more or couples filing jointly with income of $750,000 or more. Enrollees with income equal to or exceeding these thresholds pay premiums that cover 85% of the average per capita cost of the Part D benefits (instead of 80%, as they would have prior to this change). The threshold for couples filing jointly in this new income tier is calculated as 150% of the individual income level rather than 200%, as in the other income tiers. The bottom four high-income categories are adjusted annually for inflation based on the CPI-U; however, the new top high-income threshold is frozen through 2027 and then adjusted annually for inflation starting in 2028.83 Beneficiaries pay the surcharge directly to the federal government, rather than to Part D plans. When applicable, IRMAA is withheld from an enrollee’s monthly Social Security check, Railroad Retirement benefit, or federal pension payment, unless the benefit is not sufficient.84 IRA Premium Stabilization Program The IRA created a Part D premium stabilization program, effective in 2024. Under the IRA, for 2024-2029, the annual base premium is to be equal to the lesser of (1) the base premium for the previous year (e.g., 2023 for the applicable year 2024) increased by 6%, or (2) the base premium for the applicable year (in this case, 2024) as computed under the underlying Part D statutory formula of 25.5% of weighted plan bids.85 83 These threshold changes also apply to Part B income-related monthly adjustments. See CRS Report R40082, Medicare Part B: Enrollment and Premiums. 84 In cases where an enrollee’s benefit payment check is not sufficient to have the IRMAA withheld, or if an enrollee is not receiving such benefits, the beneficiary must be billed directly for the IRMAA. See 42 C.F.R. §423.293. 85 See SSA §1860D–13(a)(2). The current law formula is about 25.5% of the cost of a standard Part D plan, as determined through annual bids submitted by insurers. Congressional Research Service 25 link to page 28 link to page 8 link to page 46 Medicare Part D Prescription Drug Benefit For 2024, the base premium is required to be the lesser of (1) the 2023 base premium of $32.74 increased by 6%, or $34.70, or (2) the base premium derived from the underlying Part D formula. CMS announced in July 2023 that the 2024 base premium would be a 6% increase to $34.70. According to CMS, absent the IRA premium stabilization 6% cap, the 2024 base premium (as calculated through the underlying Part D statutory formula of 25.5% of weighted plan bids) would have been $39.35.86 That would have been a 20% increase, which would have been the largest annual rise in the base premium since Part D was implemented. (See Figure 5). For 2030 and subsequent years, the base premium is to be calculated as the percentage of average plan bids necessary to ensure that the base premium in 2030 is equal to the lesser of (1) the base premium for 2029 increased by 6% or (2) the base premium that would have been computed for 2030 using the underlying Part D formula of 25.5% of the average adjusted bid amount. However, the base premium for 2030 and subsequent years may not be set at less than 20% of the weighted average of all plan bids. In addition, under the IRA premium stabilization program, Medicare’s direct subsidies to Part D plan sponsors increase in any year from 2024 to 2029 in which the base premium would have risen by more than 6% from the previous year, absent the cap. After 2030, the direct subsidy level to plan sponsors could be adjusted, if the IRA formula for setting the base beneficiary premium from 2030 on produced a different percentage than 25.5% of weighted bids.87 Low-Income Subsidies Medicare Part D provides subsidies to assist low-income beneficiaries with premiums and cost sharing.88 For 2023,~~Downloads/MemoPDBManualChapter5_093011.pdf.~~
~~65 T he thresholds for 2021 were published in the 2021 Call Letter. CMS, “Announcement of Calendar Year (CY) 2021~~
~~Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Po licies and Final Call Letter,”~~
~~April 6, 2020, p.71, at https://www.cms.gov/files/document/2021-announcement.pdf. T he standard plan annual~~
~~deductible, initial coverage limit, out -of-pocket threshold, and beneficiary cost sharing are adjusted annually under a set~~
~~formula. See 42 C.F.R. §423.104(d). T he standard plan deductible is the maximum deductible that can be charged for~~
~~Part D plans.~~
~~Congressional Research Service~~

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~~spending in 2021 (for those not receiving the LIS) and reaches the catastrophic threshold.66 Total~~
~~drug spending needed to move through the deductible, the initial coverage limit, and the coverage~~
~~gap to the catastrophic threshold is estimated at about $10,048.39,67 with a portion paid by the~~
~~beneficiary, a portion covered by the plan, and a portion offset by manufacturer discounts for~~
~~brand-name drugs. (See “The Coverage Gap.”)~~
~~Figure 3. 2021 Standard Medicare Prescription Drug Benefit~~

Source: Figure created by CRS based on data from CMS, “Announcement of Calendar Year (CY) 2021Medicare
~~Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Cal Letter,”~~
~~Attachments IV and V.~~
Note: Beneficiaries above the catastrophic threshold pay the greater of a $3.70 co-payment for generic drugs
~~and a $9.20 co-payment for brand-name drugs or 5% cost sharing in 2021. LIS beneficiaries pay less out of~~
~~pocket than other beneficiaries. For example, ful benefit dual eligibles pay no deductible, minimal cost sharing in~~
~~the coverage gap, and no cost sharing above the catastrophic threshold. (See Table 6.)~~
~~Actual spending per beneficiary wil vary depending on plan design and purchases of brand-name~~
~~vs. generic drugs. After the catastrophic threshold has been reached, plans charge a beneficiary~~
~~the greater of a nominal set co-payment for drugs or 5% coinsurance.68 Medicare subsidizes 80%~~
~~of each plan’s costs for this catastrophic coverage, which is cal ed Part D reinsurance.~~
~~CMS uses a set formula to update annual Part D coverage parameters, including the standard~~
~~deductible, initial coverage limit, and amount of beneficiary true out-of-pocket spending (TrOOP)~~
~~required to reach the catastrophic threshold.69 There is no annual cap on out-of-pocket spending~~
~~in Part D, except for full subsidy LIS beneficiaries. Annual percentage increases are based on~~

~~66 For those receiving a low-income subsidy (who are not eligible for manufacturer discounts in the doughnut hole~~
~~because they have set, lower cost sharing throughout the benefit), the catastrophic threshold is $9,313.75. For~~
~~beneficiaries eligible for the manufacturer discount, the threshold depends on the mix of brand name and generic drugs~~
~~used; the average non-LIS threshold is about $10,048.39~~
~~67 T otal reflects catastrophic limit of about $10,048.39 minus initial coverage limit of $4,130. T otal spending per~~
~~beneficiary will vary depending on plan design and purchases of brand-name vs. generic drugs. CMS thresholds are~~
~~based on average spending data across all plans.~~
~~68 Nominal cost sharing is defined as the greater of (1) a co-payment of $3.70 in 2021 for a generic drug or preferred~~
~~multiple source drug and $9.20 in 2021 for other drugs, or (2) 5% coinsurance.~~
~~69 Social Security Act, §1860D-2.~~
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~~average per capita spending for covered outpatient drugs for Medicare beneficiaries during the~~
~~12-month period ending in July of the previous year.~~
~~Actuarially Equivalent Plans~~
~~Plan sponsors have a number of options when designing pricing and benefits. Insurers may offer~~
~~basic plans that provide the same level of coverage as the Part D standard plan, but may modify~~
~~certain parameters and cost sharing such as reducing the maximum $445 deductible, while also~~
~~imposing cost-sharing requirements that are higher than 25%. For example, nearly al plans use a~~
~~tiered cost-sharing structure, where beneficiaries have a lower co-payment for generic drugs, and~~
~~higher cost sharing for more expensive brand-name drugs. (See “Tiered Formularies.”)~~
~~In 2020, 42% of Part D enrollees in PDPs were in plans offering enhanced benefits, and 58%~~
~~were in plans that were actuarial y equivalent to the standard benefit. No PDP enrollees were in~~
~~defined standard benefit plans.70~~
~~Enhanced Plans~~
~~Insurers may also offer enhanced coverage that exceeds the value of defined standard coverage.~~
~~Enhanced coverage includes basic coverage and supplemental benefits such as reductions in cost~~
~~sharing, including reductions in cost sharing in the coverage gap. A PDP sponsor may not offer an~~
~~enhanced plan unless it also offers a standard or actuarial y equivalent plan in the same region.~~
~~The requirement is designed to ensure that Medicare beneficiaries have options for lower-cost~~
~~plans.~~
~~The structure of the Part D program, including the large number of plans available in each region,~~
~~can make it complicated for beneficiaries to compare plans. The ACA required CMS to~~
~~streamline the number of Part D plans in each region and simplify the enrollment process.~~
~~Starting in the 2011 plan year, CMS required Part D sponsors that offer more than one plan per~~
~~region to demonstrate meaningful differences between their plans, in terms of premiums, cost~~
~~sharing, formulary design, or other benefits.71 Plan sponsors were al owed to offer only one basic~~
~~plan benefit design in a service area and no more than two enhanced alternative plans in each~~
~~service area. Beginning in 2019, CMS no longer required Part D sponsors offering two enhanced~~
~~plans in a region to demonstrate meaningful differences between the enhanced plans. The sponsor~~
~~stil must demonstrate that the enhanced plans have meaningful differences from the basic plan,~~
~~however. The change is designed to give Part D sponsors more flexibility in plan design. CMS~~
~~continues to limit Part D sponsors to offering no more than two enhanced plans in each region.72~~
~~Enrollee cost sharing for prescriptions can vary widely during the course of a plan year for~~
~~enrollees that accumulate sufficient spending to move through the various phases of the Part D~~
~~benefit. For example, in 2021, an enrollee could be in a plan where he or she pays 100% of the~~
~~plan’s negotiated price for a drug until meeting the $445 deductible; a flat co-payment in the~~

~~70 MedPAC, (MedPAC), Report to the Congress: Medicare Payment Policy, March 13, 2020, Chapter 14, T able 14-5,~~
~~p. 418 at http://medpac.gov/docs/default-source/reports/mar20_medpac_ch14_sec.pdf?sfvrsn=0.~~
~~71 CMS, Medicare Prescription Drug Benefit Manual, Chapter 5, “Benefits and Beneficiary Protection,” Rev.~~
~~September 20, 2011, at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/~~
~~Downloads/MemoPDBManualChapter5_093011.pdf.~~
~~72 CMS, “Medicare Program: Contract Year 2019 Policy and T echnical Changes to Medicare Advantage, Medicare~~
~~Cost Plan, Medicare Fee-for-Service, Medicare Prescription Drug Benefit Programs, and PACE Program,” 83~~ ~~Federal~~
~~Register, April 16, 2018, p. 16613, at https://www.gpo.gov/fdsys/pkg/FR-2018-04-16/pdf/2018-07179.pdf.~~
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~~initial coverage period; 25% coinsurance in the coverage gap; and 5% coinsurance in the~~
~~catastrophic portion of the benefit.~~
~~The Coverage Gap~~
~~One unique feature of the Medicare Part D drug benefit is the coverage gap (also referred to as~~
~~the doughnut hole)—the period in which Part D enrollees initial y were required to pay 100% of~~
~~total drug costs until they reached the catastrophic coverage level. Congress included the~~
~~coverage gap in the benefit structure when the MMA was enacted in 2003 because the cost of~~
~~continuous coverage would have exceeded goals for total spending.~~
~~As original y enacted, Part D provided a basic level of coverage for al beneficiaries, and extra~~
~~protection for those with the highest drug costs (above the catastrophic limit). Part D enrollees~~
~~who did not receive a low-income subsidy general y paid the full cost of drugs while in the~~
~~coverage gap. (See original Part D in Figure 4.) The ACA, as amended,73 included provisions to~~
~~gradual y phase out the coverage gap by 2020, meaning that by 2020 enrollees in standard plans~~
~~would have a 25% cost share from the time they meet a standard plan deductible until they~~
~~reached the catastrophic threshold, after which cost sharing is reduced. (See “Phaseout of the~~
~~Coverage Gap.”) Congress included provisions in BBA 2018 that closed the Part D coverage gap~~
~~for brand-name drugs in 2019, a year earlier than required by the ACA.74 However, even though~~
~~the coverage gap has been closed (in the sense that the Part D standard benefit now has 25% cost~~
~~sharing from the deductible to the catastrophic threshold), the coverage gap is stil an important~~
~~part of the benefit structure for purposes of (1) calculating mandatory manufacturer discounts for~~
~~certain drugs; and (2) determining the required level of enrollee cost sharing and out-of-pocket~~
~~spending.75~~
~~Beneficiaries may have different levels of actual out-of-pocket spending in the coverage gap~~
~~depending on how their specific plans are structured and the percentage of brand-name and~~
~~generic drugs that they use.76~~
~~In 2018, about 21% of Medicare Part D enrollees reached the coverage gap.77 CMS offers~~
~~enrol ees suggestions for avoiding or delaying the coverage gap and for saving money while in~~

~~73 Section 3301 of the ACA created the coverage gap manufacturer discount program. Section 1101 of the Health Care~~
~~and Education Reconciliation Act of 2010 (P.L. 111-152 ) added the phase-in of government subsidies to close the~~
~~coverage gap by 2020.~~
~~74 Balanced Budget Act of 2018 (BBA 2018; P.L. 115-123), Section 53116.~~
~~75 Non-LIS beneficiaries are allowed count manufacturer on brand-name drugs in the coverage gap as their own out -of-~~
~~pocket spending. See “Phase Out of the Coverage Gap.”~~
~~76 For example, the Part D required 70% manufacturer discount on brand-name, biologics, and biosmilar drugs in the~~
~~coverage gap is counted as enrollee out of pocket spending, in addition to an enrollee’s 25% cost share. However, the~~
~~Medicare 75% contribution to the cost of generic drugs in the coverage gap does not count against enrollee out -of-~~
~~pocket spending. An individual using only generic drugs is likely to accumulate T rOOP more slowly than an individual~~
~~taking brand-name drugs. In addition, Part D plan sponsors have the option of providing supplemental coverage in the~~
~~coverage gap, which could affect enrollee T rOOP. Although few sponsors currently offer coverage gap supplemental~~
~~benefits, CMS is beginning a pilot program for insulin in 2021 that limits cost sharing to $35 and is designed in part to~~
~~reduce enrollee spending in the coverage gap. See textbox “Supplemental Cost Sharing in the Coverage Gap.”~~
~~77 MedPAC, July 2020 Data Book, Health Care Spending and the Medicare Program , Chart 10-19. Available at~~
~~http://www.medpac.gov/-documents-/data-book. T he data are the most recent available.~~
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~~the gap.78 Strategies for minimizing out-of-pocket spending include switching to generic,79 over-~~
~~the-counter, mail-order, or other lower-cost drugs when possible; exploring national and~~
~~community-based charitable programs or State Pharmacy Assistance Programs (SPAPs) that~~
~~might offer assistance;80 and looking into Pharmaceutical Assistance Programs (also cal ed~~
~~Patient Assistance Programs, or PAPs) offered by pharmaceutical manufacturers or independent~~
~~charities.81~~
~~Phaseout of the Coverage Gap~~
~~As noted, the ACA gradual y closed the coverage gap by 2020 through a combination of~~
~~manufacturer discounts and government subsidies. Under the ACA, pharmaceutical~~
~~manufacturers that choose to participate in Medicare Part D must sign agreements to take part in~~
~~the Medicare Coverage Gap Discount Program.82 The ACA required companies to provide a 50%~~
~~discount on brand-name and biologic drugs for non-LIS Part D participants in the coverage gap.~~
~~Drug makers began providing the brand-name drug discount in 2011. The ACA also gradual y~~
~~phased in additional federal subsidies for brand-name drugs purchased in the coverage gap, so~~
~~that by 2020 a beneficiary would have 25% cost sharing in the coverage gap, Medicare would~~
~~cover 25% of the cost of the drug, and the manufacturer discount would defray 50%. For generic~~
~~drugs, the ACA phased in a 75% federal subsidy by 2020. Enrollees are al owed to count the~~
~~manufacturer discounts as part of their own out-of-pocket spending. The ACA did not impose a~~
~~manufacturer discount on the less expensive generic drugs. (Those enrollees who reached the~~
~~coverage gap in 2010 received a $250 discount, in the form of a check.) (See Table 4.)~~
~~BBA 2018 included provisions to close the coverage gap for brand-name drugs one year early, in~~
~~2019. Beginning in 2019 and continuing forward, BBA 2018 (1) increased the manufacturer~~
~~discount for brand-name drugs in the coverage gap to 70% from 50%; (2) expanded the~~
~~manufacturer discount to include biosimilar drugs,83 (3) set the federal subsidy for brand-name~~
~~drugs in the coverage gap at 5%, and (4) set beneficiary cost sharing at 25%.~~

~~78 For more information on the coverage gap see CMS, “Costs in the Coverage Gap,” https://www.medicare.gov/drug-~~
~~coverage-part-d/costs-for-medicare-drug-coverage/costs-in-the-coverage-gap.~~
~~79 Part D sponsors are required to ensure that their network pharmacies inform enrollees of any price differential~~
~~between a covered drug and the lowest -price generic version of the drug that is therapeutically equivalent,~~
~~bioequivalent, on the plan’s formulary, and available at that pharmacy. In addition, under the 2018 Know the Lowest~~
~~Price Act, (P.L. 115-262), Part D plans may not restrict or penalize network pharmacies from informing enrollees of~~
~~any difference between the price/cost sharing for a drug using the Part D benefit and a lower cash price an enrollee~~
~~could pay by purchasing the drug outside the Part D benefit.~~
~~80 Some states offer payment assistance for drug plan premiums and/or other drug costs for individuals who have~~
~~trouble affording their medication but do not qualify for LIS. For example, a state may offer assistance to individuals~~
~~with incomes between 150% and 300% of the FPL. T o learn which states offer this assistance and for details on the~~
~~state programs, see http://www.medicare.gov/pharmaceutical-assistance-program/state-programs.aspx.~~
~~81 Many major drug manufacturers offer assistance programs for the drugs they manufacture. Manufacturer patient~~
~~assistance programs may be used outside the Part D benefit, and the value of benefits received under these programs~~
~~does not count toward true out -of-pocket expenses. Independent charity patient assistance programs may provide~~
~~assistance with Part D cost sharing, which does count toward true out -of-pocket expenses. T o learn which~~
~~manufacturers offer assistance, see http://www.medicare.gov/pharmaceutical-assistance-program/index.aspx. See also~~
~~CRS Report R44264, Prescription Drug Discount Coupons and Patient Assistance Program s (PAPs).~~
~~82 CMS, “Part D Information for Pharmaceutical Manufacturers,” at http://www.cms.gov/Medicare/Prescription-Drug-~~
~~Coverage/PrescriptionDrugCovGenIn/Pharma.html.~~
~~83Beginning in 2019, Section 53113 of BBA 2018 expanded the manufacturer discount to biosimilars, which are lower -~~
~~cost versions of biologic drugs. Biologics and biosimilars are drugs produced from living organisms, rather than~~
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~~BBA 2018 did not alter ACA requirements for generic drugs purchased in the coverage gap. For~~
~~generic drugs, the coverage gap closed in 2020, as scheduled under the ACA. (See Table 4).~~
~~Table 4. Closing the Coverage Gap Between 2011 and 2020~~
~~(phase-in of subsidies and reduction in beneficiary cost sharing)~~

~~Brand Name Drugs~~
~~Generic Drugs~~

~~Manufacturer~~
~~Medicare~~
~~Beneficiary~~
~~Medicare~~
~~Beneficiary~~
~~Discount~~
~~Subsidy~~
~~Cost Share~~
~~Subsidy~~
~~Cost Share~~
~~2011~~
~~50%~~
0
~~50%~~
7%
~~93%~~
~~2012~~
~~50%~~
0
~~50%~~
~~14%~~
~~86%~~
~~2013~~
~~50%~~
~~2.5%~~
~~47.5%~~
~~21%~~
~~79%~~
~~2014~~
~~50%~~
~~2.5%~~
~~47.5%~~
~~28%~~
~~72%~~
~~2015~~
~~50%~~
5%
~~45%~~
~~35%~~
~~65%~~
~~2016~~
~~50%~~
5%
~~45%~~
~~42%~~
~~58%~~
~~2017~~
~~50%~~
~~10%~~
~~40%~~
~~49%~~
~~51%~~
~~2018~~
~~50%~~
~~15%~~
~~35%~~
~~56%~~
~~44%~~
~~2019~~
~~70%~~
5%
~~25%~~
~~63%~~
~~37%~~
~~2020 on~~
~~70%~~
5%
~~25%~~
~~75%~~
~~25%~~
Source: CRS analysis of ACA, as amended by BBA 2018.
Notes: The federal government provides the generic drug subsidy.
~~From 2020 onward, Medicare wil subsidize 75% of Part D plan costs for generic drugs in the~~
~~coverage gap and enrollees wil pay 25%.84 (See Figure 4.)~~
~~Based on the latest CMS data available, in 2016 more than 4.9 mil ion beneficiaries who were in~~
~~the coverage gap received manufacturer discounts on brand-name drugs they purchased. Overal ,~~
~~2016 discounts totaled about $5.65 bil ion, with an average discount per beneficiary of $1,149.85~~
~~(Note that the manufacturer discount was set at 50% in 2016, compared to the current 70% level.)~~

~~through a chemical process. T he ACA originally excluded biosimilars from the manufacturer discount. In a separate~~
~~2018 rulemaking, CMS applied generic drug cost -sharing requirements to biosimilars purchased by LIS beneficiaries in~~
~~all phases of the Part D benefit. T he change made biosimilars more affordable for LIS beneficiaries. See CMS,~~
~~“Medicare Program: Contract Year 2019 Policy and T echnical Changes to Medicare Advantage, Medicare Cost Plan,~~
~~Medicare Fee-for-Service, Medicare Prescription Drug Benefit Programs, and PACE Program,” 83 Federal Register,~~
~~April 16, 2018, p. 16610, at https://www.gpo.gov/fdsys/pkg/FR-2018-04-16/pdf/2018-07179.pdf.~~
~~84 CMS, “Costs in the Coverage Gap,” at https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-~~
~~coverage/costs-in-the-coverage-gap. Medicare subsidies are based on projected costs in annual plan bids. Medicare~~
~~reconciles plans’ projected and actual costs at the end of each plan year.~~
~~85 CMS, “ Coverage Gap Discount Program,” at http://www.cms.gov/Medicare/Medicare-Advantage/Plan-Payment/~~
~~CGDP.html. T he data are the most recent available on the website.~~
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~~Figure 4. Closure of the Coverage Gap for Brand and Generic Drugs~~
~~(the ACA, as amended by BBA 2018, closed the doughnut hole for al drugs in 2020)~~

Source: CRS analysis of the ACA and BBA 2018.
Note: Beneficiaries above the catastrophic threshold pay the greater of a specified co-payment or 5%
~~coinsurance. LIS beneficiaries pay less out of pocket than other beneficiaries. For example, ful benefit dual~~
~~eligibles pay no deductible, minimal cost sharing in the coverage gap, and no cost sharing above the catastrophic~~
~~threshold. (See Table 6 for beneficiary cost sharing in 2021.) Non-LIS beneficiaries are al owed to count~~
~~manufacturer discounts on brand-name drugs in the coverage gap drugs as out of pocket spending.~~
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~~Supplemental Cost Sharing in the Coverage Gap~~
~~Part D plan sponsors may offer plans with supplemental coverage, such as lower deductibles or cost sharing than~~
~~in the standard benefit. Under Part D legislation and regulations, if a plan sponsor offers a supplemental benefit in~~
~~the coverage gap (such as a low, set co-payment rather than 25% coinsurance) the “the applicable beneficiary shal~~
~~not be provided a discounted price for an applicable drug under this section until after such supplemental benefits~~
~~have been applied with respect to the applicable drug.”86~~
~~For example, if a sponsor offered a plan with a $10 co-payment on a $100 drug in the coverage gap, the plan~~
~~sponsor’s liability would be calculated as ($100 - $10) or $90. The manufacturer discount would be applied to the~~
~~$10 co-payment ($10 x 0.70 =$7). The enrol ee would pay the remaining share ($100 – ($90 + $7) = $3).~~
~~If the plan sponsor did not offer an enhanced benefit in the coverage gap, the manufacturer discount would be~~
~~70% of the negotiated price of $100 ($100 x 0.70 =$70). The enrol ee would pay 25% coinsurance on the $100~~
~~negotiated price ($100 x 0.25 = $25); and the plan sponsor would be liable for the remaining $5 ($100 - ($70 +~~
~~$25.)~~
~~For the 2021 plan year, CMS is offering a pilot program (for non-LIS beneficiaries) that modifies supplemental cost~~
~~sharing for insulin, which is one of the most widely used drugs in Medicare Part D. Under the pilot, participating~~
~~Part D plan sponsors would charge no more than a $35 co-payment for a 30-day supply of insulin from the plan~~
~~deductible through the coverage gap. The 70% manufacturer discount in the coverage gap would be based on the~~
~~plan’s negotiated price for insulin rather than on the $35 co-payment.87~~
~~CMS noted that because of the current financial disincentives, Part D sponsors general y do not offer supplemental~~
~~benefits in the coverage gap. According to CMS, one in every three Medicare beneficiaries has diabetes, and over~~
~~3.3 mil ion use one or more of the common forms of insulin.~~
~~True Out-of-Pocket Costs~~
~~Before catastrophic protection begins, Part D enrollees must incur a certain level of out-of-pocket~~
~~costs.88 True out-of-pocket costs (TrOOP) are costs that are incurred by a beneficiary or are~~
~~counted by CMS as incurred by a beneficiary, including a plan deductible, cost sharing up to the~~
~~initial coverage limit, and the cost of certain drugs while in the doughnut hole, including the~~
~~manufacturer subsidy.~~
~~Enrollee spending for Part D covered drugs is treated as TrOOP89 if paid by the enrollee~~
~~(including through a Medical Savings Account, Health Savings Account or Flexible Spending~~
~~Account); paid by family members or friends; paid by a Qualified State Pharmacy Assistance~~
~~Program; covered by a low-income subsidy; paid by most charities; covered by a drug~~
~~manufacturer discount under the Medicare Coverage Gap Discount Program; covered by the~~
~~Indian Health Service;90 or paid by an AIDS Drug Assistance Program.91~~
~~Incurred costs do not include Part D premiums; costs for drugs that are not on the enrollee’s plan~~
~~formulary; coverage by other insurance, including group health plans, workers’ compensation,~~
~~Part D plans’ supplemental or enhanced benefits, or other third parties; or Patient Assistance~~
~~Programs operating outside of Part D. Additional y, while the manufacturer drug discounts count~~

~~86 SSA Section 1860D-14(A)(c)(2).~~
~~87 CMS, “Part D Senior Savings Model,” https://innovation.cms.gov/innovation-models/part-d-savings-model. T ext box~~
~~is based on CMS payment example in Webinar slide link.~~
~~88 T rue out-of-pocket costs are the payments that count toward an enrollee’s Part D out -of-pocket threshold of $6,550~~
~~for 2021.~~
~~89 CMS, Medicare Prescription Drug Benefit Manual, Chapter 5, “Benefits and Beneficiary Protection,” Section 30,~~
~~Rev. September 20, 2011, at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/~~
~~Downloads/MemoPDBManualChapter5_093011.pdf.~~
~~90 Added by §3314 of the ACA.~~
~~91 Added by §3314 of the ACA.~~
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~~Medicare Part D Prescription Drug Benefit~~

~~toward the TrOOP, federal subsidies for brand-name or generic drugs in the doughnut hole do not~~
~~count.~~
~~Examples of TrOOP Spending~~
~~Consider a non-LIS enrol ee in a 2021 standard plan. To reach the initial coverage limit, the enrol ee would need~~
~~to incur TrOOP spending consisting of the $445 deductible and 25% coinsurance or co-payments on total drug~~
~~spending up to $4,130 ($921.25 + $445 = $1,366.25). While beneficiaries move into the coverage gap on the basis~~
~~of plan plus enrol ee spending, beneficiaries move out of the coverage gap and into the catastrophic portion of the~~
~~benefit based on enrol ee out-of-pocket spending (which includes the value of manufacturer discounts.) The~~
~~beneficiary would now face about $5,183.75 of additional out-of-pocket spending in the doughnut hole before he~~
~~or she would reach the catastrophic threshold (a total of $6,550 in out-of-pocket spending).~~
~~While in the coverage gap in 2021, a beneficiary would pay 25% of the cost of brand-name drugs, including any~~
~~pharmacy dispensing fees. The manufacturer provides a 70% discount on the negotiated price of brand-name drugs~~
~~and biologic and biosimilar products, which under law counts toward TrOOP. The federal government provides a~~
~~subsidy of 5% of the cost of the brand-name drug, which would not count toward TrOOP.~~
~~A beneficiary who purchases generic drugs in the coverage gap in 2021 would pay 25% of the cost of drugs,~~
~~including pharmacy dispensing fees, which would count toward TrOOP. The federal government provides a 75%~~
~~coverage subsidy that does not count toward TrOOP.~~
~~In one example,92 the beneficiary buys a brand-name drug that has a negotiated price of $60 and a $2 pharmacy~~
~~dispensing fee. The total cost is $62. The beneficiary wil pay 25% of the cost of the drug and dispensing fee ($62 ×~~
~~0.25 = $15.50). The manufacturer discount reduces the price of the drug by $42 (70% of the $60 negotiated~~
~~price). In this case, TrOOP wil be $57.50 (the $15.50 beneficiary price, including a portion of the dispensing fee,~~
~~plus the $42 manufacturer discount). The remaining $4.50 ($3.00 cost of the drug and $1.50 of the dispensing fee)~~
~~is borne by the plan and does not count toward TrOOP.~~
~~In another example, the beneficiary buys a generic drug. The price for the generic drug is $20 and the dispensing~~
~~fee is $2. The beneficiary wil pay 25% of the cost of the generic drug plus the pharmacy fee ($22 × 0.25 = $5.50).~~
~~The $5.50 wil count as TrOOP. The government’s 75% coverage portion wil not count as TrOOP.~~
~~In 2018, about 8% of Part D enrollees exceeded the out-of-pocket threshold and reached the~~
~~catastrophic phase of the benefit. These enrollees accounted for about 60% of total Part D~~
~~spending on basic benefits that year.93 Medicare picks up a larger share of spending (reinsurance)~~
~~for enrollees who reach the catastrophic threshold. Spending for reinsurance is now the largest~~
~~share of Medicare spending for the Part D program. According to MedPAC, 71% of enrollees~~
~~reaching the catastrophic portion of the benefit in 2018 were receiving the LIS. Although LIS~~
~~enrollees were more likely to reach the catastrophic phase of the benefit, the LIS share of~~
~~enrollees reaching the catastrophic threshold has declined from more than 80% in 2010 and~~
~~earlier years. The change reflects more rapid growth in Part D enrollment by non-LIS individuals,~~
~~as wel as an increase in the average price of drugs used by the non-LIS population.94~~
~~Low-Income Subsidies~~
~~Medicare Part D provides subsidies to assist low-income beneficiaries with premiums and cost~~
~~sharing.95~~ LIS cost sharing varies according to a beneficiary’s assets and income and, LIS cost sharing varies according to a beneficiary’s assets and income and, also, whether a beneficiary is institutionalized, or is receiving community-based care. (See “Eligibility for Low-Income Assistance.”) Premium Assistance Full-Subsidy-Eligible Individuals in 2023 Low-income beneficiaries who qualify for a full subsidy do not pay monthly plan premiums if they enroll in certain, lower-cost Part D plans. A PDP qualifies as a lower-cost or “benchmark” plan if it offers basic Part D coverage and charges premiums equal to, or below, a regional low-income premium subsidy amount calculated by CMS each year. (See “Availability of Low- 86 CMS, “CMS Releases 2024 Projected Medicare Part D Premium and Bid Information,” July 31, 2023, https://www.cms.gov/newsroom/fact-sheets/cms-releases-2024-projected-medicare-part-d-premium-and-bid-information. 87 See CBO Letter to Rep. Jason Smith, August 4, 2022, at https://www.cbo.gov/system/files/2022-08/58355-Prescription-Drug.pdf. For example, if the base premium would have risen more than 6% for a year absent the cap, P.L. 117-169 would adjust the direct subsidy to Part D plans (set to average 74.5% of the average cost of a Part D standard benefit) to compensate, basically holding plans harmless. After 2030, the direct subsidy level would be equal to 100% minus the percentage amount of the base premium for 2030, which is to be derived under the IRA formula. According to the CBO letter, “That subsidy and subsequent reduction in premiums would increase federal spending by roughly $40 billion over the 2024-2031 period, CBO estimates. Beneficiaries’ spending on premiums would be lower under the premium-stabilization provision than it would be without it. That estimate is an average effect among the possible paths of premiums that CBO considered when modeling the uncertainty of future outcomes. Under some of those paths, premiums would grow by less than 6 percent a year, and the provision would have no cost; under others, premiums would grow faster, and the provision would generate costs.” 88 While assistance with Part B premiums and cost sharing for low-income beneficiaries is primarily paid for by state Medicaid programs (through their Medicare Savings Programs), the Part D low-income subsidy is federally funded. Congressional Research Service 26 link to page 46 link to page 32 link to page 33 Medicare Part D Prescription Drug Benefit Income Plans.”) If a LIS beneficiary selects a plan with a premium that is higher than the regional benchmark, he or she must pay the extra cost. Partial-Subsidy-Eligible Individuals For plan year 2023, partial-subsidy-eligible ~~also,~~

~~92 Example is based on “CMS, “Costs in the Coverage Gap,” at https://www.medicare.gov/drug-coverage-part-d/costs-~~
~~for-medicare-drug-coverage/costs-in-the-coverage-gap.~~
~~93 MedPAC, July 2020 Data Book, Health Care Spending and the Medicare Program , Chart 10-19, at~~
~~http://www.medpac.gov/-documents-/data-book. T he data are the most recent available.~~
~~94 Ibid, Chart 10-20.~~
~~95 While assistance with Part B premiums and cost sharing for low-income beneficiaries is primarily paid for by state~~
~~Medicaid programs (through their Medicare Savings Programs), the Part D low-income subsidy is federally funded.~~
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~~whether a beneficiary is institutionalized, or is receiving community-based care. Full-subsidy~~
~~eligibles96 have no deductible, minimal cost sharing during the initial coverage period and~~
~~coverage gap, and no cost sharing above the catastrophic threshold. Additional y, full-benefit dual~~
~~eligibles who are residents of medical institutions or nursing facilities have no cost sharing. (See~~
~~“Eligibility for Low-Income Assistance.”)~~
~~Premium Assistance~~
~~Full-Subsidy-Eligible Individuals~~
~~Low-income beneficiaries who qualify for a full subsidy do not pay monthly plan premiums if~~
~~they enroll in certain, lower-cost Part D plans. A PDP qualifies as a lower-cost or “benchmark”~~
~~plan if it offers basic Part D coverage and charges premiums equal to, or below, a regional low-~~
~~income premium subsidy amount calculated by CMS each year. (See~~ ~~“Availability of Low-~~
~~Income Plans.”) If a LIS beneficiary selects a plan with a premium that is higher than the regional~~
~~benchmark, he or she must pay the extra cost.~~
~~Partial-Subsidy-Eligible Individuals~~
~~Partial-subsidy-eligible~~ individuals receive premium assistance based on an income sliding scale, individuals receive premium assistance based on an income sliding scale,
as specified as specified inin Table 54.
Table 54. Sliding-Scale Premium for Partial-Subsidy-Eligible Individuals
Percentage of
Premium Subsidy
Federal Poverty Level (FPL) and Asset Thresholds
Amount
Income up to or at 135% FPL; assets that do not exceed the calendar year resource Income up to or at 135% FPL; assets that do not exceed the calendar year resource limits limits
100% 100%
for individuals or couples. for individuals or couples.
Income above 135% FPL but at or below 140% FPL; assets that do not exceed the calendar Income above 135% FPL but at or below 140% FPL; assets that do not exceed the calendar
75% 75%
year resource year resource ~~limits~~ limits for individuals or couples. for individuals or couples.
Income above 140% FPL but at or below 145% FPL; assets that do not exceed the calendar Income above 140% FPL but at or below 145% FPL; assets that do not exceed the calendar
50% 50%
year resource year resource ~~limits~~ limits for individuals or couples. for individuals or couples.
Income above 145% FPL but below 150% FPL; assets that do not exceed the calendar year Income above 145% FPL but below 150% FPL; assets that do not exceed the calendar year
25% 25%
resource resource ~~limits~~ limits for individuals or couples.for individuals or couples.
Source: SSA Program Operations Manual, Section HI 03030.025, “Resource LimitsSSA Program Operations Manual, Section HI 03030.025, “Resource Limits for Subsidy Eligibility,”for Subsidy Eligibility,” at at
https://secure.ssa.gov/poms.nsf/lnx/0603030025. https://secure.ssa.gov/poms.nsf/lnx/0603030025.
Cost-Sharing Subsidies
Cost-sharing subsidies for LIS enrollees are linked to the standard prescription drug benefit but Cost-sharing subsidies for LIS enrollees are linked to the standard prescription drug benefit but
represent the maximum cost sharing that can be applied to LIS enrollees in any type of Part D represent the maximum cost sharing that can be applied to LIS enrollees in any type of Part D
plan. Full-subsidy plan. Full-subsidy ~~eligibles~~ dual eligibles have no deductible, minimalhave no deductible, minimal cost sharing during the initial cost sharing during the initial coverage ~~coverage~~

~~96 A full-benefit dual eligible is someone who is qualified for full Medicaid benefits. Full-benefit beneficiaries may be~~
~~deemed full-subsidy Medicare Part D recipients if they meet certain guidelines. For definition of full-subsidy eligible~~
~~benefit, see CMS, Medicare Part D Prescription Drug Manual, Chapter 13, “ Premium and Cost -Sharing Subsidies for~~
~~Low-Income Individuals,” Section 50.2.1, Rev. October 1, 2018, at https://www.cms.gov/Medicare/Prescription-Drug-~~
~~Coverage/PrescriptionDrugCovContra/Downloads/Chapter-13-Premium-and-Cost -Sharing-Subsidies-for-Low-Income-~~
~~Individuals-v09-14-2018.pdf.~~
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period and coverage gap, and no cost sharing above the catastrophic threshold. Partial-subsidy period and coverage gap, and no cost sharing above the catastrophic threshold. Partial-subsidy
~~individuals~~ individuals have higher cost sharing. have higher cost sharing. ~~(Se~~e(See Table 65.) .)
Other specific policies related to cost sharing during the initial Other specific policies related to cost sharing during the initial coverage period and coverage gap coverage period and coverage gap
for dual eligiblesfor dual eligibles include the following:include the following:97
89 • Full-benefit, dual eligibles Full-benefit, dual eligibles who are residents of medical institutions or nursing who are residents of medical institutions or nursing
facilities have no cost sharing, with some exceptions. facilities have no cost sharing, with some exceptions. ~~The ACA expanded the LIS~~
~~subsidy so that beneficiaries receiving~~Enrollees with home and community-based services in home and community-based services in
lieu of institutional care also have no cost sharing. lieu of institutional care also have no cost sharing.
• Other full-benefit, dual-eligible Other full-benefit, dual-eligible ~~individuals~~ individuals with incomes up to or at 100% of with incomes up to or at 100% of
FPL pay $1. FPL pay $1.3045 for a generic drug prescription or preferred multiple-source drug for a generic drug prescription or preferred multiple-source drug
prescription and $4.prescription and $4.0030 for any other drug prescription up to the catastrophic for any other drug prescription up to the catastrophic
threshold in threshold in ~~2021~~2023. .
• Full-subsidy-eligible Full-subsidy-eligible ~~individuals~~ individuals with incomes between 100% and with incomes between 100% and ~~150~~135% of FPL % of FPL
have cost sharing have cost sharing ~~for al drug costs~~, up to the catastrophic limit, up to the catastrophic limit, of $ of $~~3.70~~4.15 for a for a
generic drug or preferred multiple-source drug and $generic drug or preferred multiple-source drug and $~~9.20~~10.35 for any other drug in for any other drug in
~~2021.~~
~~Partial-subsidy-eligible individuals have a $92 deductible in 2021, 15% coinsurance for al costs~~
~~up to the catastrophic trigger, and cost sharing above this level of $3.70 for a generic drug~~
~~prescription or preferred multiple source drug prescription and $9.20 for any other drug~~
~~prescription.~~
~~Each year, cost-sharing amounts for full-benefit dual eligibles up to or at 100% of FPL are~~
~~updated by the annual percentage increase in the CPI-U. The cost-sharing amounts for al other~~
2023. 89 CMS, Medicare Part D Prescription Drug Manual, Chapter 13, “Premium and Cost-Sharing Subsidies for Low-Income Individuals,” Section 60, Rev. October 1, 2018, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Chapter-13-Premium-and-Cost-Sharing-Subsidies-for-Low-Income-Individuals-v09-14-2018.pdf. Congressional Research Service 27 link to page 33 link to page 33 link to page 33 Medicare Part D Prescription Drug Benefit Partial-subsidy-eligible individuals have a $104 deductible in 2023, 15% coinsurance for all costs up to the catastrophic limit, and cost sharing above that level of $4.15 for a generic prescription or preferred multiple source drug prescription and $10.35 for any other prescription. Each year, cost-sharing amounts for full-benefit, dual eligibles up to or at 100% of FPL are updated by the annual percentage increase in the CPI-U. Cost sharing for all other beneficiaries, and the deductible beneficiaries, and the deductible ~~amount~~ for other full- and partial-subsidy-eligiblefor other full- and partial-subsidy-eligible individuals, individuals,
are increased by the annual percentage increase in perare increased by the annual percentage increase in per -capita beneficiary expenditures for Part D-capita beneficiary expenditures for Part D-
~~covered drugs.~~

~~97 CMS, Medicare Part D Prescription Drug Manual, Chapter 13, “Premium and Cost -Sharing Subsidies for Low-~~
~~Income Individuals,” Section 60, Rev. October 1, 2018, at https://www.cms.gov/Medicare/Prescription-Drug-~~
~~Coverage/PrescriptionDrugCovContra/Downloads/Chapter-13-Premium-and-Cost -Sharing-Subsidies-for-Low-Income-~~
~~Individuals-v09-14-2018.pdf.~~
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~~Table 6. Part D Standard Benefits, 2021~~covered drugs. Table 5. Part D Standard Benefit Cost Sharing, 2023
(by per capita drug spending category) (by per capita drug spending category)

Low-Income Subsidy (LIS)-Eligible Individuals

Non-LIS Beneficiaries
Full-Subsidy-Eligible
Other Subsidy Eligible
Total drug
Spending
(Dollar
Paid by ~~Part~~
Paid by
Paid by
Paid by
Paid by
Ranges)
Part D
Enrollee
Part D
Paid by Enrollee
Part D
Enrollee
$0 up to $ $0 up to $~~445~~505
0% 0%
$ $~~445~~505
$445 $445
0 0
$ $~~353~~401
$ $92104
Deductible Deductible
Between Between
75% 75%
25% 25%
100% less 100% less
Institutionalized Institutionalized
85% 85%
15% 15%
Deductible Deductible ~~and~~
~~enrol ee~~ enrollee cost cost
duals: $0 duals: $0
and Initial Initial
sharing sharing
Duals up to or at Duals up to or at
Coverage Coverage
100% of FPL: 100% of FPL:
Limit Limit
$1. $1.3045/$4.30 ($505~~/$4.00a~~
~~($445~~.01-.01-
Others: Others:
$4, $4,~~130)~~
~~$3.70/$9.20~~660) $4.15/$10.35
Coverage
5% (plus 70% 5% (plus 70%
25% for 25% for
100% less 100% less
Institutionalized Institutionalized
85% 85%
15% 15%
Gap
manufacturer manufacturer
brand name brand name
~~enrol ee~~ enrollee cost cost
duals: $0 duals: $0
Between Initial Between Initial
discount) for discount) for
drugs and drugs and
sharing sharing
Duals under 100% of Duals under 100% of
Coverage Coverage
brand name brand name
25% for 25% for
FPL: $1. FPL: $1.~~30/$4.0~~0a45/$4.30a
Limit Limit ($4,($4,~~130~~660) )
drugs and drugs and
generic drugs generic drugs
Others: Others:
and and
75% for 75% for
Catastrophic Catastrophic
generic drugs generic drugs
$ $~~3.70/$9.2~~0b4.15/$10.35b
Threshold Threshold
(about (about
~~$10,048.39~~$7,400))
Over Over
95% 95%
5% 5%
100% 100%
$0 $0
100% less 100% less
$ $~~3.70/$9.2~~0c4.15/$10.35c
Catastrophic Catastrophic
~~enrol ee~~enrollee
Threshold Threshold
cost cost
sharing sharing
Source: CMS, CMS, “Announcement of Calendar Year (CY) Announcement of Calendar Year (CY) ~~2021~~2023 Medicare Advantage Capitation Rates and Medicare Medicare Advantage Capitation Rates and Medicare
Advantage and Part D Payment PoliciesAdvantage and Part D Payment Policies and Final and Final ~~Cal~~ Call Letter.”Letter.” FPL is federalFPL is federal poverty level.poverty level. Duals refersDuals refers to dual to dual
eligibles. eligibles.
a. Maximum of $1.a. Maximum of $1.3045 per prescription per prescription for generic or preferredfor generic or preferred drugs that are multiple source drugs; $4.drugs that are multiple source drugs; $4.0030 per per
prescription for other drugs. prescription for other drugs.
b. Maximum of $ b. Maximum of $~~3.70~~4.15 per prescription per prescription for generic or preferredfor generic or preferred drugs that are multiple source drugs; $drugs that are multiple source drugs; $~~9.20 per~~
10.35 per prescription for other drugs. prescription for other drugs.
c. Cost sharing is the lower c. Cost sharing is the lower of 5% coinsurance orof 5% coinsurance or Minimum of $Minimum of $~~3.70~~4.15 per prescription for generic or preferred per prescription for generic or preferred
drugs that are multiple source drugs that are multiple source drugs; $drugs; $~~9.20~~10.35 per prescription per prescription for other drugs. Congressional Research Service 28 link to page 33 link to page 34 link to page 34 Medicare Part D Prescription Drug Benefit LIS Subsidy Changes Starting in 2024 Starting in 2024, the IRA merges the two categories of LIS subsidy (full and partial) into one new LIS category that provides the more generous benefits of the full LIS. Also, starting in 2024, out-of-pocket spending for all Part D enrollees is capped at the catastrophic threshold. See Table 5 for the 2024 cost-sharing subsidies for LIS and non-LIS enrollees. Table 6. Part D Standard Benefit Cost Sharing, 2024 (by per capita drug spending category) Non-LIS Beneficiaries LIS Beneficiaries Total drug Spending Paid by Paid by (Dollar Ranges) Paid by Part D Enrollee Part D Paid by Enrollee $0 up to $545 Deductible 0% $545 $545 0 Between Deductible and 75% 25% 100% less Institutionalized duals: $0 Initial Coverage Limit enrollee cost Duals up to or at 100% of ($545.01-$5,030) sharing FPL: $0 Others: $1.55/$4.60 Coverage Gap 5% (plus 70% 25% for 100% less Institutionalized duals: $0 Between Initial Coverage manufacturer brand name enrollee cost Duals under 100% of FPL: Limit ($5,030.01) and discount) for brand drugs and sharing $1.55/$4.60a Catastrophic Threshold name drugs and 75% 25% for Others up to 150% FPL: ($8,000) for generic drugs generic drugs $4.50/$11.20b Over Catastrophic 100% 0% 100% $0 Threshold Source: CMS, “Announcement of Calendar Year (CY) 2024 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter.” FPL is federal poverty level. Duals refers to dual eligibles. Notes: a. Maximum of $1.55 per prescription for generic or preferred drugs that are multiple source drugs; $4.60 per prescription for other drugs. b. Maximum of $4.50 per prescription for generic or preferred drugs that are multiple source drugs; $11.20 per prescription for other drugs. Employer Subsidies for Retiree Drug Coverage The MMA included provisions to encourage employers to continue to offer prescription drug benefits to their Medicare-eligible retirees. Employers have several options for such coverage.~~for other drugs.~~
~~Employer Subsidies for Retiree Drug Coverage~~
~~The MMA included provisions designed to encourage employers to continue to offer prescription~~
~~drug benefits to their Medicare-eligible retirees. Employers have several options for providing~~
~~such coverage.~~
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29

~~Medicare Part D Prescription Drug Benefit~~

Retiree Drug Subsidy
Employers and union groups that provide prescription drug insurance to Medicare-eligible, retired Employers and union groups that provide prescription drug insurance to Medicare-eligible, retired
workers may apply for federal retiree drug subsidies (RDS).workers may apply for federal retiree drug subsidies (RDS).9890 To qualify, an employer or union To qualify, an employer or union
must offer drug benefits that are must offer drug benefits that are ~~actuarial y~~actuarially equivalent to, or more generous than, standard Part D equivalent to, or more generous than, standard Part D
~~prescription drug~~ coverage. Sponsors must submit applications for CMS approval at least 90 days coverage. Sponsors must submit applications for CMS approval at least 90 days
prior to the prior to the beginning of a plan year. 90 CMS, “Retiree Drug Subsidy,” at https://www.rds.cms.hhs.gov/. Congressional Research Service 29 Medicare Part D Prescription Drug Benefit ~~beginning of a plan year.~~
Medicare provides payments for eligible retirees, defined as individuals Medicare provides payments for eligible retirees, defined as individuals ~~who are~~ entitled to entitled to
Medicare Medicare ~~benefits under~~ Part A and/or are enrolled in Part B, and who live in the service area of a Part A and/or are enrolled in Part B, and who live in the service area of a
Part D plan. An individualPart D plan. An individual must be a retired participant in an employer- or union-qualified group must be a retired participant in an employer- or union-qualified group
health plan or the Medicare-enrolled spouse or dependent of a retired participant. health plan or the Medicare-enrolled spouse or dependent of a retired participant. ~~A retiree health~~
~~plan cannot receive a subsidy for a current worker or an individual who is enrolled in a Part D~~
~~plan. (An employer or union does have the option of sponsoring~~(An employer or union may sponsor its own Part D plan [see its own Part D plan [see
“Employer Group Waiver Plans” section, below].) “Employer Group Waiver Plans” section, below].)
For each retiree enrolled in a qualified plan in For each retiree enrolled in a qualified plan in ~~2021~~2023, sponsors receive a federal subsidy equal to , sponsors receive a federal subsidy equal to
28% of gross prescription drug costs between a threshold of $28% of gross prescription drug costs between a threshold of $~~445~~505 and a cost limit of $ and a cost limit of $~~9,200.99~~10,350.91
The retiree subsidies The retiree subsidies ~~are designed to encourage employers to maintain drug coverage, and have~~
~~general y~~have generally been less expensive for Medicare than been less expensive for Medicare than ~~would be~~ enrolling these beneficiaries in a Part enrolling these beneficiaries in a Part
~~D drug~~ D plan. In plan. In ~~2020~~2023, the average annual RDS was forecast to be about $, the average annual RDS was forecast to be about $~~550~~619 per beneficiary per beneficiary
compared to average Medicare per beneficiary costs of $2,compared to average Medicare per beneficiary costs of $2,~~154~~352 for Part D for Part D ~~beneficiaries.100~~enrollees.92
Prior to enactment of the ACA, group health plans offering qualified drug coverage were eligible Prior to enactment of the ACA, group health plans offering qualified drug coverage were eligible
to receive the Medicare RDS and, in addition, claim a federal tax deduction for the subsidy, along to receive the Medicare RDS and, in addition, claim a federal tax deduction for the subsidy, along
with the rest of the plan’s spending on retiree health benefits. The ACA prohibited companies, with the rest of the plan’s spending on retiree health benefits. The ACA prohibited companies,
beginning in 2013, from claiming a tax deduction for the Medicare RDS.beginning in 2013, from claiming a tax deduction for the Medicare RDS.~~101~~93 In addition, retiree In addition, retiree
health plans are not eligiblehealth plans are not eligible ~~for ACA manufacturer discounts on brand-name drugs through the~~
~~coverage gap discount program. These changes, which result in higher relative costs for retiree~~
~~plans, have helped prompt employers to move~~ for the Part D manufacturer discount program. Partly as a result, many employers have moved away from the RDS program away from the RDS program, and toward EGWPs. The Medicare . The Medicare
Trustees predict that the share of beneficiaries covered through the Trustees predict that the share of beneficiaries covered through the ~~retiree drug subsidy wil~~
RDS will decline from about 20% of Part D enrollment in 2010 to about decline from about 20% of Part D enrollment in 2010 to about ~~2% in 2029.102~~
1.5% by 2032.94 Employer Group Waiver Plans EGWPs are Part D group plans sponsored by large employers, state and local governments, and other entities.95 EGWPs qualify for waivers of Medicare regulations in areas including enrollment, marketing, premiums, and benefit design. The waivers allow plan sponsors (employers or unions) to tailor Medicare EGWPs to their distinct retiree populations.96 In general, CMS may waive or modify Medicare requirements that “hinder the design of, the offering of, or the enrollment in” employer-sponsored group Medicare plans.97 More specifically, CMS may provide waivers of Medicare regulations to allow employers and unions to98 • restrict enrollment in an EGWP to the employer’s own retirees and eligible spouses and dependents of the retirees; 91 CMS, “Announcement of Calendar Year (CY) 2023 ~~Employer Group Waiver Plans~~
~~As fewer employers use the Part D retiree drug subsidy, a growing number have provided drug~~
~~benefits to retirees, through Part D Employer Group Waiver Plans (EGWPs).103 EGWPs are~~
~~sponsored by large employers, state and local governments, school districts and other entities.~~

~~98 CMS, “Retiree Drug Subsidy,” at https://www.rds.cms.hhs.gov/.~~
~~99 CMS, “Announcement of Calendar Year (CY) 2021~~ Medicare Advantage Capitation Rates and Medicare Advantage Medicare Advantage Capitation Rates and Medicare Advantage
and Part D Payment Policies and Final Call Letter,” p. and Part D Payment Policies and Final Call Letter,” p. ~~72.~~
~~100 2020 Medicare T rustees Report , T able IV.B9, p. 144, and T able V.D1, p. 188, at https://www.cms.gov/files/~~
~~document/2020-medicare-trustees-report.pdf.~~
~~101~~69. 92 2023 Medicare Trustees Report, Table IV.B9, p. 152, and Table V.D1, p. 207. 93 Internal Revenue Service, “Frequently Asked Questions: Retiree Drug Internal Revenue Service, “Frequently Asked Questions: Retiree Drug Subsidy,”Subsidy,” at https://www.irs.gov/newsroom/at https://www.irs.gov/newsroom/
frequently-asked-questions-retiree-drug-subsidy. frequently-asked-questions-retiree-drug-subsidy.
~~102 2020 Medicare T rustees Report , T able IV.B7, p. 144.~~
~~103 CMS,~~ 94 2023 Medicare Trustees Report, Table IV.B7, p. 147. 95 CMS, Medicare Prescription Drug Benefit Manual, Chapter 12, “Employer/Union Sponsored Group Health Plans,” , Chapter 12, “Employer/Union Sponsored Group Health Plans,”
Rev. November 7, 2008, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Rev. November 7, 2008, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/
PartDManuals. Employers and unions may offer EGWP PDPs only to retirees, while MA EGWPs, includingPartDManuals. Employers and unions may offer EGWP PDPs only to retirees, while MA EGWPs, including MA MA-PD plans, may be offered to retirees or current workers. 96 Employers may also offer Medicare Part C (Medicare Advantage) EGWPs, including Part C plans with a Part D component. See CMS, “Employer Group Waiver Plans,” https://www.cms.gov/medicare/coverage/prescription-drug-coverage-contracting/employer-group-waiver-plans-egwps. 97 Specific authority for EGWPs can be found at SSA §§1857(i) and 1860D-22(b). 98 CMS, “Approved Part D Waivers,” https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/EGWP-Waivers.pdf. Congressional Research Service 30 Medicare Part D Prescription Drug Benefit •~~-PD~~
~~plans, may be offered to retirees or current workers.~~
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~~Medicare Part D Prescription Drug Benefit~~

~~EGWPs qualify for waivers of Medicare regulations in areas including enrollment, marketing,~~
~~premiums, and benefit design. The waivers al ow plan sponsors (employers or unions) to tailor~~
~~Medicare EGWPs to their distinct retiree populations.~~
~~In general, CMS may waive or modify Medicare requirements that “hinder the design of, the~~
~~offering of, or the enrollment in” employer-sponsored group Medicare plans.104 More specificaly,~~
~~CMS may provide waivers of Medicare regulations to al ow employers and unions to do the~~
~~following:105~~
~~ restrict enrollment in an EGWP to the employer’s own retirees and eligible~~
~~spouses and dependents of the retirees;~~
 subsidize EGWP premiums and set different premiums in different geographic subsidize EGWP premiums and set different premiums in different geographic
areas of the country; areas of the country;
• offer national plans rather than plans in specific geographic regions; offer national plans rather than plans in specific geographic regions;
• provide provide ~~smal er~~smaller networks of contracted pharmacies than are required for other networks of contracted pharmacies than are required for other
Part D plans, so long as the networks are adequate to meet enrollee needs; Part D plans, so long as the networks are adequate to meet enrollee needs;
• offer a different benefit structure than Part D plans, so long as the EGWP meets offer a different benefit structure than Part D plans, so long as the EGWP meets
requirements for the gross value of the requirements for the gross value of the ~~overal~~ overall benefit; and benefit; and
• hold annual open enrollment periods at different times than the national Medicare hold annual open enrollment periods at different times than the national Medicare
open enrollment period for MA and Part D (October 15 through December 15). open enrollment period for MA and Part D (October 15 through December 15).
Employers and unions may offer EGWPs under direct contract with CMS or through third parties Employers and unions may offer EGWPs under direct contract with CMS or through third parties
that design and administer the benefit.that design and administer the benefit.~~106~~ EGWPs must comply with Part D requirements to offer EGWPs must comply with Part D requirements to offer
an adequate formulary, provide lower cost sharing for LIS enrollees, and other enrollee an adequate formulary, provide lower cost sharing for LIS enrollees, and other enrollee
protections. EGWP sponsors are not required to submit annual bids to CMS on the grounds that protections. EGWP sponsors are not required to submit annual bids to CMS on the grounds that
the process of putting together a bid could “hinder the design, offering, or enrollment in the process of putting together a bid could “hinder the design, offering, or enrollment in
employer-sponsors coverage given the additional complexity and level of effort that would be employer-sponsors coverage given the additional complexity and level of effort that would be
required.”required.”~~107~~99 EGWPs instead are paid by CMS based on the EGWPs instead are paid by CMS based on the average national average bid of other Part D national average bid of other Part D
plans.plans.
In addition, the coverage gap manufacturer discount is calculated differently for EGWPs than for In addition, the coverage gap manufacturer discount is calculated differently for EGWPs than for
regular Part D plans. In 2012, CMS issued regular Part D plans. In 2012, CMS issued ~~final~~ rules that changed the definition of Part D rules that changed the definition of Part D
supplemental benefits to exclude supplemental benefits offered through EGWPs.supplemental benefits to exclude supplemental benefits offered through EGWPs.~~108 Instead, any~~
100 Under the rule, supplemental benefits offered supplemental benefits offered ~~as part of~~by an EGWP an EGWP sponsor are considered non-Medicare benefits are considered non-Medicare benefits and treated instead as other health insurance that pays in a secondary position to Medicare. That means, in part, that manufacturer discounts in the coverage gap for EGWP plans are calculated based on the standard Part D benefit without taking into account any supplemental benefits.101 This allows EGWP sponsors to reduce cost sharing for enrollees in the coverage gap but still collect the maximum manufacturer discount. A MedPAC analysis found EGWPs made up about 16% of Part D enrollment in 2018 but accounted for 45% of manufacturer discounts.102 Starting in 2025, under the IRA, there will no longer be a coverage gap for all plans, including EGWPs, and the manufacturer discount program will be reconfigured. 99 CMS, “Insurance Standards Bulletin Series: ~~and are~~

~~104 Specific authority for EGWPs can be found at SSA Sections 1857(i) and 1860D-22(b).~~
~~105 CMS, “Approved Part D Waivers,” https://www.cms.gov/Medicare/Prescription-Drug-Coverage/~~
~~PrescriptionDrugCovContra/Downloads/EGWP-Waivers.pdf.~~
~~106 Secondary Payer Manual on the CMS website at http://www.cms.hhs.gov/Manuals/IOM/list.asp.~~
~~107 CMS, “Insurance Standards Bulletin Series:~~ Employer Prescription Drug Coverage that Supplemental Medicare Part Employer Prescription Drug Coverage that Supplemental Medicare Part
D Coverage provided through an Employer Group Waiver Plan,” January 23, 2013. CMS, “Part C and D User Call,” D Coverage provided through an Employer Group Waiver Plan,” January 23, 2013. CMS, “Part C and D User Call,”
November 6, 2013, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/PartD-November 6, 2013, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/PartD-
EGWP. EGWP.
~~108~~100 CMS, CMS, “Medicare Program; Changes“Medicare Program; Changes to the Medicare Advantage to the Medicare Advantage ~~an d~~and the Medicare Prescription Drug Benefit the Medicare Prescription Drug Benefit
Programs for Contract Year 2013 and Other Changes; Final Rule,”Programs for Contract Year 2013 and Other Changes; Final Rule,” 77 77 Federal Register, p. 22081, April 12, 2012, at p. 22081, April 12, 2012, at
https://www.govinfo.gov/content/pkg/FR-2012-04-12/html/2012-8071.htms. In its rulemaking, CMShttps://www.govinfo.gov/content/pkg/FR-2012-04-12/html/2012-8071.htms. In its rulemaking, CMS ~~amended~~ amended 42 CFR 42 CFR
§423.100 to include in the definition of “§423.100 to include in the definition of “ other health or prescription drug coverage” any coverage offered by EGWPs other health or prescription drug coverage” any coverage offered by EGWPs
other than basic prescription drug coverage. CMSother than basic prescription drug coverage. CMS also made a conforming change to the definition of supplemental also made a conforming change to the definition of supplemental
benefits in §423.100 to exclude benefits offered by EGWPs. “benefits in §423.100 to exclude benefits offered by EGWPs. “ With respect to EGWPs, this would mean that a With respect to EGWPs, this would mean that a
manufacturer discount alwaysmanufacturer discount always ~~would~~ would be applied before any additional coverage beyond Part D, whether offered by the be applied before any additional coverage beyond Part D, whether offered by the
EGWP itself or by another party,” according to CMS. EGWP itself or by another party,” according to CMS.
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~~treated instead as other health insurance that pays in a secondary position to Medicare. That~~
~~means that manufacturer discounts in the coverage gap for EGWP plans are calculated based on~~
~~the standard Part D benefit without taking into account the EGWP’s supplemental benefits.109~~
~~This al ows sponsors to offer EGWP plans that offer lower cost sharing in the coverage gap than~~
~~the standard benefit of 25% but stil collect the maximum manufacturer discount. A recent~~
~~MedPAC analysis found EGWPs made up about 16% of Part D enrollment in 2018 but accounted~~
~~for 45% of manufacturer discounts.110~~
~~Drug Coverage~~
~~In order for~~101 In 2014, CMS published a rule requiring EGWPs to ensure that any supplemental benefits comply with any applicable requirements for issuance under state insurance laws and/or ERISA rules (see January 25, 2013 Insurance Bulletin from the Center for Consumer Information and Insurance Oversight: http://www.cms.gov/cciio/resources/Regulations-and-Guidance/index.html#Health Market Reforms). 102 MedPAC, Report to the Congress: Medicare Payment Policy, March 13, 2020, p. 416, at https://www.medpac.gov/document/http-www-medpac-gov-docs-default-source-reports-mar20_entirereport_sec-pdf/. Congressional Research Service 31 link to page 37 Medicare Part D Prescription Drug Benefit Formulary Requirements For a drug to be paid by Medicare’s prescription drug benefit, it must be a drug that is a drug to be paid by Medicare’s prescription drug benefit, it must be a drug that is
covered under Part D and included in the formulary of an individual’s Part D plan. (See covered under Part D and included in the formulary of an individual’s Part D plan. (See
“Formularies.”) ”) The MMA defines covered Part D drugs as (1) outpatient prescription drugs The MMA defines covered Part D drugs as (1) outpatient prescription drugs
approved by the Food and Drug Administrationapproved by the Food and Drug Administration (FDA), and used for a (FDA), and used for a ~~medical y~~medically accepted accepted
indication; (2) biological products that may be dispensed only upon a prescription and that are indication; (2) biological products that may be dispensed only upon a prescription and that are
licensed under the Public Health Service (PHS) Act and produced at a licensed establishment; (3) licensed under the Public Health Service (PHS) Act and produced at a licensed establishment; (3)
insulin (including medical supplies associated with the injection of insulin); and (4) vaccines insulin (including medical supplies associated with the injection of insulin); and (4) vaccines
licensed under the PHS Act. Drugs can also be treated as part of a plan’s formulary as the result licensed under the PHS Act. Drugs can also be treated as part of a plan’s formulary as the result
of a beneficiary coverage determination or appeal. of a beneficiary coverage determination or appeal.
Certain drugs are excluded from Part D coverage by law, including drugs Certain drugs are excluded from Part D coverage by law, including drugs ~~specifical y~~specifically excluded excluded
from coverage under Medicaid. The exclusion applies to (1) drugs used for anorexia, weight loss, from coverage under Medicaid. The exclusion applies to (1) drugs used for anorexia, weight loss,
or weight gain; (2) fertility drugs; (3) drugs used for cosmetic purposes or hair growth; (4) drugs or weight gain; (2) fertility drugs; (3) drugs used for cosmetic purposes or hair growth; (4) drugs
for symptomatic relief for coughs and colds; (5) prescription vitamins and minerals; and (6) for symptomatic relief for coughs and colds; (5) prescription vitamins and minerals; and (6)
covered drugs when the manufacturer requires, as a condition of sale, that associated tests be covered drugs when the manufacturer requires, as a condition of sale, that associated tests be
purchased exclusively from the manufacturer. Drugs used for the treatment of sexual or erectile purchased exclusively from the manufacturer. Drugs used for the treatment of sexual or erectile
dysfunction are excluded from coverage unless they are used to treat another condition for which dysfunction are excluded from coverage unless they are used to treat another condition for which
~~the drug has been approved by the FDA.111~~
~~Some previously barred drugs are now covered. Since January 1, 2013, Part D plans have been~~
~~required to include benzodiazepines in their formularies.112 Barbiturates must be included in plan~~
~~formularies for an indication of epilepsy, cancer, or chronic mental health disorders. Effective in~~
~~January 2014, the ACA removed smoking cessation agents, barbiturates and benzodiazepines~~
~~from the list of drugs al owed to be excluded from Medicaid coverage. The ACA provisions~~
~~meant that Part D restrictions on barbiturate coverage (i.e., limiting the drugs to treatment of~~
~~epilepsy, cancer, or chronic mental health disorders) were ended.113~~

~~109 In 2014, CMS published a rule requiring EGWPs to ensure that any supplemental benefits comply with any~~
~~applicable requirements for issuance under state insurance laws and/or ERISA rules (see January 25, 2013 Insurance~~
~~Bulletin from the Center for Consumer Information and Insurance Oversight: http://www.cms.gov/cciio/resources/~~
~~Regulations-and-Guidance/index.html#Health Market Reforms).~~
~~110 MedPAC, Report to the Congress: Medicare Payment Policy, March 13, 2020, p. 416, at http://medpac.gov/docs/~~
~~default-source/reports/mar20_medpac_ch14_sec.pdf?sfvrsn=0.~~
~~111 CMS, Medicare Prescription Drug Benefit Manual, Chapter 6, “Part D Drugs and Formulary Requirements,”~~
~~Section 20.1, Rev. January 15, 2016, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/~~
~~PrescriptionDrugCovContra/Downloads/Part-D-Benefits-Manual-Chapter-6.pdf.~~
~~112 T hese changes were required by Section 175 of MIPPA; P.L. 110-275.~~
~~113 CMS, “ Announcement of Calendar Year (CY) 2014 Medicare Advantage Capitation Rat es and Medicare Advantage~~
~~and Part D Payment Policies and Final Call Letter,” April 1, 2013, pp. 152-153, at http://www.cms.gov/Medicare/~~
~~Health-Plans/MedicareAdvtgSpecRateStats/downloads/Announcement2014.pdf.~~
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the drug has been approved by the FDA.103 If a state covers excluded drugs for Medicaid beneficiaries, it must also cover them for dual If a state covers excluded drugs for Medicaid beneficiaries, it must also cover them for dual
eligibleseligibles in cases where the drugs are determined to be in cases where the drugs are determined to be ~~medical y~~medically necessary. Dual eligibles may necessary. Dual eligibles may
therefore receive coverage from Medicaid for some drugs that are excluded from Medicare. therefore receive coverage from Medicaid for some drugs that are excluded from Medicare.
~~Additional y,~~ Additionally, a Part D sponsor may elect to include one or more of these drugs in an enhanced a Part D sponsor may elect to include one or more of these drugs in an enhanced
Part D plan; however, no federal subsidy is available for the associated costs. Part D plan; however, no federal subsidy is available for the associated costs.
Drugs Covered by Other Parts of Medicare
Part D drug plans are prohibited from covering drugs covered by other parts of Medicare. This Part D drug plans are prohibited from covering drugs covered by other parts of Medicare. This
~~includes prescription medications~~includes prescriptions provided during a stay in a hospital or provided during a stay in a hospital or ~~skil ed~~skilled nursing facility nursing facility
that are paid for by the Part A program, and the limited circumstances when Part B covers that are paid for by the Part A program, and the limited circumstances when Part B covers
outpatient prescription drugs. Part B-covered drugs include drugs that are not prescription drugs. Part B-covered drugs include drugs that are not ~~usual y~~usually self-administered and self-administered and
are provided incident to a physician’s professional services or drugs necessary for the proper are provided incident to a physician’s professional services or drugs necessary for the proper
functioning of Part B durable medical equipment. These include such things as functioning of Part B durable medical equipment. These include such things as
immunosuppressive drugs for persons who have had a Medicare-covered transplant; immunosuppressive drugs for persons who have had a Medicare-covered transplant;
erythropoietin (an anti-anemia drug) for persons with end-stage renal disease; oral anticancer erythropoietin (an anti-anemia drug) for persons with end-stage renal disease; oral anticancer
drugs; drugs requiring administration via a nebulizer or infusion pump in the home; and certain drugs; drugs requiring administration via a nebulizer or infusion pump in the home; and certain
vaccines (influenza, pneumococcal, and hepatitis B for intermediate- or high-risk persons).vaccines (influenza, pneumococcal, and hepatitis B for intermediate- or high-risk persons).~~114 As~~
~~part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136),~~
~~Congress specified that any Coronavirus Disease 2019 (COVID-19) vaccine would be covered~~
~~under Medicare Part B.115~~104
Formularies
~~Prescription drug~~Part D plans operate formularies, which are lists of drugs that a plan plans operate formularies, which are lists of drugs that a plan ~~chooses to cover~~
covers and the terms under and the terms under which they are covered. A Part D sponsor’s formulary must be developed and reviewed by a 103 CMS, ~~which they are covered. This means that plans can choose to cover some, but~~
~~not al , FDA-approved prescription drugs, within set program standards.~~
~~A Part D sponsor’s formulary must be developed and reviewed by a special CMS-approved~~
~~Pharmacy and Therapeutics (P&T) Committee.116 A majority of the committee members must be~~
~~practicing physicians or practicing pharmacists and the committees must each include one~~
~~physician and one pharmacist who are experts in caring for elderly or disabled individuals.~~
~~Committees are to base decisions on the strength of scientific evidence and standards of practice~~
~~when developing and reviewing formularies. CMS in 2016 strengthened conflict-of-interest~~
~~provisions for P&T committees in Medicare Part D in response to concerns raised by the~~
~~Department of Health and Human Service (HHS) Office of Inspector General.117~~

~~114 For an examination of Part D vs. Part B coverage issues see CMS,~~ Medicare Prescription Drug Benefit Manual, ,
Chapter 6, “Part D Drugs and Formulary Requirements,” Chapter 6, “Part D Drugs and Formulary Requirements,” ~~Appendix C,~~ Section 20.1, Rev. January 15, 2016, at https://www.cms.gov/Rev. January 15, 2016, at https://www.cms.gov/
Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Part-D-Benefits-Manual-Chapter-6.pdf. Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Part-D-Benefits-Manual-Chapter-6.pdf.
~~115 CRS Report R46334, Selected Health Provisions in Title III of the CARES Act (P.L. 116-136). See Section 3713.~~
~~116 CMS,~~ 104 For an examination of Part D vs. Part B coverage issues see CMS, Medicare Prescription Drug Benefit Manual, Chapter 6, “Part D Drugs and Formulary RequirementsChapter 6, “Part D Drugs and Formulary Requirements,” Appendix C”
~~Section 30.1~~, Rev. January 15, 2016, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/, Rev. January 15, 2016, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/
~~PrescriptionDrugCovContra/Downloads/Part-D-Benefits-Manual-Chapter-6.pdf. T he committee may be set up by a~~
~~sponsor or a pharmacy benefit manager acting on behalf of the plan sponsor. Committee members must sign conflict of~~
~~interest statements detailing economic or other relationships with entities affected by drug coverage decisions that~~
~~could influence committee decisions.~~
~~117 HHS OIG, “Gaps in Oversight of Conflicts of Interest in Medicare Prescription Drug Decisions,” March 2013, at~~
~~https://oig.hhs.gov/oei/reports/oei-05-10-00450.asp. See also CMS, “ Medicare Program; Contract Year 2016 Policy~~
~~and T echnical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs,” 80~~ ~~Federal~~
~~Register,~~ ~~February 12, 2015, p. 7951, at https://www.federalregister.gov/documents/2015/02/12/2015-02671/medicare-~~
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PrescriptionDrugCovContra/Downloads/Part-D-Benefits-Manual-Chapter-6.pdf. Congressional Research Service 32 link to page 41 link to page 41 Medicare Part D Prescription Drug Benefit CMS-approved Pharmacy and Therapeutics (P&T) Committee.105 A majority of the committee members must be practicing physicians or practicing pharmacists, and the committees must each include one physician and one pharmacist who are experts in caring for elderly or disabled individuals. CMS requires that P&T committees “must review for clinical appropriateness the practices and CMS requires that P&T committees “must review for clinical appropriateness the practices and
policies for formulary management activities, such as prior authorizations, step therapies, quantity policies for formulary management activities, such as prior authorizations, step therapies, quantity
limitations, generic substitutions, and other drug utilization activities that affect enrollee access.” limitations, generic substitutions, and other drug utilization activities that affect enrollee access.”
However, P&T committee recommendations regarding these activities are advisory only and not However, P&T committee recommendations regarding these activities are advisory only and not
binding on the Part D sponsors.binding on the Part D sponsors.~~118~~106 (See (See “Drug Utilization.”) ”)
Formulary Categories and Classes
Formulary drugs are grouped into categories and classes of products that work in a similar way or Formulary drugs are grouped into categories and classes of products that work in a similar way or
are used to treat the same condition. The MMA required CMS to ask the United States are used to treat the same condition. The MMA required CMS to ask the United States
Pharmacopeial Convention (USP)Pharmacopeial Convention (USP)~~119~~107 to develop a list of categories and classes for plans and to to develop a list of categories and classes for plans and to
~~periodical y~~periodically revise such classifications. A plan formulary must include at least two drugs in each revise such classifications. A plan formulary must include at least two drugs in each
category or class used to treat the same medical condition (unless only one drug is availablecategory or class used to treat the same medical condition (unless only one drug is available in the in the
category or class, or two drugs are available but one drug is category or class, or two drugs are available but one drug is ~~clinical y~~ clinically superior). The two-drug superior). The two-drug
requirement must be met by providing two requirement must be met by providing two ~~chemical y~~chemically distinct drugs. (Plans cannot meet the distinct drugs. (Plans cannot meet the
requirement by including two dosage forms or strengths of the same drug or a brand-name drug requirement by including two dosage forms or strengths of the same drug or a brand-name drug
and its generic equivalent.) and its generic equivalent.)
Six Classes of Clinical Concern
In general, Part D drug plans are required to operate formularies that cover at least two drugs in In general, Part D drug plans are required to operate formularies that cover at least two drugs in
each drug class and category. However, Part D plans are required to cover each drug class and category. However, Part D plans are required to cover ~~substantial y al~~
substantially all availableavailable drugs in the following six categories or classes: immunosuppressant, antidepressant, drugs in the following six categories or classes: immunosuppressant, antidepressant,
antipsychotic, anticonvulsant, antiretroviral, and antineoplastic.antipsychotic, anticonvulsant, antiretroviral, and antineoplastic.~~120~~108 Plan sponsors are not Plan sponsors are not ~~al owed~~allowed
to steer beneficiaries who are already using these drugs toward alternative therapies via policies to steer beneficiaries who are already using these drugs toward alternative therapies via policies
such as requiring prior authorization or step-therapy mandates (seesuch as requiring prior authorization or step-therapy mandates (see “Drug Utilization”). ). ~~This~~The
protected classes requirement, which started as CMS guidance, protected classes requirement, which started as CMS guidance, ~~was~~is designed to mitigate the risk designed to mitigate the risk
that drug therapy could be interrupted for vulnerable populations. that drug therapy could be interrupted for vulnerable populations.
The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA; P.L. 110-275) and The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA; P.L. 110-275) and
the ACAthe ACA codified the six protected classes requirement, while directing the HHS Secretary to codified the six protected classes requirement, while directing the HHS Secretary to
~~spel~~ spell out more specific criteria for identifying drug categories or classes of clinical concern.out more specific criteria for identifying drug categories or classes of clinical concern.~~121 As~~
~~part of this process, the statutes al ow HHS to revamp the current protected classes and~~
~~categories, including permitting Part D sponsors to exclude certain drugs from their formularies~~

~~program-contract-year-2016-policy-and-technical-changes-to-the-medicare-advantage-and-the/.~~
118 CMS, Medicare Prescription Drug Benefits Manual~~, Chapter 6, “~~ 109 As 105 CMS, Medicare Prescription Drug Benefit Manual, Chapter 6, “Part D Drugs and Formulary Requirements” Section 30.1, Rev. January 15, 2016, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Part-D-Benefits-Manual-Chapter-6.pdf. The committee may be set up by a sponsor or a pharmacy benefit manager acting on behalf of the plan sponsor. Committee members must sign conflict of interest statements detailing economic or other relationships with entities affected by drug coverage decisions that could influence committee decisions. 106 CMS, Medicare Prescription Drug Benefits Manual, Chapter 6, “Part D Drugs and Formulary Requirements,” Part D Drugs and Formulary Requirements,”
§30.1.5, Rev. January 15, 2016, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/§30.1.5, Rev. January 15, 2016, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/
PrescriptionDrugCovContra/Downloads/Part-D-Benefits-Manual-Chapter-6.pdf; and SSAPrescriptionDrugCovContra/Downloads/Part-D-Benefits-Manual-Chapter-6.pdf; and SSA 1860D-4(b)(3). 1860D-4(b)(3).
~~119 T he~~107 The United States Pharmacopeial Convention (USP) is a nonprofit organization that sets standards for the identity, United States Pharmacopeial Convention (USP) is a nonprofit organization that sets standards for the identity,
strength, quality, and purity of medicines, food ingredients and dietary supplements.strength, quality, and purity of medicines, food ingredients and dietary supplements.
~~120~~ 108 CMS, CMS, Medicare Prescription Drug Benefit Manual, Chapter 6, “Part D Drugs and Formulary Requirements,” Chapter 6, “Part D Drugs and Formulary Requirements,”
Section 30.2.5, Rev. January 15, 2016, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/Section 30.2.5, Rev. January 15, 2016, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/
~~PrescriptionDrugCovContra~~PrescriptionDrugCovContra/Downloads/Part-D-Benefits-Manual-Chapter-6.pdf. /Downloads/Part-D-Benefits-Manual-Chapter-6.pdf.
~~121 T he~~109 The MIPPA required that, beginning with plan year 2010, the HHS Secretary identify categories and MIPPA required that, beginning with plan year 2010, the HHS Secretary identify categories and ~~cla sses~~ classes of of
drugsdrugs for which both of the following criteria are met: (1) restricted access to drugsfor which both of the following criteria are met: (1) restricted access to drugs in the category or class would have (continued...) Congressional Research Service 33 Medicare Part D Prescription Drug Benefit part of this process, the statutes allow HHS to revamp the current protected classes and categories, including permitting Part D sponsors to exclude certain drugs from their formularies ~~in the category or class would have~~
~~major or life threatening clinical consequences for individuals who have a disease or disorder treated by the drugs in~~
~~such category or class and (2) there is significant clinical need for such individuals to have access to multiple drugs~~
~~within a category or class due to unique chemical actions and pharmacological effects of the drugs within the category~~
~~or class. T he ACA specified that the six drug categories or classes of clinical concern would remain in place until the~~
~~HHS Secretary established new criteria to identify drug categories or classes of clinical concern under §1860D–~~
~~4(b)(3)(G) of the Social Security Act through no tice and rulemaking.~~
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(or limit access to such drugs through utilization management or prior authorization (or limit access to such drugs through utilization management or prior authorization
restrictions).restrictions).~~122~~110 In November 2018, CMS published a proposed rule that would have given Part D In November 2018, CMS published a proposed rule that would have given Part D
plan sponsors more authority to use step therapy and prior authorization to control enrollee plan sponsors more authority to use step therapy and prior authorization to control enrollee
utilizationutilization in the protected classes.in the protected classes.~~123~~111 In May 2019, CMS announced it would not implement most In May 2019, CMS announced it would not implement most
of the proposed changes but instead would put into regulatory form existing of the proposed changes but instead would put into regulatory form existing ~~sub-regulatory policy~~
~~regarding utilization requirements for~~ guidance regarding protected class drugs. Under the final rules, plans may use protected class drugs. Under the final rules, plans may use
step therapy and prior authorization for enrollees beginning a course of therapy with drugs in the step therapy and prior authorization for enrollees beginning a course of therapy with drugs in the
six protected classes to confirm a drug’s intended use is for a protected class indication; to ensure six protected classes to confirm a drug’s intended use is for a protected class indication; to ensure
~~clinically~~ clinically appropriate use; and to promote utilizationappropriate use; and to promote utilization of preferred formulary alternativesof preferred formulary alternatives , or a , or a
combination thereof. Step therapy and prior authorization are not combination thereof. Step therapy and prior authorization are not ~~al owed~~allowed for antiretroviral for antiretroviral
(HIV/AIDs) medications.(HIV/AIDs) medications.~~124 In the Federal Register notice announcing the final rules, CMS said~~
it 112 CMS decided against a broader expansion of step therapy because the risks of inappropriately decided against a broader expansion of step therapy because the risks of inappropriately
interrupting therapy interrupting therapy ~~for stabilized patients currently using a drug~~ outweighed the potential clinical outweighed the potential clinical
benefits and cost savings.benefits and cost savings.~~125~~
~~Vaccines~~
~~The~~ 113 Vaccines The Advisory Committee on Immunization Practices (ACIP) provides guidance to HHS and the CDC on the use of vaccines, including recommending immunization schedules for the U.S. population, with certain vaccine dosages based on age. The Tax Relief and Health Care Act of 2006 (P.L. 109-432) required that Part D plans, beginning Tax Relief and Health Care Act of 2006 (P.L. 109-432) required that Part D plans, beginning
in 2008, include in 2008, include ~~al commercial y~~all commercially available available vaccines in their drug formularies, with the exception vaccines in their drug formularies, with the exception
of vaccines covered under Medicare Part B. Medicare Part B of vaccines covered under Medicare Part B. Medicare Part B ~~general y~~generally covers vaccinations for covers vaccinations for
influenza, pneumonia, and the Hepatitis B vaccine for intermediate to high-risk cases. Part B influenza, pneumonia, and the Hepatitis B vaccine for intermediate to high-risk cases. Part B ~~wil~~
~~also cover immunizations for patients exposed to an injury or disease, such as tetanus shots.126 In~~
~~addition, under the 2020 CARES Act, Medicare Part B wil cover a vaccine for COVID-19 when~~
~~a vaccine becomes available.127 The Part B coverage designation means a COVID-19 vaccine~~
~~cannot be covered under Part D.~~
~~The Tax Relief and Health Care Act of 2006 modified the definition of a Part D drug to require~~
~~plans to cover the costs for administering Part D-covered vaccines, as wel as the vaccine itself.~~

~~122 In January 2014, CMS issued proposed rules that would~~ will major or life threatening clinical consequences for individuals who have a disease or disorder treated by the drugs in such category or class and (2) there is significant clinical need for such individuals to have access to multiple drugs within a category or class due to unique chemical actions and pharmacological effects of the drugs within the category or class. The ACA specified that the six drug categories or classes of clinical concern would remain in place until the HHS Secretary established new criteria to identify drug categories or classes of clinical concern under §1860D–4(b)(3)(G) of the Social Security Act through notice and rulemaking. 110 In January 2014, CMS issued proposed rules that would have narrowed the protected classes to anticonvulsants, have narrowed the protected classes to anticonvulsants,
antiretrovirals, and antineoplastics, beginning in plan year 2015antiretrovirals, and antineoplastics, beginning in plan year 2015 . Antipsychotic drugs would. Antipsychotic drugs would have continued to be have continued to be
treated as a classtreated as a class of clinical concern in 2015 and until CMSof clinical concern in 2015 and until CMS determined that it was appropriate to change the determined that it was appropriate to change the ~~c riteria~~criteria for for
these products. In May 2014, CMSthese products. In May 2014, CMS announced it wouldannounced it would not finalize the proposed regulations relating to the six not finalize the proposed regulations relating to the six
protected classes. Seeprotected classes. See CMS,CMS, “ “Medicare Program; Contract Year 2015 Policy and Medicare Program; Contract Year 2015 Policy and ~~T echnical~~Technical Changes to the Medicare Changes to the Medicare
Advantage and the Medicare Prescription Drug Benefit Programs; Proposed Rule,” 79 Advantage and the Medicare Prescription Drug Benefit Programs; Proposed Rule,” 79 Federal Register, pp. 1936 and , pp. 1936 and
2063, January 10, 2014, at http://www.gpo.gov/fdsys/pkg/FR-2014-01-10/pdf/2013-31497.pdf. 2063, January 10, 2014, at http://www.gpo.gov/fdsys/pkg/FR-2014-01-10/pdf/2013-31497.pdf.
~~123~~111 CMS, CMS, “ “Modernizing Part D and Medicare Advantage Modernizing Part D and Medicare Advantage ~~T o~~To Lower Drug Lower Drug Prices and ReducePrices and Reduce ~~Out~~ Out-of-Pocket Expenses,” -of-Pocket Expenses,”
Proposed Rule,Proposed Rule, 83 83 Federal Register, November 30, 2018, p. 62152; https://www.federalregister.gov/documents/2018/, November 30, 2018, p. 62152; https://www.federalregister.gov/documents/2018/
11/30/2018-25945/modernizing-part-d-and-medicare-advantage-to-lower-drug-prices-and-reduce-out-of-pocket11/30/2018-25945/modernizing-part-d-and-medicare-advantage-to-lower-drug-prices-and-reduce-out-of-pocket --
expenses. expenses.
~~124~~112 Ibid, Ibid, §30.2.5. Part D sponsors may not implement prior authorization or step therapy requirements designed to steer §30.2.5. Part D sponsors may not implement prior authorization or step therapy requirements designed to steer
enrollees already taking a drugenrollees already taking a drug to a preferred alternatives within the six classes. to a preferred alternatives within the six classes. ~~T his~~This includes includes beneficiaries already beneficiaries already
enrolled in a Part D plan as wellenrolled in a Part D plan as well as as new enrollees who were actively taking drugsnew enrollees who were actively taking drugs in any of the six classesin any of the six classes of clinical of clinical
concern prior to enrollment into the plan. If a sponsor cannot determine at the point of sale whether an enrollee is concern prior to enrollment into the plan. If a sponsor cannot determine at the point of sale whether an enrollee is
currently taking a drugcurrently taking a drug (e.g., new(e.g., new enrollee filling a prescription for the first time), the sponsor is to treat such enrollee enrollee filling a prescription for the first time), the sponsor is to treat such enrollee
as though he or she is currently taking the drug. as though he or she is currently taking the drug.
~~125~~ 113 CMS, CMS, “ “Modernizing Part D and Medicare Advantage Modernizing Part D and Medicare Advantage ~~T o~~To Lower Drug Lower Drug Prices and ReducePrices and Reduce ~~Out~~ Out-of-Pocket Expenses,” -of-Pocket Expenses,”
Final Rule,Final Rule, 84 84 Federal Register, May 23, 2019, p. 23840, at https://www.federalregister.gov/documents/2019/05/23/, May 23, 2019, p. 23840, at https://www.federalregister.gov/documents/2019/05/23/
2019-10521/modernizing-part-d-and-medicare-advantage-to-lower-drug-prices-and-reduce-out-of-pocket-expenses. 2019-10521/modernizing-part-d-and-medicare-advantage-to-lower-drug-prices-and-reduce-out-of-pocket-expenses.
~~126 CMS, Medicare Learning Network, “Medicare Part D Vaccines,” June 2019, at https://www.cms.gov/Outreach-and-~~
~~Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/Vaccines-Part -D-Factsheet -ICN908764.pdf.~~
~~127 CRS Report R46334, Selected Health Provisions in Title III of the CARES Act (P.L. 116-136).~~
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35Congressional Research Service 34 Medicare Part D Prescription Drug Benefit cover immunizations for patients exposed to an injury or disease, such as tetanus shots.114 Part B also covers COVID-19 vaccines.115 Medicare Part D covers all commercially available vaccines, except for vaccines covered under Part B, or in cases where a vaccine manufacturer has chosen not to participate in the Part D manufacturer discount program. The shingles vaccine (protecting against herpes zoster), which the ACIP recommends for adults aged 50 and older, is an example of a Part D vaccine. Starting in 2023, under the IRA, Part D plans may no longer apply a deductible, coinsurance, or other cost-sharing requirement for adult vaccines covered by Part D that are recommended by ACIP.116 An enrollee may have to pay a vaccine administration fee for an ACIP-recommended vaccine at the point of service, but can receive full reimbursement from their Part D plan. Part D plans may apply cost sharing to other, non-ACIP recommended vaccines. Plan-Year Formulary Changes Part D plans may alter their formularies from year to year and are allowed to make limited changes to their formularies within a plan year.117 Plans generally may

~~Medicare Part D Prescription Drug Benefit~~

~~CMS considers the negotiated price for a Part D vaccine to include the vaccine ingredient cost, a~~
~~dispensing fee (if applicable), sales tax (if applicable), and a vaccine administration fee.128~~
~~CMS policy is that Part D vaccines, including administration costs, are to be bil ed on one claim.~~
~~The policy applies to providers both in- and out-of-network. Unlike Part B vaccines, which are~~
~~bil ed directly to Medicare, Part D claims are paid by the insurance provider; therefore the~~
~~entity/individual administering the Part D vaccine, such as a physician, may not be able to~~
~~directly bil the Part D sponsor for the vaccine and administration. In some instances, patients~~
~~must pay a physician for a vaccination up front, and then submit the bil to their Part D plan.~~
~~CMS has issued guidance to plans regarding alternative bil ing options, such as al owing in-~~
~~network pharmacists to administer vaccinations and to directly bil Part D, or having physicians~~
~~electronical y submit claims to Part D plans.129 In an effort to increase vaccination rates, CMS has~~
~~encouraged Part D sponsors to offer a $0 vaccine tier or to put vaccines on a formulary tier with~~
~~low cost -sharing.130~~
~~Plan-Year Formulary Changes~~
~~Part D plans may alter their formularies from year to year. Plans are also al owed, in limited~~
~~circumstances, to make changes to their formularies within a plan year.131 Plans general y may~~
not change therapeutic categories and classes of drugs within a plan year, except to account for not change therapeutic categories and classes of drugs within a plan year, except to account for
new therapeutic uses or new therapeutic uses or to add newly approved Part D drugs. If Part D plans remove drugs from add newly approved Part D drugs. If Part D plans remove drugs from
their formularies during a plan year (or change cost-sharing or access requirements), they must their formularies during a plan year (or change cost-sharing or access requirements), they must
provide timely notice to CMS, affected enrollees, physicians, pharmacies, and pharmacists.provide timely notice to CMS, affected enrollees, physicians, pharmacies, and pharmacists.
~~Since 2019,~~ Part D sponsors Part D sponsors ~~have been al owed to~~may immediately remove brand-name drugs from a immediately remove brand-name drugs from a
formulary (or change the cost-sharing tier) during a plan year if they replace the brand-name formulary (or change the cost-sharing tier) during a plan year if they replace the brand-name
product with a product with a ~~therapeutical y~~ therapeutically equivalent generic that is placed on the same or lower cost-sharing equivalent generic that is placed on the same or lower cost-sharing
tier and tier and ~~if the generic~~ is subject to the same or less restrictive utilization criteria than the brand-is subject to the same or less restrictive utilization criteria than the brand-
name drug. To qualify for substitution, the new generic must have been released to the market name drug. To qualify for substitution, the new generic must have been released to the market
after the initialafter the initial formulary was submitted.118 ~~formulary was submitted. Plans are not required to give prior notice of the~~
~~formulary change but (1) must general y advise enrollees in plan documents, such as annual~~
~~formularies, that such changes may occur without a specific advance notice and (2) must tel~~
~~affected enrollees about any substitutions that do occur.132~~
Other formulary changes may be made in the following circumstances: Other formulary changes may be made in the following circumstances:
• Plans may immediately Plans may immediately remove drugs remove drugs ~~from their formularies~~ that are deemed that are deemed
unsafe by the FDA or are unsafe by the FDA or are pulled from the market by their manufacturers. Plans pulled from the market by their manufacturers. Plans
do not have to provide prior notice of such actions, but must provide do not have to provide prior notice of such actions, but must provide
retrospective notice to CMS and other affected parties. retrospective notice to CMS and other affected parties.

~~128 Ibid. p.2.~~
~~129 Ibid.~~
~~130 CMS, “Announcement of Calendar Year (CY) 2019 Medicare Advantage Capitation Rates and Medicare Advantage~~
~~and Part D Payment Policies and Final Call Letter,” p. 230, April 2, 2018, at https://www.cms.gov/Medicare/Health-~~
~~Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2019.pdf.~~
~~131 CMS,~~ 114 CMS, Medicare Learning Network, “Medicare Part D Vaccines,” June 2023, at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/Vaccines-Part-D-Factsheet-ICN908764.pdf. 115 CRS Report R46334, Selected Health Provisions in Title III of the CARES Act (P.L. 116-136). 116 CMS, “Contract Year 2023 Program Guidance Related to Inflation Reduction Act Changes to Part D Coverage of Vaccines and Insulin,” September 26, 2022, https://www.cms.gov/files/document/irainsulinvaccinesmemo09262022.pdf According to CMS, the ACIP Vaccine Recommendations and Guidelines also provide recommendations for use in limited populations and circumstances for certain other vaccines that are not on the CDC/ACIP Adult Immunization Schedule for routine immunization. CMS interprets the requirements of P.L. 117-169 as also applying to vaccines provided in such limited populations and circumstances, when used for adults in accordance with ACIP recommendations. 117 CMS, Medicare Prescription Drug Benefit Manual, Chapter 6, “Part D Drugs and Formulary Requirements,” Chapter 6, “Part D Drugs and Formulary Requirements,”
Section 30.3, Rev. January 15, 2016, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/Section 30.3, Rev. January 15, 2016, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/
~~PrescriptionDrugCovContra~~PrescriptionDrugCovContra/Downloads/Part-D-Benefits-Manual-Chapter-6.pdf. /Downloads/Part-D-Benefits-Manual-Chapter-6.pdf.
~~132~~118 CMS, CMS, “Medicare Program: Contract Year 2019 Policy and “Medicare Program: Contract Year 2019 Policy and ~~T echnical~~Technical Changes to Medicare Advantage, Medicare Changes to Medicare Advantage, Medicare
Cost Plan, Medicare Fee-for-Service, Medicare Prescription Drug Benefit Programs, and PACE Program,” 83 Cost Plan, Medicare Fee-for-Service, Medicare Prescription Drug Benefit Programs, and PACE Program,” 83 Federal
Register, April 16, 2018, p. 16604, at https://www.gpo.gov/fdsys/pkg/FR-2018-04-16/pdf/2018-07179.pdf. , April 16, 2018, p. 16604, at https://www.gpo.gov/fdsys/pkg/FR-2018-04-16/pdf/2018-07179.pdf.
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• After March 1 each year, Part D sponsors may make maintenance changes to After March 1 each year, Part D sponsors may make maintenance changes to
their their ~~formulary~~formularies, such as replacing brand name with new generic drugs or , such as replacing brand name with new generic drugs or
modifying formularies modifying formularies ~~as a result of~~due to new information on drug safety or new information on drug safety or
effectiveness.effectiveness.
 • Plans Plans, with CMS approval with CMS approval, may remove drugs from a formulary, move covered may remove drugs from a formulary, move covered
drugs to a less-preferred tier status, or add utilization management requirements drugs to a less-preferred tier status, or add utilization management requirements
in accordance with approved procedures after 30 daysin accordance with approved procedures after 30 days’ advance notice. advance notice.~~133~~119
Transition Policies
CMS established CMS established Part D formulary transition transition ~~standards~~policies to ensure that enrollees who move to a new plan do not to ensure that enrollees who move to a new plan do not
abruptly lose coverage for drugs used in ongoing therapy—for example, in a case where a new abruptly lose coverage for drugs used in ongoing therapy—for example, in a case where a new
plan does not cover a drug a beneficiary has been using. Transition policies also cover cases plan does not cover a drug a beneficiary has been using. Transition policies also cover cases
where enrollees are affected by formulary changes in their current plan from one year to the where enrollees are affected by formulary changes in their current plan from one year to the
next.next.~~134~~120 In such cases, a beneficiary In such cases, a beneficiary ~~can~~may request that request that ~~his or her~~their physician check to see if physician check to see if ~~the~~a
prescription can be switched to a similar drug on the new formulary. If the physician determines prescription can be switched to a similar drug on the new formulary. If the physician determines
that a specific drug is that a specific drug is ~~medical y~~medically necessary, the doctor may request necessary, the doctor may request ~~that the plan make an~~
~~exception to its policy~~a plan exception. .
Plans Plans ~~are required to~~must continue a beneficiary’s previous prescription during the first 90 days of continue a beneficiary’s previous prescription during the first 90 days of ~~the~~
a calendar year. Any calendar year. Any ~~refil~~ refill must be for an approved month’s supply (unless the prescription is must be for an approved month’s supply (unless the prescription is
written for a shorter period) for any drug not on the plan’s formulary.written for a shorter period) for any drug not on the plan’s formulary.~~135~~121 The requirement also The requirement also
applies to drugs that are on a plan’s formulary, but which require prior authorization or step applies to drugs that are on a plan’s formulary, but which require prior authorization or step
therapy. Transition policies also cover situations where enrollees undergo changes in the level of therapy. Transition policies also cover situations where enrollees undergo changes in the level of
care, such as moving from a hospital to homecare, such as moving from a hospital to home care. .
Drug Utilization Management Programs
CMS regulations require that each Part D plan have an appropriate drug utilizationCMS regulations require that each Part D plan have an appropriate drug utilization management management
program that (1) includes incentives to reduce costs when program that (1) includes incentives to reduce costs when ~~medical y~~medically appropriate, and (2) appropriate, and (2)
maintains policies and systems to assist in preventing over-utilization and under-utilization of maintains policies and systems to assist in preventing over-utilization and under-utilization of
prescribed medications.prescribed medications.~~136 Since the Part D program began in 2006, the trend among plans has~~
~~been to impose greater~~122 In general, over the years plans have imposed more stringent cost-sharing and utilization management. cost-sharing and utilization management. ~~In addition, during the past~~
~~several years,~~ Congress and CMS have Congress and CMS have also imposed utilization ~~imposed more stringent~~ requirements on plans in an effort requirements on plans in an effort

~~133 Ibid.~~ to identify possible program fraud and abuse involving certain prescription drugs, particularly opioids. (See “Part D Opioid Overutilization Monitoring.”) 119 Ibid. In most cases, plans may not remove covered Part D drugs from their formularies, or make any change in In most cases, plans may not remove covered Part D drugs from their formularies, or make any change in
preferred or tiered costpreferred or tiered cost -sharing status of a covered Part D drug,-sharing status of a covered Part D drug, ~~between~~ between the beginning of the annual coordinated the beginning of the annual coordinated
election period October 15, and 60 days after the beginning of the contract year. election period October 15, and 60 days after the beginning of the contract year.
~~134~~120 For example, if a plan sponsor alters an announced formulary to account for a new drug For example, if a plan sponsor alters an announced formulary to account for a new drug or therapeutic use. or therapeutic use.
According to CMS,According to CMS, a minimum of a 108-day look-back (consistent with other reviews) is typically needed to document a minimum of a 108-day look-back (consistent with other reviews) is typically needed to document
ongoing drugongoing drug therapy. therapy.
~~135~~ 121 CMS, CMS, “Medicare Program: Contract Year 2019 Policy and “Medicare Program: Contract Year 2019 Policy and ~~T echnical~~Technical Changes to Medicare Advantage, Medicare Changes to Medicare Advantage, Medicare
Cost Plan, Medicare Fee-for-Service, Medicare Prescription Drug Benefit Programs, and PACE Program,” 83 Cost Plan, Medicare Fee-for-Service, Medicare Prescription Drug Benefit Programs, and PACE Program,” 83 Federal
Register, April 16, 2018, p. 16604, at, April 16, 2018, p. 16604, at https://www.gpo.gov/fdsys/pkg/FR-2018-04-16/pdf/2018-07179.pdf. See also 42 https://www.gpo.gov/fdsys/pkg/FR-2018-04-16/pdf/2018-07179.pdf. See also 42
C.F.R.C.F.R. §423.120. §423.120. ~~T he~~The rule changed the transition requirement to an approved month’s supply (from a 30 rule changed the transition requirement to an approved month’s supply (from a 30 -day supply) so -day supply) so
that it will be equivalent to the approved monththat it will be equivalent to the approved month ’s supply measurement in the applicable plan’s annual bid’s supply measurement in the applicable plan’s annual bid to provide to provide
Part D services. Part D services. ~~T he~~The rule also shortened the length of transition prescriptions that are provided to residents of long-term rule also shortened the length of transition prescriptions that are provided to residents of long-term
care facilities to an approved month’s supply. care facilities to an approved month’s supply.
~~136~~122 42 C.F.R. §423.153. 42 C.F.R. §423.153.
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~~to identify possible program fraud and abuse involving certain prescription drugs, particularly~~
~~opioids. (See “Part D Opioid Overutilization Monitoring.”)~~
Tiered Formularies
Plan D plan sponsors may assign formulary drugs to tiers that correspond to different levels of Plan D plan sponsors may assign formulary drugs to tiers that correspond to different levels of
cost sharing. In general, this structured pricing encourages use of generic medications by placing cost sharing. In general, this structured pricing encourages use of generic medications by placing
these medicines on the plan tier with the lowest out-of-pocket costs, and discourages the use of these medicines on the plan tier with the lowest out-of-pocket costs, and discourages the use of
more expensive or less effective drugs by putting them on tiers that require higher out-of-pocket more expensive or less effective drugs by putting them on tiers that require higher out-of-pocket
spending. Plans have some flexibilityspending. Plans have some flexibility in structuring the tiers, so long as the in structuring the tiers, so long as the ~~overal~~ overall plan is at least plan is at least
~~actuarial y~~actuarially equivalent to a standard Part D plan. In equivalent to a standard Part D plan. In ~~2021, the typical five-tier formulary design in~~
~~Part D includes~~2023, a Part D formulary design could include a mix of the following tiers: preferred generics, generics, preferred brands, non-preferred the following tiers: preferred generics, generics, preferred brands, non-preferred
~~drugs, and specialty drugs.137~~
~~Part D plans are permitted to institute a specialty tier~~brands, non-preferred drugs, and two specialty drug tiers.123 Specialty drug tier designation in Part D is based on cost ($830 per month in 2023), not on special handling requirements.124 (For 2024, a drug will qualify for specialty tier placement if it is at least $950 for a month.125) Part D plans may institute two specialty tiers for expensive products (e.g., unique drugs or for expensive products (e.g., unique drugs or
biologics). Beneficiaries cannot appeal cost-sharing amounts for drugs placed on a specialty tierbiologics). Beneficiaries cannot appeal cost-sharing amounts for drugs placed on a specialty tier.
~~Plans typical y~~, except to request that a specialty drug on a higher cost-sharing tier be placed on a lower cost-sharing specialty tier.126 Plans typically charge a percentage of the cost of a drug on the specialty tier (coinsurance), rather charge a percentage of the cost of a drug on the specialty tier (coinsurance), rather
than a flat co-payment. To ensurethan a flat co-payment. To ensure ~~that~~ beneficiaries dependent on specialty drugs are not beneficiaries dependent on specialty drugs are not ~~“unduly~~
~~discouraged”~~unduly discouraged from enrolling in tiered plans, CMS from enrolling in tiered plans, CMS ~~has instituted the following conditions: (1) a~~
~~plan may have only one specialty tier; (2) a plan with a standard deductible may impose~~
~~coinsurance of up to 25% for specialty drugs, while a plan with a reduced or zero deductible may~~
~~impose coinsurance of up to 33%, and (3) only drugs with negotiated prices exceeding a set~~
~~threshold may be placed on a specialty tier ($670 for a month’s supply for 2021).138 Although~~
~~specialty drugs are less than 1% of Part D prescriptions, they are nearly 20% of expenditures.~~
sets the maximum allowable cost sharing for a single specialty tier—or, in the case of a plan with two specialty tiers, the higher cost-sharing specialty tier—at 25% coinsurance if the plan requires a standard deductible and up to 33% cost sharing if no deductible is required, or some percentage in between if a plan offers a reduced (but not zero) deductible. Therefore, according to CMS, for plans that offer two specialty tiers, the cost sharing for the lower cost-sharing, preferred specialty tier must be anything less than that of the higher cost-sharing specialty tier.127 The specialty tier is not necessarily the tier with the highest coinsurance. The specialty tier is not necessarily the tier with the highest coinsurance. ~~Some~~ Part D plans Part D plans
may charge coinsurance charge coinsurance ~~greater than 33~~of up to 50% for drugs on a non-preferred brand name formulary tier% for drugs on a non-preferred brand name formulary tier~~, up~~
~~to the initial coverage limit~~. According to CMS, best practices for developing formularies dictate . According to CMS, best practices for developing formularies dictate
that drugs are placed in a non-preferred tier only when drugs that are that drugs are placed in a non-preferred tier only when drugs that are ~~therapeutical y~~therapeutically similar (i.e., similar (i.e.,
drugs that provide similar treatment outcomes) are in more preferable positions on the drugs that provide similar treatment outcomes) are in more preferable positions on the
formulary.formulary.~~139~~128 CMS reviews plan sponsors’ drug tier placement to ensure their formulary does not CMS reviews plan sponsors’ drug tier placement to ensure their formulary does not
~~substantial y~~substantially discourage enrollment of certain beneficiaries, such as those with discourage enrollment of certain beneficiaries, such as those with ~~potential y~~potentially high ~~high~~
drug costs.drug costs.
~~Under CMS guidance, plan sponsors offering alternative or enhanced plans that use tiered cost~~
~~sharing can offer a non-preferred brand tier or a non-preferred drug tier, but not both. CMS has~~
~~warned Part D sponsors that including a significant number of generic drugs on a tier labeled as a~~
~~brand tier is misleading and could lead to beneficiary confusion. CMS set a maximum threshold~~
~~of 25% generic composition for a non-preferred brand tier starting in 2019.140 CMS reviewed but~~

~~137 Juliette Cubanski and Anthony Damico, “Medicare Part D: A First Look at Prescription Drug Plans in 2021,” Kaiser~~
~~Family Foundation, October 29, 2020, at https://www.kff.org/medicare/issue-brief/medicare-part -d-a-first-look-at-~~
~~medicare-prescription-drug-plans-in-2021/.~~
~~138 CMS, “ Updated Contract Year (CY) 2021 Final Part D Bidding Instructions,” May 22, 2020, at~~
~~https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/~~
~~2021%20mtm%20and%20specialty%20thresholds%20final%20part%20d%20bidding%2005.22.2020_7.pdf . CMS had~~
~~issued a proposed rule that would have allowed plans to offer two specialty drug price tiers rather than one. CMS did~~
~~not finalize the specialty tier portion of the rule, and instead issued special guidance for 2021.~~
~~139 CMS,~~ 123 CMS, “Contract Year (CY) 2023 Final Part D Bidding Instructions,” February 3, 2022, https://www.cms.gov/files/document/2023partdbiddinginstructions.pdf. 124 Ibid. Under 42 C.F.R. §423.104(d)(2)(iv)(D), CMS sets the maximum allowable cost sharing for a single specialty tier, or, in the case of a plan with two specialty tiers, the higher cost-sharing specialty tier, at 25% if the plan requires the standard deductible, 33% cost sharing if no deductible is required, or some percentage in between dependent on a decreased deductible. For plans that offer two specialty tiers, the cost sharing for the lower cost-sharing, preferred specialty tier must be anything less than that of the higher cost-sharing specialty tier. 125 CMS, “Final Contract Year (CY) 2024 Part D Bidding Instructions,” April 4, 2023, https://www.cms.gov/files/document/final-cy-2024-part-d-bidding-instructions.pdf. 126 CMS, Medicare and Medicaid Programs; Contract Year 2022 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicaid Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly,” 86 Federal Register, p. 5931. 127 CMS, “Contract Year (CY) 2023 Final Part D Bidding Instructions,” February 3, 2022. 128 CMS, Medicare Prescription Drug Benefit Manual, Chapter 6, “Part D Drugs and Formulary Requirements,” Chapter 6, “Part D Drugs and Formulary Requirements,”
Section 30.2.7, Rev. January 15, 2016, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/Section 30.2.7, Rev. January 15, 2016, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/
~~PrescriptionDrugCovContra~~PrescriptionDrugCovContra/Downloads/Part-D-Benefits-Manual-Chapter-6.pdf. /Downloads/Part-D-Benefits-Manual-Chapter-6.pdf.
~~140 CMS, “Announcement of Calendar Year (CY) 2019 Medicare Advantage Capitation Rates and Medicare Advantage~~
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~~did not change its policy in 2020, despite concerns from advocacy groups that placing generics on~~
~~non-preferred drug tiers could increase enrollee cost sharing for those generics. CMS noted~~
~~“limited instances when Part D sponsors were not including generic alternatives when available.”~~
~~CMS said it would continue to monitor the issue.141~~
~~Other Drug Utilization Controls~~
Other Drug Utilization Controls Other utilizationOther utilization restrictions include (1) prior authorization, in which a beneficiary, with restrictions include (1) prior authorization, in which a beneficiary, with
assistance of a prescribing physician, must obtain a plan’s approval before it assistance of a prescribing physician, must obtain a plan’s approval before it ~~wil~~ will cover a cover a
particular drug; (2) step therapy, where a beneficiary must first try a generic or less expensive particular drug; (2) step therapy, where a beneficiary must first try a generic or less expensive
drug, or a drug that a plan has deemed to be drug, or a drug that a plan has deemed to be ~~therapeutical y~~therapeutically equivalent to a prescribed drug, rather equivalent to a prescribed drug, rather
than the drug that was than the drug that was ~~original y~~originally prescribed; and (3) quantity limits, where the supply of drugs is prescribed; and (3) quantity limits, where the supply of drugs is
~~initial y limited~~ initially limited to reduce the likelihood of waste (e.g., if a drug was not effective for a to reduce the likelihood of waste (e.g., if a drug was not effective for a
beneficiary or had intolerablebeneficiary or had intolerable side effects). A beneficiary who wants his or her plan to waive a side effects). A beneficiary who wants his or her plan to waive a
utilizationutilization control must provide a physician statement indicating that a prescribed drug and control must provide a physician statement indicating that a prescribed drug and
dosage is dosage is ~~medical y~~medically necessary and providing a rationale as to why restrictions are not appropriate. ~~necessary and providing a rationale as to why restrictions are not appropriate.~~
~~Since 2014, PDPs have been required to apply a daily cost-sharing rate to prescriptions for less~~
~~than a 30-day supply of medication (with some exceptions).142 The daily cost-sharing rate is~~
~~defined as the monthly co-payment under the enrollee’s Part D plan, divided by 30 or 31 and~~
~~rounded to the nearest lower dollar amount. The daily cost-sharing requirement gives~~
~~beneficiaries an incentive to ask physicians for shorter prescriptions when trying a medication for~~
~~the first time because the Part D sponsor wil charge the lower, pro-rated cost sharing when the~~
~~prescription is dispensed. Shorter prescriptions are seen as a means to reduce Part D beneficiary~~
~~costs and drug waste in cases where a prescribed drug is ultimately found not to be effective.143~~
Part D Opioid Overutilization Monitoring
Since 2013, CMS has operated a system to combat inappropriate utilization of opioids in Part D. Since 2013, CMS has operated a system to combat inappropriate utilization of opioids in Part D.
First, CMS has encouraged Part D plans to enhance their First, CMS has encouraged Part D plans to enhance their ~~internal~~ formulary and drug utilization formulary and drug utilization
review programs to provide opioid safety controls at the point of sale, retrospectively review drug review programs to provide opioid safety controls at the point of sale, retrospectively review drug
claims to identify beneficiaries at risk of overutilization,claims to identify beneficiaries at risk of overutilization, and perform case management for and perform case management for
beneficiaries deemed at risk of opioid abuse.beneficiaries deemed at risk of opioid abuse.~~144~~129 Second, CMS Second, CMS ~~has operated~~developed a program-wide a program-wide
~~Overutilization~~ Overutilization Monitoring System (OMS) to verify that Part D sponsors have established Monitoring System (OMS) to verify that Part D sponsors have established
effective and appropriate opioid management programs. Under the OMS, CMS performs effective and appropriate opioid management programs. Under the OMS, CMS performs
retrospective reviews of Part D prescription data to identify enrollees at risk of opioid retrospective reviews of Part D prescription data to identify enrollees at risk of opioid
overutilization. CMS defines at-overutilization. CMS defines at-risk beneficiaries as those using high dosages of opioids (over a ~~risk beneficiaries as those using high dosages of opioids (over a~~

~~and Part D Payment Policies and Final Call Letter,” p. 229, April 2, 2018, at https://www.cms.gov/Medicare/Health-~~
~~Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2019.pdf.~~
~~141 CMS, “Announcement of Calendar Year (CY) 2020 Medicare Advantage Capitation Rates and Medicare Advantage~~
~~and Part D Payment Policies and Final Call Letter,” p. 210-211, April 1, 2019; https://www.cms.gov/Medicare/Health-~~
~~Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2020.pdf.~~
~~142 42 C.F.R. §423.153(b)(4)(i).~~
~~143 CMS, “Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs for Contract Year~~
~~2013 and Other Changes, Final Rule,” 77 Federal Register, April 12, 2012, p. 22126, at http://www.gpo.gov/fdsys/pkg/~~
~~FR-2012-04-12/pdf/2012-8071.pdf.~~
~~144 CMS, “Announcement of Calendar Year (CY) 2013 Medicare Advantage Capitation Rates and Medicare Advantage~~
~~and Part D Payment Policies and Final Call Letter,” April 2, 2012, p. 131, at https://www.cms.gov/Medicare/Health-~~
~~Plans/HealthPlansGenInfo/Downloads/2013-Call-Letter.pdf.~~
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specified period of time) provided by multiplespecified period of time) provided by multiple prescribers or pharmacies.prescribers or pharmacies.~~145 Part D plans are to~~
~~review drug use of beneficiaries identified through the OMS.~~
130 The Comprehensive Addiction and Recovery Act of 2016 (CARA; P.L. 114-198) provided Part D The Comprehensive Addiction and Recovery Act of 2016 (CARA; P.L. 114-198) provided Part D
sponsors with authority to limit the number of pharmacies and prescribers that can be used by sponsors with authority to limit the number of pharmacies and prescribers that can be used by
enrollees identified as at risk of overutilization of frequently abused drugs, beginning in 2019. enrollees identified as at risk of overutilization of frequently abused drugs, beginning in 2019.
This “lock-in” provision is designed to reduce fraud and abuse by making it easier to control This “lock-in” provision is designed to reduce fraud and abuse by making it easier to control
~~enrollee opioid use.146~~
~~Since 2019, Part D plan sponsors have been al owed to limit an at-risk beneficiary’s access to~~
~~frequently abused drugs (initial y defined by CMS as opioids and concurrent use of~~
~~benzodiazepines) by imposing a prescription safety edit at the point of sale, and/or by requiring~~
~~an at-risk enrollee to obtain opioids only from a selected pharmacy(ies) and/or prescriber(s), after~~
~~case management and appropriate notice.147 The~~ enrollee opioid use.131 Starting in 2022, the Substance Use-Disorder Prevention That Promotes Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act; P.L. 115-271) required Part D plan sponsors to implement lock-in programs.132 OMS and lock-in policies do not apply to Part D OMS and lock-in policies do not apply to Part D
beneficiaries who are being treated for active cancer-related pain, receiving beneficiaries who are being treated for active cancer-related pain, receiving ~~pal iative~~ palliative or end-of-or end-of-
life care, or are residents of certain long-term care facilities, including those that dispense life care, or are residents of certain long-term care facilities, including those that dispense
frequently abused drugs through a contract with a frequently abused drugs through a contract with a single pharmacy.133 129 CMS, “Announcement of Calendar Year (CY) 2013 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter,” April 2, 2012, p. 131, at https://www.cms.gov/Medicare/Health-Plans/HealthPlansGenInfo/Downloads/2013-Call-Letter.pdf. 130 For a description of the OMS, see “~~single pharmacy.148~~
~~The 2019 rule149 also seeks to reduce opioid fraud and abuse by barring Part D plans from~~
~~covering prescriptions written by physicians or other health care providers who are on a special~~
~~CMS preclusion list.150 Starting in 2022, the Substance Use-Disorder Prevention That Promotes~~
~~Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act; P.L. 115-271)~~
~~requires Part D plan sponsors to implement lock-in programs.151~~
~~Medication Therapy Management~~
~~Part D plans (with some exceptions) must include a Medication Therapy Management (MTM)~~
~~program, which is a system of coordinated pharmacy care for patients with multiple medical~~
~~conditions who may be seeing a series of practitioners. A MTM program includes medication~~

~~145 For a description of the OMS, see “~~ Announcement of Calendar Year (CY) 2018 Medicare Advantage Capitation Announcement of Calendar Year (CY) 2018 Medicare Advantage Capitation
Rates and Medicare Advantage and Part D Payment Policies and Final CallRates and Medicare Advantage and Part D Payment Policies and Final Call Letter,Letter, and see p. 234 of the CMSand see p. 234 of the CMS 2019 2019
Final Call Letter, at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Final Call Letter, at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/
Announcement2019.pdf. Announcement2019.pdf.
~~146~~131 CMS, CMS, “Medicare Program; Contract Year 2019 Policy and “Medicare Program; Contract Year 2019 Policy and ~~T echnical~~Technical Changes to the Medicare Advantage, Medicare Changes to the Medicare Advantage, Medicare
Cost Plan, Medicare Fee-for-Service, the Medicare Prescription Drug Benefit Programs, and the PACE Program,” 83 Cost Plan, Medicare Fee-for-Service, the Medicare Prescription Drug Benefit Programs, and the PACE Program,” 83
Federal Register,, April 16, 2018, pp. 16442-16480. April 16, 2018, pp. 16442-16480.
~~147 Ibid. An enrollee may ask for a redetermination of a designation as an at -risk beneficiary.~~
~~148 CMS, “ Part D Drug Management Program Policy Guidance,” November 20, 2018~~132 For the latest information, see CMS, “Part D Drug Management Programs,” Rev. 5, April 20, 2023. Available at . Available at
https://www.cms.gov/https://www.cms.gov/~~Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/RxUtilization.~~
~~149 CMS, “Announcement of Calendar Year (CY) 2019 Medicare Advantage Capitation Rates and Medicare Advantage~~
~~and Part D Payment Policies and Final Call Letter,” April 2, 2018, p. 239, at https://www.cms.gov/Medicare/Health-~~
~~Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2019.pdf. T he requirements also applied to the 2020~~
~~plan year.~~
~~150 CMS, “ CY 2020 Medication T herapy Management Program Guidance and Submission Instructions,” April 5, 2019,~~
~~at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Memo-~~
~~Contract -Year-2020-Medication-Therapy-Management-MTM-Program-Submission-v-041019-.pdf. T he preclusion list~~
~~covers prescribers, individuals, and entities that (a) are revoked from Medicare, are under an active reenrollment bar,~~
~~and for whom CMS determines that the underlying conduct that led to the revocation is detrimental to the best interests~~
~~of the Medicare program; or (b) have engaged in behavior for which CMS could have revoked the prescriber,~~
~~individual, or entity to the extent applicable if they had been enrolled in Medicare, and CMS determines that the~~
~~underlying conduct that would have led to the revocation is detrimental to the best interests of t he Medicare program.~~
~~151 CRS Report R45449, The SUPPORT for Patients and Communities Act (P.L.115 -271): Medicare Provisions.~~
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medicare/prescription-drug-coverage/prescriptiondrugcovcontra/rxutilization. 133 CMS, “Part D Drug Management Program Policy Guidance,” November 20, 2018. Available at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/RxUtilization. Congressional Research Service 38 link to page 44 Medicare Part D Prescription Drug Benefit Medication Therapy Management Part D plans (with some exceptions) must include a Medication Therapy Management (MTM) program, which is a system of coordinated pharmacy care for patients with multiple medical conditions who may be seeing a series of practitioners. A MTM program includes medication reviews, patient consultation and education and other services. Each plan’s program must be reviews, patient consultation and education and other services. Each plan’s program must be
reviewed and approved reviewed and approved ~~annual y~~annually by CMS, and is one of several, required elements by CMS, and is one of several, required elements ~~that is~~
considered when CMS evaluates a sponsor’s bid to participate in the Part D programconsidered when CMS evaluates a sponsor’s bid to participate in the Part D program ~~for an~~
~~upcoming contract year~~. .
Part D sponsors must Part D sponsors must ~~automatical y~~automatically enroll beneficiaries in a MTM program if they meet the enroll beneficiaries in a MTM program if they meet the
following criteria: (1) they have multiple chronic diseases, with three being the maximum that following criteria: (1) they have multiple chronic diseases, with three being the maximum that
can be required; (2) they are taking at least two to eight Part D drugs; and (3) they are likely to can be required; (2) they are taking at least two to eight Part D drugs; and (3) they are likely to
have annual covered drug costs that exceed $4,have annual covered drug costs that exceed $4,~~376 in 2021.152~~
~~Part D sponsors also may target beneficiaries with any chronic diseases or with specific chronic~~
~~diseases. If plans target beneficiaries with specific diseases, they must include at least five of the~~
~~diseases CMS has defined as nine core chronic conditions:153~~
~~ Alzheimer’s Disease;~~
~~ Chronic Heart Failure;~~
~~ Diabetes;~~
~~ Dyslipidemia;~~
~~ End-Stage Renal Disease (ESRD);~~
~~ Hypertension;~~
~~ Respiratory Disease (such as asthma or chronic lung disorders);~~
~~ Bone Disease-Arthritis; and~~
~~ Mental Health (such as depression, schizophrenia, or bipolar disorder).~~935 in 2023.134 (The 2024 MTM program annual cost threshold is $5,330.135)
In addition, the SUPPORT Act In addition, the SUPPORT Act ~~adds~~added Part D enrollees identified as at risk for prescription drug Part D enrollees identified as at risk for prescription drug
~~abuse to the list of targeted MTM program enrollees, effective in plan year 2021.154~~
~~CMS guidelines state that, once enrolled, beneficiaries should remain in a MTM program for the~~
~~course of a plan year, even if they no longer meet one or more of the eligibility criteria. The~~
~~MTM program must include a comprehensive review of a beneficiary’s medications, intervention~~
~~with both beneficiaries and prescribers, and quarterly, targeted medication reviews.155 In 2015,~~
~~CMS announced a five-year MTM pilot program, beginning in 2017, to test whether offering Part~~
~~D sponsors additional payment incentives and more regulatory flexibility would lead to improved~~
~~outcomes for MTM beneficiaries.156~~
abuse to the list of targeted MTM program enrollees. The provision took effect in 2022.136 Part D Plans: Payment and Participation
Medicare Part D Medicare Part D ~~participants~~enrollees must obtain coverage through a private insurer, or other entity, that must obtain coverage through a private insurer, or other entity, that
contracts with Medicare (a plan sponsor). As previously described, beneficiaries may select either contracts with Medicare (a plan sponsor). As previously described, beneficiaries may select either

~~152 CMS, “ 2021 Medication T herapy Management Program Information and Submission In structions,” May 22, 2020,~~
~~at https://www.cms.gov/files/document/memo-contract -year-2021-medication-therapy-management-mtm-program-~~
~~submission-v-052220.pdf.~~
~~153 Ibid.~~
~~154 Section 6064 of the SUPPORT Act. CRS Report R45449,~~ ~~The SUPPORT for Patients and Communities Act~~
~~(P.L.115-271): Medicare Provisions~~.
~~155 Ibid.~~
~~156 CMS, “ Part D Enhanced Medication T herapy Management Model,” at https://innovation.cms.gov/initiatives/~~
~~enhancedmtm/.~~
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~~link to page 47~~ ~~Medicare Part D Prescription Drug Benefit~~

~~a stand-alone prescription drug plan or a Medicare Advantage~~a stand-alone PDP or a MA plan that includes prescription drug plan that includes prescription drug
~~coverage along with other Medicare services.157~~coverage.137
PDPs are required to be available PDPs are required to be available region-wide within each of the 34 designated PDP regions. region-wide within each of the 34 designated PDP regions.
MA-PD plans are MA-PD plans are ~~general y~~generally local, operating on a countywide basis; however, region-wide MA- local, operating on a countywide basis; however, region-wide MA-
PD plans are availablePD plans are available in many of the 26 MA regions in the United States. A PDP sponsor may in many of the 26 MA regions in the United States. A PDP sponsor may
offer a PDP in more than one region, including offer a PDP in more than one region, including al all PDP regions; however, the sponsor must PDP regions; however, the sponsor must
submit separate coverage bids for each region it serves.submit separate coverage bids for each region it serves.~~158~~138 Medicare payments to plans are Medicare payments to plans are
determined through a competitive bidding process, and enrollee premiums are tied to plan bids. determined through a competitive bidding process, and enrollee premiums are tied to plan bids.
~~Plans bear some risk for their enrollees’ drug spending.~~ (See (See “Approval of PDP Plans.”)”)
Approval of PDP Plans
Each year, CMS issues Each year, CMS issues ~~a cal letter~~guidance through an annual call letter, and publishes updated program regulations and bidding instructions to sponsors planning to offer PDP and/or MA plans in the to sponsors planning to offer PDP and/or MA plans in the
following year. following year. ~~The 2021 final cal letter was issued in April 2020.159~~ Potential PDP and MA Potential PDP and MA
sponsors sponsors ~~are required to~~must submit bids by the first Monday in June of the year prior to the plan submit bids by the first Monday in June of the year prior to the plan
benefit year. The following information must be included benefit year. The following information must be included ~~as part of~~in the bid: (1) coverage to be the bid: (1) coverage to be
~~provided; (2) actuarial value of qualified prescription drug coverage in the~~ provided; (2) actuarial value of qualified prescription drug coverage in the 134 CMS, “2023 Medication Therapy Management Program Information and Submission Instructions,” April 15, 2022, available at https://www.cms.gov/files/document/memo-contract-year-2021-medication-therapy-management-mtm-program-submission-v-052220.pdf. 135 42 CFR 423.153(d)(2) and CMS, “2024 Medication Therapy Management Program Information and Submission Instructions,” April 23, 2023, available at https://www.cms.gov/files/document/memo-contract-year-2021-medication-therapy-management-mtm-program-submission-v-052220.pdf. 136 §6064 of the SUPPORT Act. CRS Report R45449, The SUPPORT for Patients and Communities Act (P.L.115-271): Medicare Provisions. 137 The Part D sponsors are private entities licensed to offer health insurance under state law. Alternatively, they could meet solvency standards established by CMS for entities not licensed by the state. 138 If two or more plans are not available in a region (one of which is a PDP), Medicare is required to contract with a “fallback” plan to serve beneficiaries in that area. Because of the large number of Part D plans participating in the program, CMS has not needed to solicit bids from fallback contractors. Congressional Research Service 39 Medicare Part D Prescription Drug Benefit region of a beneficiary ~~region of a beneficiary~~
with a national average risk profile; (3) information on the bid, including the basis for the with a national average risk profile; (3) information on the bid, including the basis for the
actuarial value, the portion of the bid attributable to basic coverage and, if applicable, the portion actuarial value, the portion of the bid attributable to basic coverage and, if applicable, the portion
attributable to enhanced coverage, and assumptions regarding the reinsurance subsidy; and (4) attributable to enhanced coverage, and assumptions regarding the reinsurance subsidy; and (4)
service area. The bid also includes costs (including administrative costs and return on service area. The bid also includes costs (including administrative costs and return on
investment/profit) for which the plan is responsible. The bid must exclude costs paid by enrollees, investment/profit) for which the plan is responsible. The bid must exclude costs paid by enrollees,
payments expected to be made by CMS for reinsurance (although plans provide a separate payments expected to be made by CMS for reinsurance (although plans provide a separate
estimate of reinsurance costs), and any other costs for which the sponsor is not estimate of reinsurance costs), and any other costs for which the sponsor is not responsible.139~~responsible. CMS~~
~~reviews the information when negotiating with plan sponsors and in deciding whether to approve~~
~~their program bids.~~
CMS may approve a drug plan only if certain requirements are met. For example, CMS may approve a drug plan only if certain requirements are met. For example, ~~CMS must~~
~~determine that the plan and sponsor~~ the plan must meet requirements relating to actuarial determinations and meet requirements relating to actuarial determinations and
beneficiary protections. The plan cannot be designed in a way (including any formulary or tiered beneficiary protections. The plan cannot be designed in a way (including any formulary or tiered
formulary structure) that would likely discourage enrollment by certain beneficiaries.formulary structure) that would likely discourage enrollment by certain beneficiaries.
If their bids are approved, plan sponsors enter into 12-month contracts with CMS. If their bids are approved, plan sponsors enter into 12-month contracts with CMS. ~~A contract may~~
~~cover more than one Part D plan. Under the terms of a contract, the sponsor agrees to comply~~
~~with Part D requirements and have satisfactory administrative and management arrangements.~~
~~Beginning in 2016, CMS imposed~~CMS imposes a two-year Part D application ban on sponsors that a two-year Part D application ban on sponsors that ~~have been~~
~~approved to offer PDP plans but withdraw their bids after CMS announces the annual LIS~~
~~benchmark amounts.160~~

~~157 T he Part D sponsors are private entities licensed to offer health insurance under state law. Alternatively, they could~~
~~meet solvency standards established by CMS for entities not licensed by the state.~~
~~158 If two or more plans are not available in a region (one of which is a PDP), Medicare is required to contract with a~~
~~“fallback” plan to serve beneficiaries in that area. Because of the large number of Part D plans participating in the~~
~~program, CMS has not needed to solicit bids from fallback contractors.~~
~~159 CMS, “Announcement of Calendar Year (CY) 2021 Medicare Advantage Capitation Rates and Medicare Advantage~~
~~and Part D Payment Policies and Final Call Letter,” April 6, 2020, p.71, at https://www.cms.gov/files/document/2021-~~
~~announcement.pdf.~~
~~160 CMS, “ CMS Finalizes Program Changes for Medicare Advantage and Prescription Drug Benefit Programs for~~
~~Contract Year 2016,” February 6, 2015, at http://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact -sheets/2015-~~
~~Fact -sheets-items/2015-02-06.html.~~
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were approved to offer PDPs for a coming plan year, but withdrew their bids after CMS announced the annual LIS premium benchmark amounts.140 Noninterference Provision
To bolster market competition and limit the federal role, the MMA included a To bolster market competition and limit the federal role, the MMA included a noninterference
provision (SSA §1860D-11(i)), stating that in carrying out the requirements of the Part D (SSA §1860D-11(i)), stating that in carrying out the requirements of the Part D
program, “the Secretary: (1) may not interfere with the negotiations program, “the Secretary: (1) may not interfere with the negotiations ~~betw een~~between drug manufacturers drug manufacturers
and pharmacies and PDP sponsors; and (2) may not require a particular formulary or institute a and pharmacies and PDP sponsors; and (2) may not require a particular formulary or institute a
price structure for the reimbursement of covered part D drugs.”price structure for the reimbursement of covered part D drugs.”~~161~~
~~Some Members of Congress have introduced~~141 In the nearly two decades since the MMA was enacted, Congress has debated proposals to repeal or modify the noninterference proposals to repeal or modify the noninterference
~~provision since the start of the Part D program,~~provision in order to give the HHS Secretary to give the HHS Secretary ~~the~~ authority to authority to
negotiate drug prices. Supporters of secretarial negotiation maintain that by leveraging the negotiate drug prices. Supporters of secretarial negotiation maintain that by leveraging the
combined purchasing power of tens of combined purchasing power of tens of ~~mil ions~~millions of Part D enrollees, the Secretary could secure of Part D enrollees, the Secretary could secure
larger price reductions from larger price reductions from ~~drug manufacturers and pharmacies~~manufacturers than can be obtained by plan than can be obtained by plan
~~sponsors. Opponents note that Part D enrollment is concentrated in a few plan sponsors that~~
~~already have substantial bargaining power.~~ sponsors. The Congressional Budget The Congressional Budget Office (CBO) in analyses of such legislation generally held that~~Office in previous analyses~~
~~of legislation has said~~ the Secretary was not likely to have sufficient negotiating leverage unless the Secretary was not likely to have sufficient negotiating leverage unless
given authority to create a central formulary, set prices administratively, and/or take other actions given authority to create a central formulary, set prices administratively, and/or take other actions
if manufacturers failed to cut prices. if manufacturers failed to cut prices. ~~162~~
~~Plan Availability~~
~~For the 2020 plan year, sponsors offered 948 PDPs and 2,799 MA-PD plans.163 The number of~~
~~PDPs per region in 2020 ranged from a low of 24 to a high of 32 across the 34 Part D regions,~~
~~and beneficiaries in an average county (weighted by population) have 27 MA-PD options to~~
~~choose from.164 The number of PDPs and MA-PD plans has been increasing in recent years, as~~
~~CMS has relaxed some regulations and insurers have expanded MA-PD plan offerings.165~~
~~According to early analyses, in 2021 a total of 996 PDPs are to be offered nationwide. Medicare~~
~~beneficiaries wil have 30 PDPs and 27 MA-PD plans to choose from in their geographic area, on~~
~~average.166~~
~~Availability of Low-Income Plans~~
~~A Part D plan qualifies as a LIS benchmark plan if it offers basic Part D coverage and charges~~
~~premiums that are equal to, or lower than, the average, regional low -income benchmark premium.~~
~~Regional LIS benchmark premiums are recalculated annual y, based on the weighted average of~~
~~al premiums in each of the 34 PDP regions.~~ In 2022, as part of the IRA, Congress amended the noninterference provision to give the HHS Secretary authority to negotiate prices for a set number of high spending Part D drugs each year, with the first negotiated prices taking effect in 2026.142 The CBO scored the drug price negotiation provision as having a cost savings, because the IRA imposes a steep excise tax on manufacturers of Part D drugs that refuse to negotiate.143 139 See CMS, “Instructions For Completing the Prescription Drug Plan Bid Pricing Tool for Contract Year 2023,” April 8, 2022. 140 CMS, “CMS Finalizes Program Changes for Medicare Advantage and Prescription Drug Benefit Programs for Contract Year 2016,” February 6, 2015, at http://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-02-06.html. 141 Social Security Act, §1860D-11(i). 142 CRS In Focus IF11318, Negotiation of Drug Prices in Medicare Part D. 143 CRS Report R47396, Health Care Provisions of the Budget Reconciliation Measure P.L. 117-169. Congressional Research Service 40 link to page 17 Medicare Part D Prescription Drug Benefit Plan Availability According to MedPAC, for 2023, Part D plan sponsors offered 3,539 MA−PDs and 1,254 MA–PDs that are special needs plans aimed at specific populations, an increase of 5% and 11%, respectively, from the previous year. In 2023, plan sponsors offered 804 PDPs, 5% above 2022.144 Availability of Low-Income Plans A Part D plan qualifies as a LIS benchmark plan if it offers basic Part D coverage and charges premiums that are equal to, or lower than, the average, regional low-income benchmark premium. Regional LIS benchmark premiums are recalculated annually, based on the weighted average of all premiums in each of the 34 PDP regions. LIS beneficiaries are eligible for a full or reduced premium, up to the benchmark amount.145 The formula for determining the benchmark is based The formula for determining the benchmark is based
on premiums for basic prescription drug coverage, or the actuarial value of basic prescription on premiums for basic prescription drug coverage, or the actuarial value of basic prescription
drug coverage for plans that offer enhanced coverage. For MA-PD plans, the formula uses the drug coverage for plans that offer enhanced coverage. For MA-PD plans, the formula uses the
portion of the premium attributable to basic portion of the premium attributable to basic prescription drug benefits. In 2023, there are 191 benchmark plans available, down 4% from 2022. All regions have at least three benchmark Part D plans available.146 LIS ~~prescription drug benefits.~~

~~161 Social Security Act, §1860D-11(i).~~
~~162 CRS In Focus IF11318, Negotiation of Drug Prices in Medicare Part D.~~
~~163 MedPAC, Report to the Congress: Medicare Payment Policy, March 13, 2020, p. 419, at http://medpac.gov/docs/~~
~~default-source/reports/mar20_medpac_ch14_sec.pdf?sfvrsn=0.~~
~~164 Ibid.~~
~~165 Ibid.~~
~~166 Juliette Cubanski and Anthony Damico, “Medicare Part D: A First Look at Prescription Drug Plans in 2021,” Kaiser~~
~~Family Foundation, October 29, 2020, at https://www.kff.org/medicare/issue-brief/medicare-part -d-a-first-look-at-~~
~~medicare-prescription-drug-plans-in-2021/.~~
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~~link to page 18 link to page 20 link to page 19 link to page 67 link to page 67~~ ~~Medicare Part D Prescription Drug Benefit~~

~~In 2020, there were 244 LIS benchmark PDPs—an increase of 13% from 2019.167 LIS~~
beneficiaries enrolled in a plan that loses its benchmark status for a coming plan year either are beneficiaries enrolled in a plan that loses its benchmark status for a coming plan year either are
enrolled enrolled ~~automatical y~~automatically in a new plan by CMS or must select a new plan to avoid paying in a new plan by CMS or must select a new plan to avoid paying
premiums and other cost-sharing requirements. (Seepremiums and other cost-sharing requirements. (See “LIS Enrollment.”) ~~“LIS Enrollment.”) As is the case for non-~~
~~LIS enrollees, enrollment for LIS enrollees has become concentrated over time. In 2020, 90% of~~
~~LIS beneficiaries were in plans offered by five sponsors: CVS Health, UnitedHealth Group,~~
~~Humana, Wel Care, and Cigna (including its subsidiary Express Scripts).168~~
Plan Payments
Medicare provides a subsidy for each non-LIS Medicare enrollee in a Part D plan that is equal to Medicare provides a subsidy for each non-LIS Medicare enrollee in a Part D plan that is equal to
74.5% of average, standard coverage. The average subsidy takes two forms: 74.5% of average, standard coverage. The average subsidy takes two forms: direct subsidy
payments and and reinsurance payments. Medicare also establishes . Medicare also establishes risk corridors to limit a plan’s to limit a plan’s
~~overal~~ overall losses or profits. In addition, Medicare pays most of the cost sharing and premiums for losses or profits. In addition, Medicare pays most of the cost sharing and premiums for
LIS beneficiaries enrolled in PDP or MA-PD plans.LIS beneficiaries enrolled in PDP or MA-PD plans.
Direct Subsidies
Medicare makes monthly prospective payments (direct subsidies) to plans for each Part D Medicare makes monthly prospective payments (direct subsidies) to plans for each Part D
enrollee. The perenrollee. The per -enrollee subsidy is based on the nationwide average of plan bids for providing enrollee subsidy is based on the nationwide average of plan bids for providing
basic drug coverage,basic drug coverage,~~169~~147 weighted by the plans’ shares of total enrollment. (The national average 144 MedPAC, Report to the Congress: Medicare Payment Policy, March 15, 2023, p. 385 at https://www.medpac.gov/document/march-2023-report-to-the-congress-medicare-payment-policy/. 145 CMS, Medicare Part D Prescription Drug Manual, Chapter 13, “Premium and Cost-Sharing Subsidies for Low-Income Individuals,” Section 50.2.1, Rev. October 1, 2018, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Chapter-13-Premium-and-Cost-Sharing-Subsidies-for-Low-Income-Individuals-v09-14-2018.pdf. The premium subsidy is equal to the lesser of the plan’s premium for basic prescription drug coverage or the regional low-income premium subsidy amount as calculated. The regional low-income premium subsidy amount is the greater of the PDP region’s low-income benchmark premium amount or the lowest monthly beneficiary premium for a PDP that offers basic prescription drug coverage in the PDP region. 146 Ibid. 147 The calculation of the national average monthly bid amount does not include bids submitted by Medical Savings Account (MSA) plans, MA private fee-for-service plans, specialized MA plans for special needs populations (SNP), Program of All-Inclusive Care for the Elderly (PACE) plans, or plans established through reasonable cost contracts. Congressional Research Service 41 link to page 18 link to page 19 Medicare Part D Prescription Drug Benefit monthly bid is $34.71 for plan year 2023.)148 ~~weighted by the plans’ shares of total enrollment. (The national average~~
~~monthly bid is $43.07 for plan year 2021.)170~~ A plan’s total subsidy amount across A plan’s total subsidy amount across al all plan plan
enrollees is risk-adjusted to account for the health status of the beneficiaries expected to enroll; enrollees is risk-adjusted to account for the health status of the beneficiaries expected to enroll;
plans with sicker enrollees receive a higher subsidy based on Medicare data on the health history plans with sicker enrollees receive a higher subsidy based on Medicare data on the health history
of those enrollees. The subsidy is further adjusted to cover expected, additional costs associated of those enrollees. The subsidy is further adjusted to cover expected, additional costs associated
with LIS enrollees in that plan. Lastly, the payment is reduced by the base beneficiary premium with LIS enrollees in that plan. Lastly, the payment is reduced by the base beneficiary premium
for the plan times the number of enrollees.for the plan times the number of enrollees. ~~(See “Premiums.”)~~
~~Reinsurance Subsidies~~
~~As previously noted, in a standard drug plan,~~ Reinsurance Subsidies Medicare subsidizes 80% of each plan’s costs for Medicare subsidizes 80% of each plan’s costs for
catastrophic coverage—the reinsurance subsidy. catastrophic coverage—the reinsurance subsidy. ~~Plan~~For 2023, plan sponsors are liable for 15% of costs and sponsors are liable for 15% of costs and
enrollees have maximum 5% coinsurance. (Seeenrollees have maximum 5% coinsurance. (See “Part D Benefit Structure.”.”) Prospective ) Prospective
reinsurance payments to plans are made on a monthly basis during the year, reinsurance payments to plans are made on a monthly basis during the year, ~~based on either~~
~~estimated or incurred costs,~~ with final reconciliation made after the close of the year when plans with final reconciliation made after the close of the year when plans
have data on their actual costs. Medicare subsidies for reinsurance are now the largest component have data on their actual costs. Medicare subsidies for reinsurance are now the largest component
~~of Part D and also are the fastest-growing portion of the program. (See “Historical Program~~
~~Spending.”)~~

~~167 MedPAC, Report to the Congress: Medicare Payment Policy, March 13, 2020, p. 422, at http://medpac.gov/docs/~~
~~default-source/reports/mar20_medpac_ch14_sec.pdf?sfvrsn=0.~~
~~168 Ibid, p. 423.~~
~~169 T he calculation of the national average monthly bid amount does not include bids submitted by Medical Savings~~
~~Account (MSA) plans, MA private fee-for-service plans, specialized MA plans for special needs populations (SNP),~~
~~Program of All-Inclusive Care for the Elderly (PACE) plans, or plans established through reasonable cost contracts.~~
~~170 CMS, “Annual Release of Part D National Average Bid Amount and other Part C & D Bid Related Information ,”~~
~~July 29, 2020, at https://www.cms.gov/files/document/july-29-2020-parts-c-d-announcement.pdf.~~
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of Part D and also are the fastest-growing portion of the program. As explained in “Standard Prescription Drug Coverage,” beginning in 2025, the IRA reduces to 20% from 80% the federal reinsurance subsidy to Part D sponsors for catastrophic coverage for applicable drugs (brand-name, biologic, and biosimilar drugs) and to 40% from 80% for non-applicable drugs (generics).149
Beneficiary Cost Sharing/Direct and Indirect Remuneration
Beneficiary cost sharing for Part D drugs dispensed by network pharmacies is based on each Beneficiary cost sharing for Part D drugs dispensed by network pharmacies is based on each
sponsor’s negotiated price for a drug.sponsor’s negotiated price for a drug.~~171~~150 Negotiated prices, as Negotiated prices, as ~~currently~~ defined by CMSdefined by CMS for 2023, are the , are the
total amount network pharmacies receive from Part D plans for dispensing a covered drug, total amount network pharmacies receive from Part D plans for dispensing a covered drug,
inclusive of inclusive of al all pharmacy price concessions except those that cannot reasonably be determined at pharmacy price concessions except those that cannot reasonably be determined at
the point of sale.the point of sale.~~172 Negotiated prices include pharmacy dispensing fees~~151 Starting in 2024, CMS will define negotiated prices as the lowest possible price paid by a plan to a pharmacy at the point of sale. Negotiated prices must ~~. Negotiated prices must~~
not be rebated back to a plan sponsor in full or in part.not be rebated back to a plan sponsor in full or in part.~~173~~
152 When a beneficiary When a beneficiary ~~fil s~~fills a prescription at a network pharmacy, the plan sponsor compiles a a prescription at a network pharmacy, the plan sponsor compiles a
summary record summary record ~~cal ed~~called a Prescription Drug Event (PDE). The PDE includes a range of a Prescription Drug Event (PDE). The PDE includes a range of
information, such as the amount paid to the pharmacy for the drug, quantity dispensed, out-of-information, such as the amount paid to the pharmacy for the drug, quantity dispensed, out-of-
pocket spending by the beneficiary, and coverage by qualified third parties, such as other insurers. pocket spending by the beneficiary, and coverage by qualified third parties, such as other insurers.
~~CMS and plan sponsors use PDA data to track out-of-pocket and total drug spending (plan plus~~
~~beneficiary spending) as enrollees move through stages of the Part D benefit.174~~
~~Prescription drug concessions that are not passed on to enrollees at the point of sale are not~~
~~included in PDE records but instead are reported to CMS as direct and indirect remuneration~~
~~(DIR). DIR includes discounts, chargebacks or manufacturer rebates, cash discounts, free goods~~
~~contingent on a purchase agreement, up-front payments, coupons, goods in kind, free or reduced-~~
~~price services, grants, or other price concessions or similar benefits from manufacturers,~~
~~pharmacies, or similar entities.175 Plans must submit detailed DIR reports to CMS within six~~
~~months after the close of a plan year.176~~
~~As noted, during the course of each plan year, CMS makes monthly prospective payments to Part~~
~~D sponsors based on estimated costs in their annual plan bids. After the close of each plan year,~~
~~CMS uses PDE and DIR data along with other information during the annual reconciliation~~
~~process, to determine whether sponsors have been overpaid or whether Medicare owes them~~
~~money. (See “Reconciliation.”)~~
~~Risk Corridor Payments~~
~~The MMA also established risk corridors for Part D plans. Under the risk corridors, Medicare~~
~~limits plan sponsors’ potential losses, or gains, by financing some higher-than-expected costs, or~~

~~171 As defined at 42 C.F.R. §423.100. Enrollees can be charged the usual and customary price (list price) f or~~ 148 CMS, “Annual Release of Part D National Average Bid Amount and other Part C & D Bid Information,” July 29, 2022, at https://www.cms.gov/files/document/july-29-2022-parts-c-d-announcement-pdf.pdf. 149 CRS Report R47396, Health Care Provisions of the Budget Reconciliation Measure P.L. 117-169. 150 As defined at 42 C.F.R. §423.100. Enrollees can be charged the usual and customary price (list price) for a drug, a drug,
rather than the negotiated price, when filling a prescription at an outrather than the negotiated price, when filling a prescription at an out -of-network pharmacy. -of-network pharmacy.
~~172~~151 42 C.F.R. §423.100. 42 C.F.R. §423.100.
~~173~~152 By law, By law, Part D sponsors must provide beneficiaries with access to negotiated prices for covered drugsPart D sponsors must provide beneficiaries with access to negotiated prices for covered drugs at the point of at the point of
sale thatsale that “ “take into account” any rebates, discounts, or other direct and indirect price concessions obtained bytake into account” any rebates, discounts, or other direct and indirect price concessions obtained by the plans. the plans.
According to CMS,According to CMS, the statutory language givesthe statutory language gives plan sponsors latitude to decideplan sponsors latitude to decide what price concessions to includewhat price concessions to include in in
the negotiated price. Plan sponsors may instead choose to pass price concessions through to beneficiaries outsidethe negotiated price. Plan sponsors may instead choose to pass price concessions through to beneficiaries outside of of
negotiated prices, suchnegotiated prices, such as in the form of lower monthly plan premiums. However, all aggregateas in the form of lower monthly plan premiums. However, all aggregate price concessions that price concessions that
plan sponsors obtain for Part D covered drugs—whetherplan sponsors obtain for Part D covered drugs—whether ~~included~~ included in the negotiated price at the point of sale or passed in the negotiated price at the point of sale or passed
on to enrollees outside the negotiated price—must be reported to CMSon to enrollees outside the negotiated price—must be reported to CMS for usefor use in annual plan payment and administration. See 42 C.F.R. §423.100. Congressional Research Service 42 link to page 49 Medicare Part D Prescription Drug Benefit CMS and plan sponsors use PDE data to track out-of-pocket and total drug spending (plan plus beneficiary spending) as enrollees move through stages of the Part D benefit.153 Prescription drug price concessions that are not passed on to enrollees at the point of sale are not included in PDE records but instead are reported to CMS as direct and indirect remuneration (DIR). DIR includes such things as discounts, manufacturer rebates, free or reduced-price services, grants, or other benefits from manufacturers, pharmacies, or similar entities.154 Plans must submit detailed DIR reports to CMS within six months after the close of a plan year. During each plan year, CMS makes monthly prospective payments to Part D sponsors based on estimated costs in their annual plan bids. After the close of each plan year, CMS uses PDE and DIR data along with other information during the reconciliation process, to determine whether sponsors have been overpaid or whether Medicare owes them money. (See “Reconciliation.”) Risk Corridor Payments The MMA established risk corridors for Part D plans. Under the risk corridors, Medicare limits plan sponsors’ potential losses, or gains, by financing some higher-than-expected costs, or recouping some excessive profits, relative to the amount the plan originally bid to offer Part D. Risk corridors are based on a plan’s allowable costs (spending) relative to a percentage of its target amount (revenues), as defined below: • Allowable ~~in annual plan payment and~~
~~administration. See 42 C.F.R. §423.100.~~
~~174 For more CMS information on PDE data see https://www.cms.gov/Medicare/Prescription-Drug-Coverage/~~
~~PrescriptionDrugCovGenIn/PartDData.html.~~
~~175 DIR is defined at 42 C.F.R. §423.308, under “Actually Paid.”~~
~~176 On November 20, 2020, HHS issued a final rule to bar most drug rebates, effective in plan year 2022 . If the final~~
~~rule takes effect, it is forecast to reduce cost sharing for some Part D enrollees who are sicker or are taking more~~
~~expensive brand-name drugs, but to increase plan premiums for all enrollees, and possibly increase costs to the~~
~~Medicare program. See Appe ndix B.~~
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~~Medicare Part D Prescription Drug Benefit~~

~~recouping some excessive profits, relative to the amount the plan original y bid to offer Part D.~~
~~Risk corridors are based on a plan’s al owable costs (spending) relative to a percentage of its~~
~~target amount (revenues), as defined below:~~
~~ Allowable~~ costs are defined as costs (excluding administrative costs, but costs are defined as costs (excluding administrative costs, but
including costs directly related to drug dispensing) incurred by a plan sponsor or including costs directly related to drug dispensing) incurred by a plan sponsor or
organization that are organization that are ~~actual y~~actually paid (net of discounts, chargebacks, and average paid (net of discounts, chargebacks, and average
percentage rebates from drug manufacturers) by the sponsor or organization. percentage rebates from drug manufacturers) by the sponsor or organization.
Plans may not include costs for benefits beyond the Part D basic benefit amount. Plans may not include costs for benefits beyond the Part D basic benefit amount.
The costs are reduced by the sum of reinsurance payments and low-income The costs are reduced by the sum of reinsurance payments and low-income
subsidy payments.subsidy payments.~~177~~
155 • The target amount is defined as total payments to a plan (including amounts paid The target amount is defined as total payments to a plan (including amounts paid
by both Medicare and enrollees) based on a plan’s standardized by both Medicare and enrollees) based on a plan’s standardized ~~bid178~~bid for for
offering the Part D drug benefit,offering the Part D drug benefit,156 as risk adjusted. The target amount does not as risk adjusted. The target amount does not
include administrative expenses assumed in the plan’s standardized bid.include administrative expenses assumed in the plan’s standardized bid.~~179~~157
At the end of each year, CMS compares a Part D plan’s At the end of each year, CMS compares a Part D plan’s ~~al owable~~allowable costs to its target amount and costs to its target amount and
shares in any gains or losses within a predetermined range, or corridor. For shares in any gains or losses within a predetermined range, or corridor. For ~~plan year 2021~~2023, a plan , a plan
that has higher-than-expected costs must cover that has higher-than-expected costs must cover al all benefit spending up to 105% of its benefit spending up to 105% of its
standardized bid. A plan with costs above 105% and up to 110% of its bid must cover 50% of the standardized bid. A plan with costs above 105% and up to 110% of its bid must cover 50% of the
costs within this range and CMS costs within this range and CMS ~~wil~~ will pay the other 50%. A plan with costs above 110% of the bid pay the other 50%. A plan with costs above 110% of the bid
must pay 20% of this additional amount, with CMS covering the other 80%.must pay 20% of this additional amount, with CMS covering the other 80%. Likewise, a plan that Likewise, a plan that
spends less than its standardized bid may keep spends less than its standardized bid may keep al all savings between 100% and 95% of the bid. A savings between 100% and 95% of the bid. A
plan that has spending below 95% to 90% of its bid may keep 50% of the savings within this plan that has spending below 95% to 90% of its bid may keep 50% of the savings within this
range, while rebating 50% to CMS. A plan with savings below 90% of the bid may keep 20% of range, while rebating 50% to CMS. A plan with savings below 90% of the bid may keep 20% of
the savings within this range and must rebate 80% to CMS. the savings within this range and must rebate 80% to CMS. ~~As CMS has gained more experience~~
~~with Part D, the risk corridors have widened, increasing the share of insurance risk borne by the~~
~~plans. Since 2012, CMS has had the authority under the MMA to either leave the corridors~~
~~unchanged or to widen them. CMS has moved to keep the corridors at 2011 levels through the~~
~~2021 program year.180 CMS does not have the authority to narrow the risk corridors.~~

~~177 Social Security Act §1860D-15(e)(1)(B).~~
~~178 T he plans’ standardized bid is~~ CMS has the 153 For more CMS information on PDE data see https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/PartDData.html. 154 DIR is defined at 42 C.F.R. §423.308, under “Actually Paid.” 155 Social Security Act §1860D-15(e)(1)(B). 156 The plans’ standardized bid is their estimated cost of providing the standard Part D drugtheir estimated cost of providing the standard Part D drug benefit. benefit. ~~T his bid is used~~ This bid is used in in
the calculation to determine plan payments. the calculation to determine plan payments.
~~179~~157 Social Social Security Act §1860D-15(e)(3)(B). Congressional Research Service 43 link to page 49 Medicare Part D Prescription Drug Benefit authority to leave the risk corridors unchanged or to widen them. CMS has elected to keep the corridors at 2011 levels through the 2024 program year.158 CMS does not have authority to narrow the risk corridors. ~~Security Act §1860D-15(e)(3)(B).~~
~~180 CMS, “ Advance Notice of Methodological Changes for Calendar Year (CY) 20 21 for Medicare Advantage (MA)~~
~~Capitation Rates, Part C and Part D Payment Policies and 2015 Call Letter ,” February 5, 2020, p. 42, at~~
~~https://www.cms.gov/files/document/2021-advance-notice-part-ii.pdf.~~
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~~link to page 52~~ ~~Medicare Part D Prescription Drug Benefit~~

Table 7. Plan Liability Under Part D Risk Corridor Provisions
Risk Corridor
Plan Liability for Costs Above and Below Target
2006-2007

Costs below 95% of target Costs below 95% of target
80% refund 80% refund
Costs between 95% and 97.5% of target Costs between 95% and 97.5% of target
75% refund 75% refund
Costs between 97.5% and 102.5% of target Costs between 97.5% and 102.5% of target
~~Ful~~ Full risk risk
Costs between 102.5% and 105% of target Costs between 102.5% and 105% of target
Risk for 25% of amount Risk for 25% of amount
Costs over 105% of target Costs over 105% of target
Risk for 20% of amount Risk for 20% of amount
2008-2021

Costs below 90% of target Costs below 90% of target
80% refund 80% refund
Costs between 90% and 95% of target Costs between 90% and 95% of target
50% refund 50% refund
Costs between 95% and 105% of target Costs between 95% and 105% of target
~~Ful~~ Full risk risk
Costs between 105% and 110% of target Costs between 105% and 110% of target
Risk for 50% of amount Risk for 50% of amount
Costs over 110% of target Costs over 110% of target
Risk for 20% of amount Risk for 20% of amount
Source: CMS, “: CMS, “~~2021~~2023 Initial Initial ~~Cal~~ Call Letter.” Letter.”
Reconciliation
Following the close of a calendar year, CMS makes retroactive adjustments to Following the close of a calendar year, CMS makes retroactive adjustments to ~~the~~sponsors’ direct direct subsidy payments~~subsidy~~
~~payments made to plans to reflect actual plan experience~~. The direct subsidy payments are . The direct subsidy payments are
adjusted based on updated data about actual beneficiary health status and enrollment. adjusted based on updated data about actual beneficiary health status and enrollment.
~~Additional y,~~ Additionally, prospective payments for reinsurance and low-income subsidy payments are prospective payments for reinsurance and low-income subsidy payments are
compared to actual incurred costs, net of any DIR (including discounts, chargebacks, or rebates compared to actual incurred costs, net of any DIR (including discounts, chargebacks, or rebates
from drug manufacturers), and other related data, and from drug manufacturers), and other related data, and ~~appropriate~~ adjustments are made to the adjustments are made to the
plan payments. plan payments. ~~Final y~~Finally, any necessary adjustments are made to reflect risk sharing under the risk , any necessary adjustments are made to reflect risk sharing under the risk
~~corridor provisions. In general, Part D sponsors have tended to overestimate their costs for~~
~~operating Part D plans in the aggregate. For example, Part D plans in most years made net risk~~
~~corridor payments to CMS. (Se~~ecorridor provisions. (See Table 8.)
Table 8. Medicare Part D Risk Corridor Payments
(in (in ~~bil ions of dol ars~~billions of dollars) )
Net Risk-Sharing
Year
Payments
~~2006~~
~~-$1.6~~
~~2007~~2013
- 0. - 0.5
~~2008~~7 2014
- 0. - 0.2
~~2009~~
~~- 0.7~~
~~2010~~
~~- 0.1~~
~~2011~~
~~- 0.9~~
~~2012~~
~~- 1.1~~
~~2013~~
~~- 0.7~~
~~2014~~
~~- 0.1~~
~~Congressional Research Service~~

471 2015 - 1.1 2016 - 1.1 2017 -0.5 158 CMS, “Advance Notice of Methodological Changes for Calendar Year (CY) 2024 for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies,” February 1, 2023, p. 91, https://www.cms.gov/medicare/health-plans/medicareadvtgspecratestats/announcements-and-documents/2024-advance-notice. Congressional Research Service 44

Medicare Part D Prescription Drug Benefit

Net Risk-Sharing
Year
Payments
~~2015~~
~~- 1.1~~
~~2016~~
~~- 1.1~~
~~2017~~
~~-0.5~~
~~2018~~
~~0.0~~
~~2019~~
~~0.2~~
~~2020~~
~~0.9~~
~~Source:~~ ~~2020 Medicare Trustees Report, Table IV.B10, and 2016~~2018 0.0 2019 0.5 2020 1.5 2021 1.2 2022 1.1 2023 2.7 Source: 2023 Medicare Trustees Report, Table IV.B10. Medicare Trustees Report, Table IV.B10.
Notes: Positive amounts representPositive amounts represent net payments from CMS to Part D insurers,net payments from CMS to Part D insurers, and negative amounts represent and negative amounts represent
net payments from the plans to CMS. The amounts may include the delayed settlementnet payments from the plans to CMS. The amounts may include the delayed settlement of riskof risk sharing from prior years. Figure for 2023 is an estimate. Reduction of Part D Plan Payments Under Sequestration Under the Budget Control Act of 2011 (BCA; P.L. 112-25), most Medicare benefit-related payments have a 2% sequestration reduction.159 The BCA mandatory spending sequester is scheduled to continue each year through FY2031.~~sharing from prior~~
~~years. Figures for 2006 and 2007 include reimbursement of certain state costs under the Part D transition~~
~~demonstration program. Figures for 2019 and 2020 are estimates; other years are actual data.~~
~~According to CMS, data on individual plans continue to show considerable variation in terms of~~
~~risk sharing, with some plans making significant risk corridor payments to CMS and others~~
~~requiring government payments.181 In the past, MEDPac has raised questions about whether Part~~
~~D plans adequately assess risk in their annual plan bids but has suggested that keeping Part D risk~~
~~corridors in place, at least temporarily, would help to limit excess plan profits.182~~
~~Reduction of Part D Plan Payments Under Sequestration~~
~~Due to provisions in the Budget Control Act of 2011 (BCA; P.L. 112-25), most Medicare benefit~~
~~related payments are to be reduced through sequestration by 2%.183 (The CARES Act suspended~~
~~these reductions from May 2020 through December 2020.)~~ Under Part D, Medicare payments to Under Part D, Medicare payments to
plans for plans for ~~the~~ direct subsidies and retiree drug subsidies are direct subsidies and retiree drug subsidies are ~~to be~~ reduced by this amount. reduced by this amount.
Payments for reinsurance, risk-sharing, and the LIS are exempt from these reductions. Part D Payments for reinsurance, risk-sharing, and the LIS are exempt from these reductions. Part D
plans are not permitted to increaseplans are not permitted to increase ~~beneficiary~~ premiums or cost sharing or to reduce benefits to premiums or cost sharing or to reduce benefits to
~~make up for their lower payments under sequestration.184 The sequestration of Medicare benefit~~
~~spending is scheduled to continue through FY2030.~~
~~Pharmacy Access and Payment~~
~~Part D sponsors are required to establish a pharmacy network sufficient to ensure access to~~
~~covered Part D drugs for al enrollees. Sponsors must demonstrate that they provide (1)~~

~~181 CMS, “ Advance Notice of Methodological Changes for Calendar Year (CY) 201 8 for Medicare Advantage (MA)~~
~~Capitation Rates, Part C and Part D Payment Policies and 2015 Call Letter ,” February 1, 2017, p. 39, at~~
~~https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents-Items/~~
~~2018Advance.html.~~
~~182 MedPAC, Report to the Congress: Medicare and the Health Care Delivery System , June 2016, p. 165, at~~
~~http://www.medpac.gov/docs/default -source/reports/june-2016-report -to-the-congress-medicare-and-the-health-care-~~
~~delivery-system.pdf?sfvrsn=0.~~
~~183 For additional information on sequestration and Medicare, see CRS Report R45106,~~ ~~Medicare and Budget~~
~~Sequestration~~.
~~184 CMS~~ make up for their lower payments.160 Expected Shifts in Part D Sponsor Reimbursement Due to the IRA The 2022 IRA requires changes to the Part D standard benefit that are projected to result in large shifts in subsidy payments to Part D sponsors. For example, effective in 2025, the IRA reduces reinsurance payments to Part D plans; caps enrollee out-of-pocket spending at $2,000; and reconfigures the manufacturer discount program to, among other things, apply to drugs purchased by LIS enrollees. The IRA also imposes mandatory price negotiation for certain Part D drugs, as well as mandatory rebates for drugs with price increases above consumer inflation. The 2023 Medicare Trustees Report projects that, in part due to the IRA, Part D reinsurance spending will decline from $1,153 per enrollee in 2024 to $628 per enrollee by 2032. At the same time, the direct subsidy will rise from a forecast $383 per enrollee in 2024 to $1,618 in 2032. Medicare per-capita LIS subsidies will decline from $2,588 in 2024 to $1,434 in 2032. The Medicare Trustees also project that Medicare will make larger risk-sharing payments to plans under the Part D risk corridors through 2032.161 Pharmacy Access and Payment Part D sponsors are required to establish pharmacy networks sufficient to ensure access to covered Part D drugs for all enrollees. Sponsors must provide (1) convenient access to retail 159 For additional information on sequestration and Medicare, see CRS Report R45106, Medicare and Budget Sequestration. 160 CMS Memorandum, “Additional Information Regarding the Mandatory Payment Reductions in the Medicare Memorandum, “Additional Information Regarding the Mandatory Payment Reductions in the Medicare
Advantage, Part D, and Other Programs,” May 1, 2013, at https://www.cms.gov/Medicare/Medicare-Advantage/Plan-Advantage, Part D, and Other Programs,” May 1, 2013, at https://www.cms.gov/Medicare/Medicare-Advantage/Plan-
Payment/Downloads/PaymentReductions.pdf. Payment/Downloads/PaymentReductions.pdf.
161 2023 Medicare Trustees Report, pp. 148-152. Congressional Research Service Congressional Research Service

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Medicare Part D Prescription Drug Benefit

~~convenient access to retail pharmacies for al enrollees~~pharmacies, (2) adequate access to home infusion , (2) adequate access to home infusion
~~pharmacies for al enrollees~~pharmacies, (3) convenient access to long-term care (LTC) pharmacies for , (3) convenient access to long-term care (LTC) pharmacies for
residents of LTC facilities, and (4) access to Indian Health Service, Tribes, or Urban Indian residents of LTC facilities, and (4) access to Indian Health Service, Tribes, or Urban Indian
Programs pharmacies operating in Programs pharmacies operating in ~~the~~a sponsor’s service area. sponsor’s service area.
Any Willing Pharmacy
Part D sponsors Part D sponsors ~~are required to~~must permit any pharmacy that is permit any pharmacy that is ~~wil ing~~willing to accept the sponsor’s to accept the sponsor’s
standard contracting terms and conditions to participate in the plan’s network, including mail-standard contracting terms and conditions to participate in the plan’s network, including mail-
order pharmacies.order pharmacies.~~185~~162 A sponsor’s standard terms and conditions, particularly reimbursement A sponsor’s standard terms and conditions, particularly reimbursement
terms, may vary to accommodate geographic areas or types of pharmacies, so long as terms, may vary to accommodate geographic areas or types of pharmacies, so long as al all similarly similarly
situated pharmacies are offered the same standard terms and conditions. situated pharmacies are offered the same standard terms and conditions. ~~A Part D sponsor may~~
~~not require a network pharmacy to accept insurance risk as a condition of participation in its~~
~~pharmacy network.~~
~~Since 2019, Part D plans have been~~Part D plans are required to (1) make standard pharmacy contract terms and required to (1) make standard pharmacy contract terms and
conditions availableconditions available by September 15 of each year for contracts effective on January 1 of the by September 15 of each year for contracts effective on January 1 of the
following year, and (2) provide a copy of a standard contract to a requesting pharmacy within following year, and (2) provide a copy of a standard contract to a requesting pharmacy within
seven business days after receiving such a requestseven business days after receiving such a request ~~from the pharmacy.186~~
.163 Preferred Pharmacy
While any qualifiedWhile any qualified pharmacy can participate in a plan network, Part D plans, with the exception pharmacy can participate in a plan network, Part D plans, with the exception
of plans offering defined, standard coverage,of plans offering defined, standard coverage,~~187~~164 may contract with a may contract with a ~~smal er~~smaller subset of pharmacies, subset of pharmacies,
or pharmacy chains, to serve as preferred pharmacies.or pharmacy chains, to serve as preferred pharmacies.~~188~~165 Preferred pharmacies Preferred pharmacies ~~general y~~generally are are
marketed as having lower beneficiary cost sharing than other pharmacies in the plan network. marketed as having lower beneficiary cost sharing than other pharmacies in the plan network.
~~Beneficiaries~~Enrollees who sign up for a preferred pharmacy plan who sign up for a preferred pharmacy plan ~~stil have the option of going to any one~~
~~of a number of~~may still use other network pharmacies in their plan region, but may network pharmacies in their plan region, but may ~~face a higher cost share to fil a~~
pay more to fill a prescription at a non-preferred pharmacy. prescription at a non-preferred pharmacy.
The creation of a preferred pharmacy network must not increase The creation of a preferred pharmacy network must not increase ~~overal~~ overall CMS payments to a Part CMS payments to a Part
D plan.D plan.~~189~~166 In addition, the cost differential between preferred and non-preferred pharmacies In addition, the cost differential between preferred and non-preferred pharmacies
cannot be set at a level that discourages enrollees in certain locations, such as inner cities or rural cannot be set at a level that discourages enrollees in certain locations, such as inner cities or rural
areas, from enrolling in a Part D plan. areas, from enrolling in a Part D plan.

~~185 CMS,~~ Retail Pharmacy Access To ensure that enrollees have convenient access to covered drugs, Part D networks must include a sufficient number of pharmacies that dispense drugs directly to patients (other than mail order). 162 CMS, Medicare Prescription Drug Manual, Chapter 5, “Benefits and Beneficiary Protections,” Section 50.8.1, Rev. , Chapter 5, “Benefits and Beneficiary Protections,” Section 50.8.1, Rev.
September 30, 2011, at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/September 30, 2011, at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/
Downloads/MemoPDBManualChapter5_093011.pdf. Downloads/MemoPDBManualChapter5_093011.pdf.
~~186~~163 CMS, CMS, “Medicare Program: Contract“Medicare Program: Contract Year 2019 Policy and Year 2019 Policy and ~~T echnical~~Technical Changes to Medicare Advantage, Medicare Changes to Medicare Advantage, Medicare
Cost Plan, Medicare Fee-for-Service, Medicare Prescription Drug Benefit Programs, and PACE Program,” 83 Cost Plan, Medicare Fee-for-Service, Medicare Prescription Drug Benefit Programs, and PACE Program,” 83 Federal
Register, April 16, 2018, p. 16589, at, April 16, 2018, p. 16589, at https://www.gpo.gov/fdsys/pkg/FR-2018-04-16/pdf/2018-07179.pdf. Final rule is https://www.gpo.gov/fdsys/pkg/FR-2018-04-16/pdf/2018-07179.pdf. Final rule is
42 C.F.R42 C.F.R §423.38. §423.38.
~~187~~164 Because Because cost sharing cannot be changed undercost sharing cannot be changed under defined standard coverage, such plans cannot have price differences defined standard coverage, such plans cannot have price differences
basedbased on the pharmacy used. on the pharmacy used.
~~188 T he~~ 165 The rules are waived rules are waived in certain instances, such as MA-PD plans that offer access to drugsin certain instances, such as MA-PD plans that offer access to drugs through retail pharmacies through retail pharmacies
ownedowned and operated by the MA organization that offers the plan. See CMS,and operated by the MA organization that offers the plan. See CMS, Medicare Prescription Drug Manual, ,
Chapter 5, “Benefits and Beneficiary Protections,” Section 50.9, Rev. September 30, 2011,Chapter 5, “Benefits and Beneficiary Protections,” Section 50.9, Rev. September 30, 2011, at http://www.cms.gov/at http://www.cms.gov/
Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/
~~MemoPDBManualChapter5_093011.pdf.~~
~~189~~MemoPDBManualChapter5_093011.pdf. 166 Ibid. Ibid.
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~~Retail Pharmacy Access~~
~~To ensure that enrollees have convenient access to covered drugs, Part D networks must include a~~
~~sufficient number of pharmacies that dispense drugs directly to patients (other than by mail~~
~~order).~~
~~CMS defines convenient access~~CMS defines convenient access as follows: as follows:
• In urban areas, at least 90% of Medicare beneficiaries in a Part D sponsor’s In urban areas, at least 90% of Medicare beneficiaries in a Part D sponsor’s
service area, on average, live within 2 miles of a retail pharmacy participating in service area, on average, live within 2 miles of a retail pharmacy participating in
the sponsor’s network. the sponsor’s network.
• In suburban areas, at least 90% of Medicare beneficiaries in the sponsor’s service In suburban areas, at least 90% of Medicare beneficiaries in the sponsor’s service
area, on average, live within 5 miles of a retail pharmacy participating in the area, on average, live within 5 miles of a retail pharmacy participating in the
sponsor’s network. sponsor’s network.
• In rural areas, at least 70% of Medicare beneficiaries in the sponsor’s service In rural areas, at least 70% of Medicare beneficiaries in the sponsor’s service
area, on average, live within 15 miles of a retail pharmacy participating in the area, on average, live within 15 miles of a retail pharmacy participating in the
sponsor’s network.sponsor’s network.~~190~~
~~CMS issued a definition of retail pharmacy, which took effect in 2019, to provide better guidance~~
~~for Part D plans in determining which contracted pharmacies count toward meeting the~~
~~convenient access standards.191 The definition of retail pharmacy includes ‘‘any licensed~~
~~pharmacy that is open to dispense prescription drugs to the walk-in general public from which~~
~~Part D enrollees could purchase a covered Part D drug without being required to receive medical~~
~~services from a provider or institution affiliated with that pharmacy.’’192~~167
Mail-Order Pharmacy Access
Part D plans have the option of including mail-order pharmacies in their networks, although they Part D plans have the option of including mail-order pharmacies in their networks, although they
may not count such pharmacies in meeting retail pharmacy access requirements.may not count such pharmacies in meeting retail pharmacy access requirements.~~193~~168 Plan sponsors Plan sponsors
may offer a subset of formulary drugs (such as a particular tier of drugs or maintenance drugs) may offer a subset of formulary drugs (such as a particular tier of drugs or maintenance drugs)
through mail-order pharmacies. If a Part D plan offers a mail-order pharmacy benefit (such as a through mail-order pharmacies. If a Part D plan offers a mail-order pharmacy benefit (such as a
90-day supply of a maintenance drug) it must ensure that enrollees have reasonable access to the 90-day supply of a maintenance drug) it must ensure that enrollees have reasonable access to the
same benefit at retail network pharmacies. same benefit at retail network pharmacies. ~~However, enrol ees may be charged more by Part D~~

~~190 CMS recognizes that the rural standard can be impracticable or impossible to meet in such areas, and will consider~~
~~modifications in certain cases. CMS, Medicare Prescription Drug Manual, Chapter 5, “ Benefits and Beneficiary~~
~~Protections,” Section 50.10, Rev. September 30, 2011, at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/~~
~~PrescriptionDrugCovContra/Downloads/MemoPDBManualChapter5_093011.pdf.~~
~~191 CMS, “Medicare Program: Contract Year 2019 Policy and T echnical Changes to Medicare Advantage, Medicare~~
~~Cost Plan, Medicare Fee-for-Service, Medicare Prescription Drug Benefit Programs, and PACE Program,” 83~~ ~~Federal~~
~~Register, April 16, 2018, p. 16589, at https://www.gpo.gov/fdsys/pkg/FR-2018-04-16/pdf/2018-07179.pdf. Final rule is~~
~~42 C.F.R. §423.38.~~
~~192 CMS, “Medicare Program: Contract Year 2019 Policy and T echnical Changes to Medicare Advantage, Medicare~~
~~Cost Plan, Medicare Fee-for-Service, Medicare Prescription Drug Benefit Programs, and PACE Program,” 83~~ ~~Federal~~
~~Register, April 16, 2018, p. 16596, at https://www.gpo.gov/fdsys/pkg/FR-2018-04-16/pdf/2018-07179.pdf; 42 C.F.R.~~
~~§423.100.~~
~~193 CMS, Medicare Prescription Drug Manual, Chapter 5, “Benefits and Beneficiary Protections,” Section 50.10 and~~
~~50.2, Rev. September 30, 2011, at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/~~
~~PrescriptionDrugCovContra/Downloads/MemoPDBManualChapter5_093011.pdf.~~
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~~Medicare Part D Prescription Drug Benefit~~

~~sponsors for fil ing~~ Part D sponsors may charge enrollees more for filling certain prescriptions at a retail pharmacy, rather than a mail-order pharmacy, certain prescriptions at a retail pharmacy, rather than a mail-order pharmacy,
~~within limits set by CMS.194~~
within set limits.169 Specialty Pharmacy Access
Part D plans may designate certain pharmacies as Part D plans may designate certain pharmacies as specialty pharmacies for the distribution of for the distribution of
drugs where the FDA has restricted distribution of the drug to certain facilities or physicians or drugs where the FDA has restricted distribution of the drug to certain facilities or physicians or
appropriate dispensing requires extraordinary special handling, provider coordination, or patient appropriate dispensing requires extraordinary special handling, provider coordination, or patient
education that cannot be met by a network pharmacy. Part D plans may not require enrollees to education that cannot be met by a network pharmacy. Part D plans may not require enrollees to
use a specialty pharmacy to use a specialty pharmacy to ~~fil~~ fill a prescription solely because a drug has been placed on a Part D a prescription solely because a drug has been placed on a Part D
planplan~~’s specialty drug tier. Specialty drug tier designation is based on cost ($670 per month in~~
~~2021), not on other special handling requirements.195~~
~~CMS does not have a regulatory definition of specialty pharmacy.~~ specialty drug tier. Plans may set their own Plans may set their own
definition and fee structure for specialty pharmacies and specialty networks, including preferred definition and fee structure for specialty pharmacies and specialty networks, including preferred
specialty networks. However, specialty networks. However, ~~Part D pharmacy~~ such contracting conditions must be reasonable and contracting conditions must be reasonable and
relevant and must be applied consistently. relevant and must be applied consistently.
Long-Term Care Pharmacy Access
Part D sponsors must offer convenient LTC pharmacy access to beneficiaries in LTC facilities.Part D sponsors must offer convenient LTC pharmacy access to beneficiaries in LTC facilities.~~196~~170 In meeting this access requirement, plan sponsors must offer standard LTC pharmacy network 167 CMS recognizes that the rural standard can be impracticable or impossible to meet in such areas, and will consider modifications in certain cases. CMS, Medicare Prescription Drug Manual, Chapter 5, “Benefits and Beneficiary Protections,” Section 50.10, Rev. September 30, 2011, at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/MemoPDBManualChapter5_093011.pdf. 168 CMS, Medicare Prescription Drug Manual, Chapter 5, “Benefits and Beneficiary Protections,” Section 50.10 and 50.2, Rev. September 30, 2011, at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/MemoPDBManualChapter5_093011.pdf. 169 Ibid, Section 50.10. Sponsors may require an enrollee to pay higher cost sharing up to an amount equal to the mail-order cost sharing plus any differential in contracted rates between retail and mail-order, but plans may charge beneficiaries a lower cost sharing at retail if they so choose. Some pharmacies may ship drugs
~~In meeting this access requirement, plan sponsors must offer standard LTC pharmacy network~~
~~contracts to al LTC pharmacies operating in their service area that request such contracts. The~~
~~pharmacies must be able to meet performance and service criteria specified by CMS, as wel as~~
~~any standard terms and conditions established by the Part D sponsor for its network LTC~~
~~pharmacies. Part D sponsors may not rely on out-of-network pharmacies to meet the LTC~~
~~convenient access standards.~~
~~Home Infusion Pharmacy Access~~
~~Part D covers certain home-infusion drugs, which are prescription drugs that are given~~
~~intravenously in a home setting. Administration of the drugs may require supplies and equipment~~
~~such as tubing and catheters or special pumps. Part D plan sponsors must be able to deliver home-~~
~~infusion drugs to plan enrollees within 24 hours after the enrollees are released from an acute care~~
~~setting, unless the next dose of the medication is not due to be taken for more than 24 hours. (An~~
~~acute care setting is a hospital, ambulatory care unit, or similar facility where a patient receives~~

~~194 Ibid, Section 50.10. Sponsors may require an enrollee to pay higher cost sharing up to an amount equal to the mail -~~
~~order cost sharing plus any differential in contracted rates between retail and mail-order, but plans may charge~~
~~beneficiaries a lower cost sharing at retail if they so choose. Some pharmacies may ship drugs~~ to patients in long-term to patients in long-term
care facilities or in rural areas. A pharmacy that makes some but not the predominance of its deliveries through the mail care facilities or in rural areas. A pharmacy that makes some but not the predominance of its deliveries through the mail
is not a mail-order pharmacy. is not a mail-order pharmacy.
~~195~~ 170 Ibid. Ibid. ~~Section 50.3 and CMS, “Updated Contract Year (CY) 2021 Final Part D Bidding Instructions,” May 22, 2020,~~
~~at https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/~~
~~2021%20mtm%20and%20specialty%20thresholds%20final%20part%20d%20bidding%2005.22.2020_7.pdf . CMS had~~
~~issued a proposed rule that would have allowed plans to offer two specialty drug price tiers rather than one. CMS did~~
~~not finalize the specialty tier portion of the rule, and instead issued special guidance on specialty tier pricing for 2021.~~
~~196 Ibid. Section 50.5.1. “Part D sponsors must demonstrate that they have a network of contracted LT C pharmacies that~~
~~provide convenient access to LT C pharmacies for enrollees who reside in LT C facilities. In order to demonstrate~~
~~convenient access to LT C pharmacies, Part D sponsors must include, as part of their initial pharmacy access~~
~~submissions, a list of all contracted LT C pharmacies. In addition, Part D sponsors are required to submit an updated list~~
~~of all contracted LT C pharmacies as part of the annual Part D reporting requirements.”~~
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~~treatment for a serious but brief il ness.) Part D plans are not expected to pay for supplies,~~
~~equipment, or professional services needed for home infusion therapy. They are expected to stock~~
~~drugs in a form that can be easily used, to deliver products when needed, and to ensure that~~
~~enrollees have the necessary supplies and professional assistance before dispensing home-~~
~~infusion drugs.~~ Section 50.5.1. “Part D sponsors must demonstrate that they have a network of contracted LTC pharmacies that (continued...) Congressional Research Service 47 link to page 62 Medicare Part D Prescription Drug Benefit contracts to all LTC pharmacies operating in their service area that request such contracts. The pharmacies must be able to meet performance and service criteria specified by CMS, as well as any standard terms and conditions established by the Part D sponsor. Part D sponsors may not rely on out-of-network pharmacies to meet the LTC convenient access standards. Home Infusion Pharmacy Access Part D covers certain home-infusion drugs, which are prescription drugs given intravenously in a home setting. Administration of such drugs may require supplies and equipment such as tubing and catheters or special pumps. Part D plan sponsors must be able to deliver home-infusion drugs to enrollees within 24 hours after the enrollees are released from an acute care setting, unless the next dose of the medication is not due to be taken for more than 24 hours. (An acute care setting is a hospital, ambulatory care unit, or similar facility where a patient receives treatment for a serious but brief illness.)
Out-of-Network Access
In general, a beneficiary must go to a pharmacy in his or her Part D network. However, in cases In general, a beneficiary must go to a pharmacy in his or her Part D network. However, in cases
where enrollees cannot reasonably be expected to obtain covered drugs at a network pharmacy, where enrollees cannot reasonably be expected to obtain covered drugs at a network pharmacy,
and when such cases are not routine, a Part D plan must ensure that enrollees have adequate and when such cases are not routine, a Part D plan must ensure that enrollees have adequate
access to out-of-network pharmacies.access to out-of-network pharmacies.~~197~~171 One example would be if a Part D enrollee were traveling One example would be if a Part D enrollee were traveling
in the United States, came down with an in the United States, came down with an ~~il ness~~illness, and needed to have a prescription , and needed to have a prescription ~~fil ed~~filled. Another . Another
possible scenario would be a federal disaster declaration in the case of major storm or other event, possible scenario would be a federal disaster declaration in the case of major storm or other event,
where a beneficiary was not able to use an in-network provider. In 2020, CMS and Congress where a beneficiary was not able to use an in-network provider. In 2020, CMS and Congress
made special provision for Part D early made special provision for Part D early ~~refil s~~refills and out-of-network pharmacy access during the and out-of-network pharmacy access during the
COVID-19 public health emergency (PHE).COVID-19 public health emergency (PHE).~~198~~172
Part D plans must craft reasonable guidelines for out-of-network usage, including limits on out- Part D plans must craft reasonable guidelines for out-of-network usage, including limits on out-
of-network access such as limiting the quantity of drugs dispensed or the purchase of of-network access such as limiting the quantity of drugs dispensed or the purchase of
maintenance medications via mail order for extended out-of-area travel. In general, plans may not maintenance medications via mail order for extended out-of-area travel. In general, plans may not
routinely routinely ~~al ow~~allow more than a month’s worth of medication to be dispensed at an out-of-network more than a month’s worth of medication to be dispensed at an out-of-network
pharmacy. Enrollees likelypharmacy. Enrollees likely ~~wil~~ will be required to pay more for a covered Part D drug purchased out be required to pay more for a covered Part D drug purchased out
of the plan network than one purchased at a network pharmacy. of the plan network than one purchased at a network pharmacy.
Payments to Pharmacies
Part D sponsors often own or hire pharmacy benefit managers (PBMs) that design and/or Part D sponsors often own or hire pharmacy benefit managers (PBMs) that design and/or
administer many aspects of their Part D plans. PBMs are the middlemen in the prescription drug administer many aspects of their Part D plans. PBMs are the middlemen in the prescription drug
pricing system. Among other things, PBMs contract with pharmacies to participate in Part D pricing system. Among other things, PBMs contract with pharmacies to participate in Part D
networks, design plan formularies, and operate electronic systems for processing Part D claims. networks, design plan formularies, and operate electronic systems for processing Part D claims.
((SeeSee Appendix BA for more information.) PBMs, acting on behalf of plan sponsors, for more information.) PBMs, acting on behalf of plan sponsors, ~~general y~~
generally reimburse pharmacies at a reimburse pharmacies at a ~~contractual y~~contractually set rate for the cost of a drug (ingredient cost) plus a set rate for the cost of a drug (ingredient cost) plus a
~~dispensing fee.199 Sponsors separately reimburse the PBMs for the drugs. PBM pharmacy~~
~~reimbursement for generic drugs general y is based on a maximum al owable cost (MAC) list,~~
~~where a PBM sets a ceiling price based on a survey of market prices for the product. Part D MAC~~
~~lists must be updated on a regular basis.200 For brand-name drugs, PBMs may reimburse~~

~~197 CMS,~~ provide convenient access to LTC pharmacies for enrollees who reside in LTC facilities. In order to demonstrate convenient access to LTC pharmacies, Part D sponsors must include, as part of their initial pharmacy access submissions, a list of all contracted LTC pharmacies. In addition, Part D sponsors are required to submit an updated list of all contracted LTC pharmacies as part of the annual Part D reporting requirements.” 171 CMS, Medicare Prescription Drug Manual, Chapter 5, “Benefits and Beneficiary Protections,” Section 60, Rev. , Chapter 5, “Benefits and Beneficiary Protections,” Section 60, Rev.
September 30, 2011, at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/September 30, 2011, at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/
Downloads/MemoPDBManualChapter5_093011.pdf. Downloads/MemoPDBManualChapter5_093011.pdf.
~~198~~172 CRS CRS Report R46334, Selected Health Provisions in Title III of the CARES Act (P.L. 116-136). See Section 3714. Congressional Research Service 48 Medicare Part D Prescription Drug Benefit dispensing fee.173 Sponsors separately reimburse the PBMs for the drugs. PBM pharmacy reimbursement for generic drugs generally is based on a maximum allowable cost (MAC) list, where a PBM sets a ceiling price based on a survey of market prices for the product. Part D MAC lists must be updated on a regular basis.174 For brand-name drugs, PBMs often reimburse pharmacies based on a list price (such as the Average Wholesale Price, or AWP, which is the ~~Report R46334, Selected Health Provisions in Title III of the CARES Act (P.L. 116-136), coordinated by~~
~~Elayne J. Heisler. See Section 3714. Requiring Medicare Prescription Drug Plans and MA-PD Plans to Allow During~~
~~the COVID-19 Emergency Period for Fills and Refills of Covered Part D Drugs for Up to a 3-Month Supply.~~
~~199 42 C.F.R. §423.100 Dispensing fees are costs incurred at the point of sale in excess of the ingredient cost of a~~
~~covered Part D drug. Dispensing fees include pharmacy costs such as checking insurance status, performing quality~~
~~assurance, physically delivery, special packaging, and salaries of pharmacists and other pharmacy workers as well as~~
~~the costs associated with maintaining the pharmacy facility and acquiring and maintaining technology and equipment.~~
~~200 42 C.F.R. §423.505(b)(21). Under CMS regulations for plan contracting, plan sponsors must update MAC lists at~~
~~least every seven days and indicate the source for pricing data for the updates. Sponsors must disclose MAC prices in~~
~~advance of their use for reimbursement.~~
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~~pharmacies based on a list price (such as the Average Wholesale Price, or AWP, which is the~~
estimated price paid by a retailer to a wholesaler), minus a set percentage. estimated price paid by a retailer to a wholesaler), minus a set percentage.
Pharmacies negotiate separately with wholesalers or manufacturers for the drugs they dispense. Pharmacies negotiate separately with wholesalers or manufacturers for the drugs they dispense.
PBM pharmacy contracts and accompanying guidance may impose various conditions, including PBM pharmacy contracts and accompanying guidance may impose various conditions, including
pricing; audit terms; and quality requirements, such as set targets for accuracy in dispensing pricing; audit terms; and quality requirements, such as set targets for accuracy in dispensing
drugs. Contracts are confidentialdrugs. Contracts are confidential ~~and are not standard among Part D plans~~. .
Part D sponsors are required to make payment for “clean claims,” within 14 calendar days of the Part D sponsors are required to make payment for “clean claims,” within 14 calendar days of the
date date ~~when~~ an electronic claim is received, and within 30 calendar days of the date that non-an electronic claim is received, and within 30 calendar days of the date that non-
~~electronical y~~electronically submitted claims are received. submitted claims are received.~~201~~175 A clean claim is a claim that does not require A clean claim is a claim that does not require
further development or investigation (for example, has further development or investigation (for example, has al all required documentation) or other required documentation) or other
special treatment that would prevent the claim from being paid in a timely manner. If payment is special treatment that would prevent the claim from being paid in a timely manner. If payment is
not issued, mailed, or otherwise transmitted within the applicable number of calendar daysnot issued, mailed, or otherwise transmitted within the applicable number of calendar days ~~after a~~
~~clean claim is received~~, the PDP sponsor or MA-PD plan , the PDP sponsor or MA-PD plan ~~wil be required to~~must pay interest to the pay interest to the
pharmacy that submitted the claim.pharmacy that submitted the claim.
In recent years, Part D sponsors have imposed fees on pharmacies for not meeting In recent years, Part D sponsors have imposed fees on pharmacies for not meeting ~~contractual y~~contractually
specified quality metrics (such as accuracy in specified quality metrics (such as accuracy in ~~fil ing~~filling prescriptions or goals for generic dispensing) prescriptions or goals for generic dispensing)
or as a condition of participating in a preferred pharmacy network. PBM contracts also may or as a condition of participating in a preferred pharmacy network. PBM contracts also may
provide incentive payments to pharmacies that exceed set standards. provide incentive payments to pharmacies that exceed set standards. ~~CMS considers such fees on~~
~~network pharmacies to be a concession that reduces the cost of dispensing a Part D drug.~~
~~However, because many~~Because plan sponsors plan sponsors, and their PBMs and their PBMs~~, impose~~ often calculate pharmacy fees based on pharmacy fees based on
~~performance over time, sponsors often do not pass the fees on as a price reduction at point of sale~~
~~but report them~~performance over a period of time, the fees are reported to CMS as DIR. According to CMS, DIR pharmacy price concessions, net of as DIR. According to CMS, DIR pharmacy price concessions, net of ~~al pharmacy~~
all plan incentive paymentsincentive payments to pharmacies, grew more than 45,000% from 2010 to 2017.176 CMS considers pharmacy fees to be price concessions in the sense that they lower a Part D plan’s cost for dispensing a drug. In May 2022 CMS issued a final rule, effective in 2024, that changes the definition of a Part D negotiated price to the lowest possible reimbursement a network pharmacy is to receive for a particular drug, taking into account pharmacy price concessions such as fees.177 The change is expected to reduce average prices at the pharmacy, benefiting enrollees. 173 42 C.F.R. §423.100 Dispensing fees are costs incurred at the point of sale in excess of the ingredient cost of a covered Part D drug. Dispensing fees include pharmacy costs such as checking insurance status, performing quality assurance, physical delivery, special packaging, and salaries of pharmacists and other pharmacy workers as well as the costs associated with maintaining the pharmacy facility and acquiring and maintaining technology and equipment. 174 42 C.F.R. §423.505(b)(21). Under CMS regulations for plan contracting, plan sponsors must update MAC lists at least every seven days and indicate the source for pricing data for the updates. Sponsors must disclose MAC prices in advance of their use for reimbursement. 175 This provision was added by MIPPA and may be found at SSA §1860D-12(b)(4)(A)(ii). 176 CMS, “Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce ~~, grew more than 45,000% from 2010 to 2017.202~~
~~Coverage Determinations, Appeals, and Grievances~~
~~Part D enrollees have the right to request or appeal coverage determinations, file grievances~~
~~against plan sponsors, and file complaints regarding quality of care.203 PDPs and MA-PD plans~~
~~are required to provide enrollees with written information about their rights, and to institute both~~
~~standard and expedited procedures for addressing coverage issues.204~~
~~If a Part D sponsor operates a drug management program, the sponsor must comply with special~~
~~appeal procedures for issues involving beneficiaries who have been deemed at risk of prescription~~
~~drug abuse. (See “Part D Opioid Overutilization Monitoring.”) An at-risk determination is subject~~
~~to the Part D benefit appeals process and timeframes. If an enrollee disagrees with an at-risk~~
~~determination, the enrollee has the right to request a redetermination and potential y higher levels~~
~~of appeal.205~~

~~201 T his provision was added by MIPPA and may be found at §1860D-12(b)(4)(A)(ii) of the Social Security Act.~~
~~202 CMS, “Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce~~ Out of Pocket Out of Pocket
ExpendituresExpenditures,” 83 83 Federal Register 6217, November 30, 20184, at https://www.federalregister.gov/documents/2018/ 6217, November 30, 20184, at https://www.federalregister.gov/documents/2018/
11/30/2018-25945/modernizing-part-d-and-medicare-advantage-to-lower-drug-prices-and-reduce-out-of-pocket11/30/2018-25945/modernizing-part-d-and-medicare-advantage-to-lower-drug-prices-and-reduce-out-of-pocket --
expenses. expenses.
~~203~~177 CMS, “Medicare Program: Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs,” xxx Federal Register, May 2022, p. xx Congressional Research Service 49 link to page 43 link to page 43 Medicare Part D Prescription Drug Benefit Coverage Determinations, Appeals, and Grievances Part D enrollees have the right to request or appeal coverage determinations, file grievances against plan sponsors, and file complaints regarding quality of care.178 Part D plans must provide enrollees with written information about their rights, and institute both standard and expedited procedures for addressing coverage issues.179 If a Part D sponsor operates a drug management program, the sponsor must comply with special appeal procedures for issues involving beneficiaries deemed at risk of prescription drug abuse. (See “Part D Opioid Overutilization Monitoring.”)180 ~~CMS, Medicare Appeals, at https://www.medicare.gov/Pubs/pdf/11525-Medicare-Appeals.pdf.~~
~~204 CMS, “Parts C & D Enrollee Grievances, Organization/Coverage Determinations, and Appeals Guidance,”~~
~~Effective January 1, 2020, at https://www.cms.gov/Medicare/Appeals-and-Grievances/MMCAG/Downloads/Parts-C-~~
~~and-D-Enrollee-Grievances-Organization-Coverage-Determinations-and-Appeals-Guidance.pdf.~~
~~205 CMS, “Parts C & D Enrollee Grievances, Organization/Coverage Determinations, and Appeals Guidance,” Section~~
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An enrollee may appoint a representative to act on his or her behalf during the An enrollee may appoint a representative to act on his or her behalf during the Part D grievance and grievance and
appeals process such as a friend, relative, attorney, physician, or an employee of a pharmacy or a appeals process such as a friend, relative, attorney, physician, or an employee of a pharmacy or a
charity. To appoint a representative, an enrollee must submit a written statement to the drug plan charity. To appoint a representative, an enrollee must submit a written statement to the drug plan
sponsor.sponsor.~~206~~181 Alternatively, a surrogate or representative may be appointed by a court or authorized Alternatively, a surrogate or representative may be appointed by a court or authorized
under a state or other applicable law to act on behalf of an enrollee. A prescribing physician or under a state or other applicable law to act on behalf of an enrollee. A prescribing physician or
other prescriber may request a standard or expedited coverage determination, redetermination, or other prescriber may request a standard or expedited coverage determination, redetermination, or
independent review entity (IRE) reconsideration on behalf of an enrollee without being named a independent review entity (IRE) reconsideration on behalf of an enrollee without being named a
representative.representative.~~207~~182 (Physicians or prescribers do not have (Physicians or prescribers do not have al all the rights of a designated the rights of a designated
~~representative, however,~~representative unless they have gone through the formal appointment process.) unless they have gone through the formal appointment process.)
Coverage Determination
A coverage determination is any decision (whether an approval or denial) made by a plan sponsor A coverage determination is any decision (whether an approval or denial) made by a plan sponsor
with regard to covered benefits. Examples of coverage determinations include (1) a decision with regard to covered benefits. Examples of coverage determinations include (1) a decision
about whether to provide or pay for a Part D drug that an enrollee believes may be covered;about whether to provide or pay for a Part D drug that an enrollee believes may be covered;~~208~~
183 (2) a decision concerning a request about a specific drug payment tier;(2) a decision concerning a request about a specific drug payment tier;~~209~~184 (3) a decision (3) a decision
concerning a request to cover a drug that is not included on a plan formulary; (4) a decision concerning a request to cover a drug that is not included on a plan formulary; (4) a decision
regarding cost-sharing levels; or (5) a decision regarding whether an enrollee has satisfied a prior regarding cost-sharing levels; or (5) a decision regarding whether an enrollee has satisfied a prior
authorization or other utilizationauthorization or other utilization management requirement. An management requirement. An ~~enrol ee~~enrollee, an enrollee’s appointed , an enrollee’s appointed
~~representative, or his or her physician may file a request for a coverage determination.210~~
~~An enrollee may also request an expedited decision regarding a drug that has not already been~~
~~furnished. The plan is to make a decision within 24 hours in cases where using the standard~~
~~timeframe may seriously jeopardize the life or health of the enrollee or the enrollee’s ability to~~
~~regain maximum function. A Part D sponsor that approves a request for expedited determination~~
~~must make its determination and notification, whether adverse or favorable, as expeditiously as~~
~~the enrollee’s health condition requires, but no later than within 24 hours.211 If a Part D plan~~
~~sponsor denies a request for an expedited determination, it must~~

~~40.3, Effective January 1, 2020, at https://www.cms.gov/Medicare/Appeals-and-Grievances/MMCAG/Downloads/~~
~~Parts-C-and-D-Enrollee-Grievances-Organization-Coverage-Determinations-and-Appeals-Guidance.pdf.~~
~~206~~representative, or his or her physician may file a request for a coverage determination.185 178 CMS, Medicare Appeals, at https://www.medicare.gov/Pubs/pdf/11525-Medicare-Appeals.pdf. 179 CMS, “Parts C & D Enrollee Grievances, Organization/Coverage Determinations, and Appeals Guidance,” Effective August 2023, at https://www.cms.gov/Medicare/Appeals-and-Grievances/MedPrescriptDrugApplGriev. 180 CMS, “Parts C & D Enrollee Grievances, Organization/Coverage Determinations, and Appeals Guidance,” Section 40.3, Effective August 2023, https://www.cms.gov/Medicare/Appeals-and-Grievances/MMCAG and https://www.cms.gov/medicare/appeals-and-grievances/mmcag/downloads/parts-c-and-d-enrollee-grievances-organization-coverage-determinations-and-appeals-guidance.pdf. 181 An enrollee may request a representative by using a government form (Form CMS-1696) or by submitting an An enrollee may request a representative by using a government form (Form CMS-1696) or by submitting an
equivalent written notice that includes information about enrollee and is signedequivalent written notice that includes information about enrollee and is signed and dated by both the enrollee and the and dated by both the enrollee and the
~~representat ive. T here~~representative. There are exceptions in the case of institutionalized or incapacitated enrollees. are exceptions in the case of institutionalized or incapacitated enrollees.
~~207~~ 182 CMS, CMS, “Parts C & D Enrollee Grievances, Organization/Coverage Determinations, and Appeals Guidance,”“Parts C & D Enrollee Grievances, Organization/Coverage Determinations, and Appeals Guidance,” Section 60.1, Effective August 2023. 183 This includes a decision not to pay because the drug is not on the plan’s formulary, the drug is determined not medically necessary, or the drug is furnished by an out-of-network pharmacy. 184 The MMA provided that if a Part D plan includes a tiered cost~~Section~~
~~60.1, Effective January 1, 2020, at https://www.cms.gov/Medicare/Appeals-and-Grievances/MMCAG/Downloads/~~
~~Parts-C-and-D-Enrollee-Grievances-Organization-Coverage-Determinations-and-Appeals-Guidance.pdf.~~
~~208 T his includes a decision not to pay because the drug is not on the plan’s formulary, the drug is determined not~~
~~medically necessary, or the drug is furnished by an out -of-network pharmacy.~~
~~209 T he MMA provided that if a Part D plan includes a tiered cost~~ -sharing structure, a plan enrollee can request an -sharing structure, a plan enrollee can request an
exception to the structure. Under an exception, a nonpreferred drug could beexception to the structure. Under an exception, a nonpreferred drug could be covered as a preferred drugcovered as a preferred drug if the if the
prescribing physician determined that the preferred drug for treatment of the same condition would not be as effective prescribing physician determined that the preferred drug for treatment of the same condition would not be as effective
for the individual,for the individual, ~~would~~ would have adverse effects for the individual, or both.have adverse effects for the individual, or both.
~~210~~ 185 CMS, CMS, “Parts C & D Enrollee Grievances, Organization/Coverage Determinations, and “Parts C & D Enrollee Grievances, Organization/Coverage Determinations, and ~~Ap peals~~Appeals Guidance,” Guidance,” Section 40.2. Congressional Research Service 50 Medicare Part D Prescription Drug Benefit An enrollee may also request an expedited decision regarding a drug that has not already been furnished. The plan is to make a decision within 24 hours in cases where using the standard timeframe may seriously jeopardize the life or health of the enrollee or the enrollee’s ability to regain maximum function. A Part D sponsor that approves a request for expedited determination must make its determination and notification, whether adverse or favorable, as expeditiously as the enrollee’s health condition requires, but no later than within 24 hours.186 If a Part D plan sponsor denies a request for an expedited determination, it must •~~Section~~
~~40.2, Effective January 1, 2020, at https://www.cms.gov/Medicare/Appeals-and-Grievances/MMCAG/Downloads/~~
~~Parts-C-and-D-Enrollee-Grievances-Organization-Coverage-Determinations-and-Appeals-Guidance.pdf.~~
~~211 CMS, “Coverage Determinations,” https://www.cms.gov/Medicare/Appeals-and-Grievances/~~
~~MedPrescriptDrugApplGriev/CoverageDeterminations-.~~
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 make the determination within the 72-hour timeframe established for a standard make the determination within the 72-hour timeframe established for a standard
determination; and determination; and
• give the enrollee and prescribing physician or other prescriber prompt oral notice give the enrollee and prescribing physician or other prescriber prompt oral notice
of the denial. of the denial.
If a sponsor fails to notify the beneficiary of its decision within the established time frames, the If a sponsor fails to notify the beneficiary of its decision within the established time frames, the
decision is deemed an automatic denial, at which point the sponsor must forward the case to the decision is deemed an automatic denial, at which point the sponsor must forward the case to the
independent review entity, the second level of appeal.independent review entity, the second level of appeal.~~212~~187
Appeals
If a plan sponsor’s coverage determination is unfavorable, it must provide the affected enrollee If a plan sponsor’s coverage determination is unfavorable, it must provide the affected enrollee
with a written denial notice that includes information on appeals rights. An appeal is a request for with a written denial notice that includes information on appeals rights. An appeal is a request for
a further review of a coverage determination.a further review of a coverage determination.~~213~~188 There are five levels of appeals. There are five levels of appeals.
Redetermination
The first level of appeal is a The first level of appeal is a redetermination by the plan. An enrollee, enrollee’s representative, by the plan. An enrollee, enrollee’s representative,
or enrollee’s prescribing physician or other prescriber may request a standard or expedited or enrollee’s prescribing physician or other prescriber may request a standard or expedited
redetermination by filing a written request with the plan sponsor. The request redetermination by filing a written request with the plan sponsor. The request ~~general y~~generally must be must be
filed within 60 calendar days from the date printed or written on the written coverage filed within 60 calendar days from the date printed or written on the written coverage
determination denial notice. If a physician asks for, or supports, an expedited appeal on the determination denial notice. If a physician asks for, or supports, an expedited appeal on the
grounds that waiting seven days could seriously harm an enrollee’s health, the appealgrounds that waiting seven days could seriously harm an enrollee’s health, the appeal ~~is to~~
~~automatical y~~ is to automatically be expedited. be expedited.~~214~~
189 Plan sponsors must provide immediate access to the redetermination process through their Plan sponsors must provide immediate access to the redetermination process through their
websites. CMS strongly encourages plans to establish interactive, web-based systems to meet this websites. CMS strongly encourages plans to establish interactive, web-based systems to meet this
requirement. requirement.
A plan sponsor must also provide an enrollee or prescribing physician with a reasonable A plan sponsor must also provide an enrollee or prescribing physician with a reasonable
opportunity to present evidence, and the redetermination must be made by a person not involved opportunity to present evidence, and the redetermination must be made by a person not involved
in the originalin the original coverage decision.coverage decision.~~215~~190 Enrollees are to be notified of the results within 7 days in the Enrollees are to be notified of the results within 7 days in the
case of standard redetermination or within 72 hours for an expedited request. Part D sponsors case of standard redetermination or within 72 hours for an expedited request. Part D sponsors
~~must authorize payment for a benefit within 14 calendar days and must mail the payment no later~~
~~than 30 calendar days after receiving the request.216~~
~~Reconsideration by an Independent Review Entity~~
~~At the second level of appeal, an enrollee dissatisfied with a redetermination has a right to~~
reconsideration by an independent review entity (IRE) working under contract with CMS, also

~~212 42 C.F.R. §423.570.~~
~~213 Individuals~~ 186 CMS, “Coverage Determinations,” https://www.cms.gov/Medicare/Appeals-and-Grievances/MedPrescriptDrugApplGriev/CoverageDeterminations-. 187 42 C.F.R. §423.570. 188 Individuals can appeal coverage determinations related to formulary drugs andcan appeal coverage determinations related to formulary drugs and nonformulary drugs. nonformulary drugs. ~~T hey~~They cannot cannot
appeal denial of coverage for excludedappeal denial of coverage for excluded drugs. drugs.
~~214~~ 189 CMS, CMS, “Parts C & D Enrollee Grievances, Organization/Coverage Determinations, and Appeals Guidance,”“Parts C & D Enrollee Grievances, Organization/Coverage Determinations, and Appeals Guidance,” Section 50.7.1, Effective August 2023. 190 If the issue is the denial of coverage based on medical ~~Section~~
~~50.7.1, Effective January 1, 2020, at https://www.cms.gov/Medicare/Appeals-and-Grievances/MMCAG/Downloads/~~
~~Parts-C-and-D-Enrollee-Grievances-Organization-Coverage-Determinations-and-Appeals-Guidance.pdf.~~
~~215 If the issue is the denial of coverage based on medical necessity, the redetermination must be made by a physician.~~
~~216 CMS, “Parts C & D Enrollee Grievances, Organization/Coverage Determinations, and Appeals Guidance,” Section~~
~~60.3, Effective January 1, 2020, at https://www.cms.gov/Medicare/Appeals-and-Grievances/MMCAG/Downloads/~~
~~Parts-C-and-D-Enrollee-Grievances-Organization-Coverage-Determinations-and-Appeals-Guidance.pdf.~~
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~~known as a Qualified Independent Contractor (QIC). An~~ necessity, the redetermination must be made by a physician. Congressional Research Service 51 Medicare Part D Prescription Drug Benefit must authorize payment for a benefit within 14 calendar days and must mail the payment no later than 30 calendar days after receiving the request.191 Reconsideration by an Independent Review Entity At the second level of appeal, an enrollee dissatisfied with a redetermination has a right to reconsideration by an independent review entity (IRE) working under contract with CMS. An enrollee or an enrollee’s appointed enrollee or an enrollee’s appointed
representative may request a standard or expedited reconsideration. The request must be made representative may request a standard or expedited reconsideration. The request must be made
within 60 days of a redetermination. The IRE is required to make a decision within 7 days for a within 60 days of a redetermination. The IRE is required to make a decision within 7 days for a
standard reconsideration and 72 hours for an expedited reconsideration. Plans must make standard reconsideration and 72 hours for an expedited reconsideration. Plans must make
payment in 14 days for a standard reconsideration.payment in 14 days for a standard reconsideration.~~217~~
~~According to CMS, Medicare received 35,414 reconsideration cases in CY2016. In about 30% of~~
~~the cases, the plan sponsor’s decision was overturned.218~~192
Additional Levels of Appeal
If the above appeals result in decisions unfavorable to the enrollee, several additional If the above appeals result in decisions unfavorable to the enrollee, several additional levels of levels of
review may be pursued. review may be pursued.
At the third level of appeal, an enrollee or the appointed representative may request a hearing At the third level of appeal, an enrollee or the appointed representative may request a hearing
with an with an administrative law judge (ALJ). A request must be made within 60 days of the IRE (ALJ). A request must be made within 60 days of the IRE
decision letter. To qualify for an ALJ hearing, the projected value of denied coverage must meet a decision letter. To qualify for an ALJ hearing, the projected value of denied coverage must meet a
minimum dollar amount ($minimum dollar amount ($~~170~~180 for for ~~2020).219~~2023).193 An enrollee cannot request an expedited hearing if An enrollee cannot request an expedited hearing if
the only issue at question involves a request for payment of Part D drugs that have already been the only issue at question involves a request for payment of Part D drugs that have already been
furnished.furnished.~~220~~194 There is a 90-day limit for a regular decision and a 10-day limit for an expedited There is a 90-day limit for a regular decision and a 10-day limit for an expedited
decision.decision.
The fourth level of appeal is the The fourth level of appeal is the Medicare Appeals Council (MAC). A beneficiary or the . A beneficiary or the
appointed representative may request a review by the MAC within 60 days of the ALJ decision. appointed representative may request a review by the MAC within 60 days of the ALJ decision.
The MAC may grant or deny the request for review. If it grants the request, it may issue a final The MAC may grant or deny the request for review. If it grants the request, it may issue a final
decision or dismissal, or remand the case to the ALJ with instructions on how to proceed with the decision or dismissal, or remand the case to the ALJ with instructions on how to proceed with the
case. The review is to be completed within 90 days for a regular review and 10 days for an case. The review is to be completed within 90 days for a regular review and 10 days for an
expedited review.expedited review.
Standard Hearing
The final appeal level is a The final appeal level is a federal district court. A beneficiary or the appointed representative may . A beneficiary or the appointed representative may
request a review by a federal court within 60 days of the MAC decision notice. To receive a request a review by a federal court within 60 days of the MAC decision notice. To receive a
review by the court, the projected value of denied coverage must be greater than or equal to a review by the court, the projected value of denied coverage must be greater than or equal to a
minimum dollar amount ($1,minimum dollar amount ($1,~~670~~850 for for ~~2020).~~
2023). Grievances
Grievances are complaints or disputes other than those involving coverage determinations. Grievances are complaints or disputes other than those involving coverage determinations.
Grievances may include such things as complaints about a plan’s customer service hours of Grievances may include such things as complaints about a plan’s customer service hours of

~~217 Ibid.~~
~~218 CMS, “Fact Sheet: Part D Reconsiderations Appeals Data-2016,” at CMS webpage “ Reconsiderations by the~~
~~Independent Review Entity,” at https://www.cms.gov/Medicare/Appeals-and-Grievances/MedPrescriptDrugApplGriev/~~
~~Reconsiderations.html. Data exclude cases that were dismissed, withdrawn, or remanded (the Part D QIC did not have~~
~~jurisdiction to make a substantive decision on the case) and cases involving non -Part D drugs. T he Part D QIC reversed~~
~~plan decisions in 29.81% of cases.~~
~~219 “Medicare Part D Flowchart 2020~~operation, the time it takes to get a prescription filled, or a plan’s benefit design. A grievance may 191 CMS, “Parts C & D Enrollee Grievances, Organization/Coverage Determinations, and Appeals Guidance,” Section 60.3, Effective August 2023. 192 Ibid. 193 “Medicare Part D Flowchart 2023,” at https://www.cms.gov/Medicare/Appeals-and-Grievances/,” at https://www.cms.gov/Medicare/Appeals-and-Grievances/
~~MedPrescriptDrugApplGriev~~MedPrescriptDrugApplGriev/Downloads/Flowchart/Downloads/Flowchart -Medicare-Part-Medicare-Part -D.pdf. -D.pdf.
~~220~~194 CMS, CMS, “Parts C & D Enrollee Grievances, Organization/Coverage Determinations, and Appeals Guidance,”“Parts C & D Enrollee Grievances, Organization/Coverage Determinations, and Appeals Guidance,” Section 30, Effective August 2023~~Section~~
~~30, Effective January 1, 2020, at https://www.cms.gov/Medicare/Appeals-and-Grievances/MMCAG/Downloads/Parts-~~
~~C-and-D-Enrollee-Grievances-Organization-Coverage-Determinations-and-Appeals-Guidance.pdf~~. .
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~~operation, the time it takes to get a prescription fil ed, or a plan’s benefit design. A grievance may~~
also include a complaint that a Part D plan refused to expedite a coverage determination or also include a complaint that a Part D plan refused to expedite a coverage determination or
redetermination. A beneficiary with a grievance may file a complaint within 60 days of the event. redetermination. A beneficiary with a grievance may file a complaint within 60 days of the event.
Although CMS regulations do not require a Part D plan sponsor to consider a grievance that is Although CMS regulations do not require a Part D plan sponsor to consider a grievance that is
filed after the 60-day deadline, the regulations do not prevent a plan sponsor from doing so on a filed after the 60-day deadline, the regulations do not prevent a plan sponsor from doing so on a
case-by-case basis.case-by-case basis.~~221~~
195 Plan sponsors are to respond in a timely manner. A Part D plan sponsor must respond to an Plan sponsors are to respond in a timely manner. A Part D plan sponsor must respond to an
enrollee grievance within 24 hours if it involves a refusal by the Part D plan to grant an enrollee’s enrollee grievance within 24 hours if it involves a refusal by the Part D plan to grant an enrollee’s
request for an expedited coverage determination or an expedited redetermination and the enrollee request for an expedited coverage determination or an expedited redetermination and the enrollee
has not yet purchased or received the drug in dispute.has not yet purchased or received the drug in dispute.~~222~~196 (Sometimes a complaint may involve (Sometimes a complaint may involve
both a grievance and a coverage determination.)both a grievance and a coverage determination.)
Quality of Care Complaints
Complaints regarding quality of care received by Part D enrollees may be resolved by the plan Complaints regarding quality of care received by Part D enrollees may be resolved by the plan
sponsor, but also may be handled through a separate process: the Quality Improvement sponsor, but also may be handled through a separate process: the Quality Improvement
Organization (QIO) process.Organization (QIO) process.~~223~~197 The QIO program is implemented by a network of contractors The QIO program is implemented by a network of contractors
throughout the United States that work with providers and beneficiaries to improve the quality of throughout the United States that work with providers and beneficiaries to improve the quality of
health care delivered to Medicare beneficiaries. When a Part D plan responds to an enrollee’s health care delivered to Medicare beneficiaries. When a Part D plan responds to an enrollee’s
grievance in writing, it must include a description of the enrollee’s right to file a QIO grievance in writing, it must include a description of the enrollee’s right to file a QIO
grievance.grievance.~~224~~198 Quality of care grievances filed with a QIO may be filed and investigated beyond Quality of care grievances filed with a QIO may be filed and investigated beyond
~~the 60-day time frame.~~
~~Program Oversight~~
~~The size, nature, and complexity of the Medicare Part D program put it at particular risk for fraud,~~
~~waste, and abuse. Some examples of program vulnerabilities that have been identified include~~
~~drug diversion (redirecting prescription drugs, such as opioids, for il egal purposes); bil ing for~~
~~drugs that are not dispensed; and inappropriate plan denials of covered drugs. A variety of entities~~
~~are involved in oversight activities to ensure program compliance and identify potential y~~
~~fraudulent activities~~
~~CMS Oversight~~
~~CMS is responsible for preventing and detecting fraud and abuse in Medicare Part D and ensuring~~
~~sponsors’ compliance with applicable requirements. CMS conducts a wide variety of oversight~~
~~activities, such as bid reviews, marketing reviews, financial and accounting reviews, program~~
~~audits, and LIS-readiness audits.225 Some of the management controls used in the routine~~
~~operation of Medicare Part D play a primary role in the administration of the benefit and a~~
~~secondary role in fraud prevention and detection.~~

~~221 42 C.F.R. §423.564.~~
~~222 42 C.F.R. §423.564.~~
~~223 Social Security Act, §1154(a)(14).~~
~~224~~the 60-day time frame. Program Spending and Financing Medicare’s financial operations are accounted for through two trust funds maintained by the Department of the Treasury—the Hospital Insurance (HI) trust fund for Part A and the Supplementary Medical Insurance (SMI) trust fund, which contains separate accounts for Parts B and Part D.199 Unlike the HI program, SMI was not intended to be fully supported through dedicated sources of income. Instead, it relies primarily on general tax revenues and beneficiary premiums as revenue sources. Expenditures According to the 2023 Medicare Trustees Report, during 2022, total Part D expenditures were approximately $125.7 billion.200 (See Table 9.) This amount included the combined costs of prescription drugs provided by Part D plans to enrollees, Medicare payments to employer-sponsored retiree health plans, and federal administrative expenses including expenses incurred 195 42 C.F.R. §423.564. 196 42 C.F.R. §423.564. 197 Social Security Act, §1154(a)(14). 198 For more information, see CMS, “Quality Improvement Organizations,” at http://www.cms.gov/Medicare/Quality- For more information, see CMS, “Quality Improvement Organizations,” at http://www.cms.gov/Medicare/Quality-
Initiatives-Patient-AssessmentInitiatives-Patient-Assessment ~~-Instruments/QualityImprovementOrgs/index.html?redirect=/qualityimprovementorgs.~~
~~225 T he only statutorily required activity is that CMS conduct financial audits of o ne-third of the plans each year. Social~~
~~Security Act §1860D-12(b)(3)(C).~~
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~~For each plan sponsor, CMS establishes a point of contact (account manager) for al~~
~~communications with the plan. The account managers are to work with plans to resolve any~~
~~problems, including compliance issues. As part of its oversight strategy, CMS conducts routine~~
program audits to ensure compliance with various program requirements, including such things
~~as enrollment and disenrollment, marketing and beneficiary information, pharmacy access,~~
~~coordination of benefits, claims processing and payment, and grievances and coverage~~
~~determinations.226 CMS can also conduct separate, focused audits to confirm that a previously~~
~~identified deficiency has been corrected or to check into an indication of noncompliance. These~~
~~audits include a combination of desk and on-site activities.~~
~~In financial audits, CMS looks at the accuracy and validity of data reported by the plans. These~~
~~audits, normal y conducted after payment reconciliation, may examine things such as possible~~
~~overpayments to plans, misrepresentation of bids, underreporting of rebates, and inaccurate~~
~~prescription drug event data. If financial audits identify problems, CMS would recalculate~~
~~payment reconciliation for that sponsor and target the sponsor for a future audit.~~
~~If egregious problems are identified, CMS actions can range from warning letters to civil~~
~~monetary penalties or removal from the program, depending on the extent to which plans have~~
~~violated Part D program requirements.~~
~~Oversight Responsibilities of Part D Sponsors~~
~~CMS requires plan sponsors to monitor and correct their own behavior, as wel as the behavior of~~
~~those they contract with. Part D sponsors are required by law to implement a comprehensive~~
~~fraud and abuse program to detect, correct, and prevent fraud, waste, and abuse. Chapter 9 of~~
~~CMS’s Prescription Drug Benefit Manual provides both interpretive rules and guidelines for~~
~~sponsors to follow in developing this program.227~~
~~Part D sponsors are required to have, and to implement, an effective compliance plan as a~~
~~condition of participation in the Medicare program. Elements of an effective plan include written~~
~~policies and procedures; a designated compliance officer and committee; training and education,~~
~~effective lines of communication, wel -publicized disciplinary guidelines, and internal monitoring~~
~~and auditing; and prompt response to detected offences and development of corrective actions.~~
~~Part D sponsors are also required to provide fraud, waste, and abuse training and education to~~
~~first-tier, downstream, and related entities.228 This includes pharmacists, pharmacy clerks, and~~
~~others who are employed by entities that plans contract with to provide the Medicare drug benefit.~~

~~226 CMS, “Program Audits, at https://www.cms.gov/Medicare/Compliance-and-Audits/Part-C-and-Part-D-Compliance-~~
~~and-Audits/ProgramAudits.html; and CMS, Prescription Drug Benefit Manual, Chapter 9, “ Compliance Program~~
~~Guidelines,” Rev. January 11, 2013, at http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Do wnloads/~~
~~mc86c21.pdf.~~
~~227 CMS, Prescription Drug Benefit Manual, Chapter 9, “Compliance Program Guidelines,” Rev. January 11, 2013, at~~
~~http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Do wnloads/mc86c21.pdf.~~
~~228 Ibid.~~
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~~Medicare Part D Oversight Contractors~~
~~Medicare Drug Integrity Contractor: National Benefit Integrity~~
~~CMS contracts with a private firm, Qlarant,229 to act as the National Benefit Integrity Medicare~~
~~Drug Integrity Contractor (NBI MEDIC) for Part D plans. The NBI MEDIC’s responsibilities~~
~~include conducting complaint investigations; performing data analysis; developing and referring~~
~~cases to law enforcement, as wel as supporting ongoing investigations; conducting audits; and~~
~~reviewing PDP and MA-PD plan fraud and abuse compliance programs.230~~
~~The NBI MEDIC is also responsible for working with other entities to coordinate fraud~~
~~prevention and detection efforts, including the Part D sponsors, other Medicare contractors, the~~
~~HHS Office of Inspector General (OIG), the Department of Justice, and state agencies.~~
~~Medicare Drug Integrity Contractor: Outreach and Education~~
~~CMS also has contracted with Rainmakers Strategic Solutions LLC231 to act as the Outreach and~~
~~Education Medicare Drug Integrity Contractor (O&E MEDIC). The O&E MEDIC provides~~
~~education on waste, fraud, and abuse for plan sponsors, pharmacists, law enforcement, as wel as~~
~~for Medicare advocates and enrollees. The O&E MEDIC maintains a website containing fraud~~
~~and abuse related regulations and guidance, professional education materials, and relevant state~~
~~and federal agency contact information.~~
~~Part D Recovery Audit Contractor~~
~~The ACA required CMS to expand its Recovery Audit Contractor (RAC) program to Medicare~~
~~Part C and Part D.232 CMS has contracted with ACLR Strategic Business Solutions to perform the~~
~~Part D RAC audit functions.233 The Part D RAC reviews Medicare payments made to plan~~
~~sponsors and pharmacies to identify any over- or underpayments, provides information to CMS to~~
~~help prevent future improper payments, and refers potential fraud findings to the NBI MEDIC.~~
~~Program Spending and Financing234~~
~~Medicare’s financial operations are accounted for through two trust funds maintained by the~~
~~Department of the Treasury—the Hospital Insurance (HI) trust fund for Part A and the~~
~~Supplementary Medical Insurance (SMI) trust fund, which contains separate accounts for Parts B~~

~~229 NBI Medicare Drug Integrity Contractor, at https://www.qlarant.com/about/contracts/.~~
~~230 CMS, Prescription Drug Benefit Manual, Chapter 9, “Compliance Program Guidelines,” Section 50.7.4, Rev.~~
~~January 11, 2013, at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/~~
~~Downloads/Chapter9.pdf.~~
~~231 CMS, “ Review Contractor Directory - Interactive Map,” at https://www.cms.gov/Research-Statistics-Data-and-~~
~~Systems/Monitoring-Programs//Medicare-FFS-Compliance-Programs/Review-Contractor-Directory-Interactive-Map/~~
~~index.html. See also: Education & Outreach Medicare Drug Integrity Contractor, at~~
~~http://www.rainmakerssolutions.com/.~~
~~232 For additional information see CMS, “ Review Contractor Directory - Interactive Map,” at https://www.cms.gov/~~
~~Research-Statistics-Data-and-Systems/Monitoring-Programs//Medicare-FFS-Compliance-Programs/Review-~~
~~Contractor-Directory-Interactive-Map/index.html.~~
~~233 CMS, “Part D RAC Audit Process,” at https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-~~
~~Programs/recovery-audit-program-parts-c-and-d/Audit-Process.html.~~
~~234 T his section was written by Patricia A. Davis, Specialist in Health Care Financing, Congressional Research Service.~~
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~~and Part D.235 Unlike the HI program, SMI was not intended to be fully supported through~~
~~dedicated sources of income. Instead, it relies primarily on general tax revenues and beneficiary~~
~~premiums as revenue sources.~~
~~Expenditures~~
~~According to the 2020 Medicare Trustees Report, during CY2019, total Part D expenditures were~~
~~approximately $97.6 bil ion.236 (See Table 9.) This amount included the combined costs of~~
~~prescription drugs provided by Part D plans to enrollees and Medicare payments to employer-~~
~~sponsored retiree health plans and federal administrative expenses, including expenses incurred~~
-Instruments/QualityImprovementOrgs/index.html?redirect=/qualityimprovementorgs. 199 The MMA established within the Supplementary Medical Insurance (SMI) trust fund the Medicare Prescription Drug Account to be used in conjunction with the Part D prescription drug program. For additional information on Medicare program financing, see CRS Report R43122, Medicare Financial Status: In Brief. 200 2023 Medicare Trustees Report, Table III.D3, p. 110, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/index.html. Congressional Research Service 53 link to page 28 Medicare Part D Prescription Drug Benefit by HHS, SSA, and the Department of the Treasury in administering Part D. Such duties include by HHS, SSA, and the Department of the Treasury in administering Part D. Such duties include
making payments to Part D plans and implementing fraud and abuse control activities.making payments to Part D plans and implementing fraud and abuse control activities. ~~(See the~~
Appendix A for historical and projected Part D expenditures.)
Revenues
The major sources of revenue for the Part D account include general revenues, beneficiary The major sources of revenue for the Part D account include general revenues, beneficiary
premiums, and state contributions. In premiums, and state contributions. In ~~CY2019~~2022, of the $, of the $~~98.7 bil ion~~124.3 billion in total Part D income, general in total Part D income, general
revenues accounted for $revenues accounted for $~~70.2 bil ion~~92.4 billion, premiums accounted for $, premiums accounted for $~~15.8 bil ion~~17.6 billion, and transfers from , and transfers from
states for $states for $~~12.3 bil ion~~13.7 billion. .
The appropriation language adopted for the Part D account provides resources for benefit The appropriation language adopted for the Part D account provides resources for benefit
payments without the need for congressional approval. This payments without the need for congressional approval. This ~~al ows~~allows substantial flexibility substantial flexibility in the in the
amount of general revenues availableamount of general revenues available to the account, and eliminates the need for a contingency to the account, and eliminates the need for a contingency
reserve. As a result, assets in the Part D account are reserve. As a result, assets in the Part D account are ~~general y~~generally low and only need to be held for a low and only need to be held for a
short time until they are used to meet immediate expenditures. As premium and general revenue short time until they are used to meet immediate expenditures. As premium and general revenue
income for Part D is reset each year to match expected costs, the Medicare Trustees consider the income for Part D is reset each year to match expected costs, the Medicare Trustees consider the
Part D account to be in satisfactory financial condition under current law. Part D account to be in satisfactory financial condition under current law.
Beneficiary Premiums
~~Beneficiary premiums are based on the participating plans’ national average bid amounts and are~~
~~defined prior to each year’s operations,237 with the average premium amounting to~~Premiums made up 14.2% of total Part D program revenues in 2022. See “Part D Premiums.” The base premium is set at 25.5% of the 25.5% of the
~~expected per capita plan costs for basic coverage. (See “Premiums.”) In 2021, the base monthly~~
~~premium is $33.06; however, beneficiaries pay different premiums depending on the plan they~~
~~selected (and whether they are entitled to low-income premium subsidies). Beneficiaries may~~
~~have their premiums deducted from their Social Security or other federal benefit payments; these~~
~~are then forwarded to Part D plans on their behalf. Alternatively, they may pay their premiums~~
~~directly to the Part D plans.~~
~~As required by the ACA, since 2011, beneficiaries~~expected per capita plan costs for basic coverage, although beneficiaries pay different premiums depending on the plan they select.201 (The IRA premium stabilization formula caps base premium increases at 6% a year through 2029 and resets the formula for determining the base premium as a percentage of expected per capita plan costs in 2030.) LIS beneficiaries may have minimal or no premiums, depending on the plan in which they are enrolled. Beneficiaries with higher incomes pay income-related with higher incomes pay income-related
monthly premium monthly premium adjustments in addition to the premiums charged by the plans in which they have enrolled. (See ~~adjustments in addition to the premiums charged by the plans in which they~~

~~235 T he MMA established within the Supplementary Medical Insurance (SMI) T rust Fund the Medicare Prescription~~
~~Drug Account to be used in conjunction with the Part D prescription drug program . For additional information on~~
~~Medicare program financing, see CRS Report R43122, Medicare Financial Status: In Brief.~~
~~236 2020 Medicare T rustees Report , T able III.D3, p. 103, at https://www.cms.gov/Research-Statistics-Data-and-~~
~~Systems/Statistics-T rends-and-Reports/ReportsTrustFunds/index.html.~~
~~237 For example, the base premiums for 2021 were announced in July 2020. See CMS Memorandum, CMS, “Annual~~
~~Release of Part D National Average Bid Amount and other Part C & D Bid Information,” July 20, 2020, at~~
~~https://www.cms.gov/files/document/2021-announcement.pdf.~~
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~~have enrolled.238 (See~~ “Premium Surcharge for Higher-Income Enrollees.”) These extra amounts “Premium Surcharge for Higher-Income Enrollees.”) These extra amounts
are credited to the Part D trust fund account and reduce the amount of general revenue funding are credited to the Part D trust fund account and reduce the amount of general revenue funding
~~needed. Because individual plan premiums vary, the additional amount paid is calculated as a~~
~~percentage of the base beneficiary premium, not the individual’s actual premium amount. This~~
~~extra amount is usual y deducted from an individual’s monthly Social Security payments~~
~~regardless of how that person ordinarily pays the monthly prescription plan premiums. If the~~
~~amount is greater than the monthly payment from Social Security, or an individual does not~~
~~receive Social Security payments (e.g., the individual has not yet signed up for Social Security~~
~~benefits), then CMS may directly bil the individual for this amount.~~
~~In CY2019, $5.2 bil ion in premium amounts were withheld from Social Security benefit checks~~
~~or other federal benefit payments. (See Table 9.) Another $10.6 bil ion in premiums were paid~~
~~directly to the plans by beneficiaries. As noted, premiums for the Part D program are general y set~~
~~at an amount equal to 25.5% of standard benefit costs; however, as recipients of the Part D low -~~
~~income subsidies are not required to pay premiums and premiums are based only on standard~~
~~benefits (i.e., the premium calculation does not include such things as costs associated with the~~
~~low-income subsidy and risk-corridor payments), premiums made up about 16% of total Part D~~
~~program revenues in 2019.~~
needed. General Revenues
General revenues are transferred from the Treasury to the Part D Account on an as-needed basis General revenues are transferred from the Treasury to the Part D Account on an as-needed basis
to cover the portion of program expenditures funded by federal subsidies. These transfers are to cover the portion of program expenditures funded by federal subsidies. These transfers are
based on expected costs of the direct subsidy, reinsurance payments, employer subsidies, lowbased on expected costs of the direct subsidy, reinsurance payments, employer subsidies, low --
income subsidies, net risk-sharing payments, administrative expenses, and advanced discount income subsidies, net risk-sharing payments, administrative expenses, and advanced discount
payments.payments.~~239 In CY2019~~202 In 2022, contributions received from the general fund of the Treasury amounted , contributions received from the general fund of the Treasury amounted
~~to $70.2 bil ion~~to $92.4 billion, or about , or about 7174.3% of total Part D revenue. 201 CMS, “Annual Release of Part D National Average Bid Amount and other Part C & D Bid Information,” July 29, 2022, at https://www.cms.gov/files/document/july-29-2022-parts-c-d-announcement-pdf.pdf. 202 Beginning in 2011, prescription drug manufacturers of brand name drugs provide a discount for their drugs when used during the coverage gap. Medicare makes payments prospectively to non-employer Part D plan sponsors and is reimbursed for these amounts once the sponsors receive the discounts from the manufacturers. This discount reduces beneficiary out-of-pocket costs, but has little net effect on federal Part D spending. Congressional Research Service 54 link to page 61 Medicare Part D Prescription Drug Benefit Table 9. Statement of Operations of Part D Account, CY2022 (in millions of dollars) Assets at Beginning of Year $19,692.7 Revenues $124,344.0 Premiums from Enrollees 17,611.1 Premiums deducted from Social Security checks 5,236.4 Premiums paid directly to plans 12,374.7 Government Contributions 92,372.0 Prescription drug benefits 91,644.6 Administrative expenses 727.4 Payments from States 13,676.7 Interest 144.5 Expenditures $125,700.9 Benefit Payments 125,184.0 Federal Administrative Expenses 517.0 Assets at End of Year $18,335.8 Source: 2023~~% of total Part D revenue.~~
~~Table 9. Statement of Operations of Part D Account, CY2019~~
~~(in mil ions of dol ars)~~
~~Assets at Beginning of Year~~
~~$7,999.4~~
~~Revenues~~
~~$98,747.9~~
~~Premiums from Enrol ees~~
~~15,760.1~~
~~Premiums deducted from Social Security checks~~
~~5,159.6~~
~~Premiums paid directly to plans~~
~~10,600.5~~
~~Government Contributions~~
~~70,222.2~~
~~Prescription drug benefits~~
~~70,162.6~~
~~Administrative expenses~~
~~59.7~~
~~Payments from States~~
~~12,288.5~~
~~Interest~~
~~59.1~~

~~238 T he income thresholds are set at the same levels as those under Part B. For additional information, see CMS~~
~~Memorandum, “ 2020 Part D Income-Related Monthly Premium Adjustment ,” September 27, 2019 at~~
~~https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/PartDIRMAA2020.pdf.~~
~~239 Beginning in 2011, prescription drug manufacturers of brand name drugs provide a discount for their drugs when~~
~~used during the coverage gap. Medicare makes payments prospectively to non-employer Part D plan sponsors and is~~
~~reimbursed for these amounts once the sponsors receive the discounts from the manufacturers. T his discount reduces~~
~~beneficiary out -of-pocket costs, but has little net effect on federal Part D spending.~~
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~~Expenditures~~
~~$97,572.9~~
~~Benefit Payments~~
~~97,090.6~~
~~Federal Administrative Expenses~~
~~482,3~~
~~Assets at End of Year~~
~~$9,174.4~~
~~Source:~~ ~~2020~~ Medicare Trustees Report, Table III.D1. Medicare Trustees Report, Table III.D1.
Note: Totals may not add due to rounding. Totals may not add due to rounding.
State Contributions
Subsequent to the availability Subsequent to the availability of Part D drug coverage and low-income subsidies beginning in of Part D drug coverage and low-income subsidies beginning in
2006, Medicaid is no longer the primary payer of drug costs for full-benefit dual-eligible 2006, Medicaid is no longer the primary payer of drug costs for full-benefit dual-eligible
beneficiaries. However, MMA contained a provision (labeled by some as the “clawback beneficiaries. However, MMA contained a provision (labeled by some as the “clawback
provision”) that requires states to pay the Part D account in the SMI trust fund a portion of the provision”) that requires states to pay the Part D account in the SMI trust fund a portion of the
costs that they would have incurred for this population if they were costs that they would have incurred for this population if they were ~~stil~~ still the primary payer. These the primary payer. These
amounts are based on the product of the estimated annual per capita full dual-eligibleamounts are based on the product of the estimated annual per capita full dual-eligible drug drug
payment amount and the monthly State enrollment of full dualpayment amount and the monthly State enrollment of full dual- eligibles.eligibles.
Starting in 2006, states paid 90% of these estimated costs. This percentage phased down over a Starting in 2006, states paid 90% of these estimated costs. This percentage phased down over a
10-year period to 75% starting in 2015. In 10-year period to 75% starting in 2015. In ~~CY2019~~2022, state payments amounted to $, state payments amounted to $~~12.3 bil ion, or~~
~~about 12.4~~13.7 billion, or about 11.3% of Part D revenues. Estimated Future Part D Expenditures Over the 10-year period from 2022 to 2032, the Medicare Trustees project that aggregate benefits are to increase 5.1% annually, on average, and the average per capita rate of growth is projected to be 2.6%. That is a slower rate of growth than the Medicare Trustees projected in 2022. The projections reflect the impact of the IRA provisions governing Part D redesign, as well as regulatory changes. See Table 10 for information on historical and projected growth in Part D benefits. Congressional Research Service 55 link to page 61 Medicare Part D Prescription Drug Benefit Table 10. Historical and Projected Growth in Part D Benefits Aggregate Part D Benefits Calendar Benefitsa Percentage Per Capita Percentage as a Percentage Year (Billions) Change Benefits Change of GDP Historical data 2004 $0.4 — $362 — 0.00% 2005 1.1 — 596 — 0.01 2006 47.1 — 1,708 — 0.34 2007 48.8 3.7% 1,556 −8.9% 0.34 2008 49.0 0.4 1,504 −3.3 0.33 2009 60.5 23.4 1,798 19.6 0.42 2010 61.7 2.0 1,775 −1.3 0.41 2011 66.7 8.1 1,868 5.3 0.43 2012 66.5 −0.4 1,776 −5.0 0.41 2013 69.3 4.2 1,772 −0.2 0.41 2014 77.7 12.1 1,919 8.3 0.44 2015 89.4 15.1 2,140 11.5 0.49 2016 99.5 11.2 2,302 7.6 0.53 2017 100.1 0.7 2,251 −2.2 0.51 2018 94.7 −5.4 2,068 −8.1 0.46 2019 97.0 2.5 2,058 −0.5 0.45 2020 104.6 7.7 2,148 4.4 0.50 2021 104.5 -0.1 2,092 -2.6 0.45 2022 125.2. 19.8 2,437 16.5 0.49 Intermediate Estimates 2023 129.5 3.4 2,447 0.4 0.49 2024 138.7 7.2 2,545 4.0 0.50 2025 151.8 9.4 2,677 5.2 0.53 2026 161.5 6.3 2,767 3.3 0.54 2027 168.9 4.6 2,823 2.0 0.54 2028 173.3 2.6 2,831 0.3 0.53 2029 182.5 5.3 2,921 3.2 0.53 2030 190.2 4.2 2,992 2.4 0.54 2031 195.7 2.9 3,034 1.4 0.53 2032 205.7 5.1 3,151 3.9 0.53 Source: 2023 Medicare Trustees Report, Table III.D4 Notes: Amounts shown are on a cash basis. The Trustees Report uses three sets of assumptions: low cost, intermediate, and high cost. The intermediate assumptions represent the Trustees’ best estimates of likely future economic and demographic conditions. a. This amount does not include administrative expenses. Congressional Research Service 56 Medicare Part D Prescription Drug Benefit Appendix A. Drug Rebates and PBMs in Medicare Part D Part D plan sponsors typically contract with or own pharmacy benefit managers (PBMs), which are intermediates that perform services for health insurers such as developing plan formularies and negotiating price concessions from drug manufacturers. PBMs also develop networks of ~~% of Part D revenues.~~
~~Historical Program Spending~~
~~Actual spending for the Medicare prescription drug benefit has been lower than estimated at the~~
~~beginning of the program. The 2004 Medicare Trustees Report, the first of such reports issued~~
~~subsequent to the enactment of MMA, projected that total program spending would be $85 bil ion~~
~~in CY2006 (the first year of the program) and would grow to about $162 bil ion by CY2013.240~~
~~Actual Medicare expenditures for the Part D drug benefit were approximately $47 bil ion in~~
~~CY2006 and close to $70 bil ion in CY2013. The difference between projected and actual~~
~~spending has been due to both lower than expected enrollment and per capita spending. (See~~
Table 10.) Original CBO estimates of Part D spending were also higher than actual spending for
~~FY2004-FY2013. (See Table 11.)~~

~~240 Original spending projections were made for the 10-year period 2004 to 2013. The Medicare T rustees report on a~~
~~calendar year basis, while CBO reports on a fiscal year basis.~~
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~~Table 10. Comparison of Projected and Actual Part D Enrollment and Spending~~
~~(CY2006-CY2013)~~
~~Enrollment~~
~~Total Part D Spending~~

~~(in thousands)~~
~~Per Enrollee Spending~~
~~(in billions of dollars)~~
~~2004~~
~~2016~~
~~2004~~
~~2016~~
~~2004 Trustees~~
~~2016 Trustees~~
~~Trustees~~
~~Trustees~~
~~Trustees~~
~~Trustees~~
~~Report~~
~~Report~~
~~Report~~
~~Report~~
~~Report~~
~~Report~~

~~(Projected)a~~
~~(Actual)b~~
~~(Projected)~~
~~(Actual)~~
~~(Projected)~~
~~(Actual)~~
~~2006~~
~~40,736~~
~~30,560~~
~~$2,069~~
~~$1,708~~
~~$85.0~~
~~$47.4~~
~~2007~~
~~41,468~~
~~31,392~~
~~2,225~~
~~1,556~~
~~93.0~~
~~49.7~~
~~2008~~
~~42,296~~
~~32,589~~
~~2,391~~
~~1,504~~
~~101.9~~
~~49.3~~
~~2009~~
~~43,158~~
~~33,644~~
~~2,557~~
~~1,798~~
~~111.2~~
~~60.8~~
~~2010~~
~~44,069~~
~~34,772~~
~~2,725~~
~~1,775~~
~~120.9~~
~~62.1~~
~~2011~~
~~45,117~~
~~35,720~~
~~2,892~~
~~1,868~~
~~131.4~~
~~67.1~~
~~2012~~
~~46,374~~
~~37,448~~
~~3,120~~
~~1,776~~
~~145.6~~
~~66.9~~
~~2013~~
~~47,761~~
~~39,103~~
~~3,367~~
~~1,772~~
~~161.8~~
~~69.7~~
Source: CRS analysis of data from Tables II.A3, II.C18 and II.C19 of the 2004 Medicare Trustees Report and
~~Tables V.B4, III.D3 and III.D4 of the 2016 Medicare Trustees Report.~~
~~a. Al data from the 2004 report are projected.~~
~~b. Al data from the 2016 report are actual.~~
~~Table 11. Comparison of Original CBO Estimates and Actual Part D Costs,~~
~~FY2004-FY2013~~
~~(in bil ions of dol ars)~~

~~% Actual~~
~~Different~~
~~2004-~~
~~from~~

~~2004~~
~~2005~~
~~2006~~
~~2007~~
~~2008~~
~~2009~~
~~2010~~
~~2011~~
~~2012~~
~~2013~~
~~2013~~
~~Projected~~
~~Federal~~
~~CBO~~
~~$0.6~~
~~$1.5~~
~~$32.1 $52.9 $59.9 $65.7 $72.6 $79.5 $88.5~~
~~$98.9~~
~~$552.2~~

~~Spending~~
~~Original~~
~~Cost~~
~~Estimatea~~

~~2016~~
~~0.2~~
~~1.2~~
~~27.7~~
~~41.5~~
~~35.4~~
~~43.5~~
~~52.7~~
~~57.0~~
~~44.5~~
~~50.1~~
~~353.8~~
~~35.9%~~
~~Medicare~~
~~less~~
~~Trustees~~
~~Reportb~~
~~Total~~
~~CBO~~
~~0.6~~
~~1.5~~
~~46.8~~
~~74.8~~
~~84.2~~
~~92.0~~
~~101.3 110.6 122.8~~
~~136.8~~
~~771.4~~

Spending Original
~~Cost~~
~~Estimate~~

~~2016~~
~~0.2~~
~~1.2~~
~~33.9~~
~~52.4~~
~~47.2~~
~~56.8~~
~~63.8~~
~~71.0~~
~~61.0~~
~~68.3~~
~~455.8~~
~~40.9%~~
~~Medicare~~
~~less~~
~~Trustees~~
Source: Congressional Budget Office, Projection of Spending for the Medicare Part D Benefit: Letter to the
~~Honorable Wil iam “Bil ” M. Thomas, February 9, 2005; and the 2016 Medicare Trustees Report, June 22, 2016,~~
~~Table V.H8.~~
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~~Notes:~~
~~a. The figures in this table are for fiscal years, whereas those in Table 11 are for calendar years. Original~~
~~projections were for the 10-year period FY2004 through FY2013.~~
~~b. Actual federal Medicare Part D cost is measured as total expenditures less premium income and transfers~~
~~from states. Trustee report figures for FY2004-FY2013 reflect actual spending.~~
~~While aggregate Part D expenditures have increased by an average annual rate of 4.8% from 2009~~
~~to 2019, most of this growth reflects the growth in enrollment during the initial years of the~~
~~program. Per capita expenditures during this time increased at a much slower annual rate of~~
~~1.4%.241 Both the Medicare Trustees and CBO attribute the slower per capita growth rate to a~~
~~high proportion of prescriptions fil ed with low-cost generic drugs, as wel as to patent~~
~~expirations of major drugs during this period.242~~
~~In their 2020 report, the Medicare Trustees noted that 2018 Part D per capita benefit expenditures~~
~~were lower than in 2017 and attributed this decrease to reconciliation payments received from~~
~~plans for their experience in 2017.243 The Medicare Trustees reported a similar level of per capita~~
~~expenditures for 2019 and attributed this to higher assumed DIR and slow reinsurance growth in~~
~~plan bids. (However, in 2020, the trustees expect significant reconciliation payments to be made~~
~~to plans, which would substantial y increase the level of per capita benefit spending in 2020.)~~
~~(See Table 12.)~~
~~Estimated Future Part D Expenditures~~
~~Over the 10 year period from 2020 to 2029, the Medicare Trustees project more rapid growth in~~
~~Part D costs, with aggregate benefits increasing on average at 6.9% annual y and per capita~~
~~expenditures increasing on average by 4.2% each year.244 This projected growth is due to~~
~~expectations of a slowing in the generic drug dispensing rate and an increase in the cost of~~
~~specialty drugs. (See Table 12 and Table 13.)~~
~~Table 12. Historical and Projected Growth in Part D Benefits~~
~~Part D Benefits~~
~~Aggregate~~
~~as a~~
~~Calendar~~
Benefitsa
~~Percentage~~
~~Per Capita~~
~~Percentage~~
~~Percentage of~~
~~Year~~
~~(Billions)~~
~~Change~~
~~Benefits~~
~~Change~~
~~GDP~~
~~Historical data~~
~~2004~~
~~$0.4~~
—
~~$362~~
—
~~0.00%~~
~~2005~~
~~1.1~~
—
~~596~~
—
~~0.01~~
~~2006~~
~~47.1~~
—
~~1,708~~
—
~~0.34~~
~~2007~~
~~48.8~~
~~3.7%~~
~~1,556~~
~~−8.9%~~
~~0.34~~
~~2008~~
~~49.0~~
~~0.4~~
~~1,504~~
~~−3.3~~
~~0.33~~
~~2009~~
~~60.5~~
~~23.4~~
~~1,798~~
~~19.6~~
~~0.42~~

~~241 T he corresponding rates for the 2008-2018 period were 6.8% for total expenditure growth and 3.2% for per capita~~
~~growth. T he T rustees note that this “erratic pattern” occurred primarily because of the large 2009 reconciliation~~
~~payment for the 2008 plan year which had the effect of establishing a higher base level in 2009, thus reducing the 10 -~~
~~year annual rate for 2009-2019. 2020 Medicare T rustees Report , pp. 105-106.~~
~~242 2020 Medicare T rustees Report , pp. 105-106; and CBO, “ Competition and the Cost of Medicare’s Prescription Drug~~
~~Program,” July 2014, at http://www.cbo.gov/sites/default/files/cbofiles/attachments/45552-PartD.pdf.~~
~~243 2020 Medicare T rustees Report, p. 104.~~
~~244 Ibid., pp. 106.~~
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~~Part D Benefits~~
~~Aggregate~~
~~as a~~
~~Calendar~~
Benefitsa
~~Percentage~~
~~Per Capita~~
~~Percentage~~
~~Percentage of~~
~~Year~~
~~(Billions)~~
~~Change~~
~~Benefits~~
~~Change~~
~~GDP~~
~~2010~~
~~61.7~~
~~2.0~~
~~1,775~~
~~−1.3~~
~~0.41~~
~~2011~~
~~66.7~~
~~8.1~~
~~1,868~~
~~5.3~~
~~0.43~~
~~2012~~
~~66.5~~
~~−0.4~~
~~1,776~~
~~−5.0~~
~~0.41~~
~~2013~~
~~69.3~~
~~4.2~~
~~1,772~~
~~−0.2~~
~~0.41~~
~~2014~~
~~77.7~~
~~12.1~~
~~1,919~~
~~8.3~~
~~0.44~~
~~2015~~
~~89.5~~
~~15.1~~
~~2,140~~
~~11.5~~
~~0.49~~
~~2016~~
~~99.5~~
~~11.2~~
~~2,302~~
~~7.6~~
~~0.53~~
~~2017~~
~~100.1~~
~~0.6~~
~~2,251~~
~~−2.2~~
~~0.51~~
~~2018~~
~~94.7~~
~~−5.4~~
~~2,069~~
~~−8.1~~
~~0.46~~
~~2019~~
~~97.1~~
~~2.5~~
~~2,057~~
~~−0.6~~
~~0.45~~
~~Intermediate Estimates~~
~~2020~~
~~106.3~~
~~9.4~~
~~2,176~~
~~5.8~~
~~0.48~~
~~2021~~
~~115.6~~
~~8.8~~
~~2,300~~
~~5.7~~
~~0.50~~
~~2022~~
~~122.3~~
~~5.7~~
~~2,361~~
~~2.7~~
~~0.50~~
~~2023~~
~~129.0~~
~~5.5~~
~~2,424~~
~~2.7~~
~~0.51~~
~~2024~~
~~138.4~~
~~7.2~~
~~2,534~~
~~4.5~~
~~0.52~~
~~2025~~
~~146.6~~
~~5.9~~
~~2,618~~
~~3.3~~
~~0.53~~
~~2026~~
~~156.6~~
~~6.8~~
~~2,731~~
~~4.3~~
~~0.55~~
~~2027~~
~~167.2~~
~~6.8~~
~~2,853~~
~~4.5~~
~~0.56~~
~~2028~~
~~178.1~~
~~6.5~~
~~2,977~~
~~4.3~~
~~0.57~~
~~2029~~
~~189.6~~
~~6.4~~
~~3,108~~
~~4.4~~
~~0.58~~
Source: 2020 Medicare Trustees Report, Table III.D4
Notes: Amounts shown are on a cash basis.
~~a. This amount does not include administrative expenses. See Table A-1 for data on total Part D~~
~~expenditures.~~
~~Table 13. Medicare Part D Reimbursement Amounts~~
~~(in bil ions of dol ars)~~
~~Retiree Drug~~

~~Direct Subsidya~~
~~Reinsurance~~
~~Low-Income Subsidy~~
~~Subsidy~~

~~Calenda r~~
~~Year~~
~~Amount~~
~~Percentage~~
~~Amount~~
~~Percentage~~
~~Amount Percentage~~
~~Amount~~
~~Percentage~~
~~Totalb~~
~~Historical Data~~
~~2006~~
~~$16.00~~
~~39.2%~~
~~$6.0~~
~~14.7%~~
~~$15.0~~
~~36.8%~~
~~$3.8~~
~~9.3%~~
~~$40.8~~
~~2007~~
~~17.6~~
~~38.1%~~
~~8.0~~
~~17.3%~~
~~16.7~~
~~36.1%~~
~~3.9~~
~~8.4%~~
~~46.2~~
~~2008~~
~~17.5~~
~~35.9%~~
~~9.4~~
~~19.3%~~
~~18.1~~
~~37.1%~~
~~3.8~~
~~7.8%~~
~~48.8~~
~~2009~~
~~18.2~~
~~35.1%~~
~~10.1~~
~~19.5%~~
~~19.6~~
~~37.8%~~
~~3.9~~
~~7.5%~~
~~51.8~~
~~Congressional Research Service~~

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~~Retiree Drug~~

~~Direct Subsidya~~
~~Reinsurance~~
~~Low-Income Subsidy~~
~~Subsidy~~

~~Calenda r~~
~~Year~~
~~Amount~~
~~Percentage~~
~~Amount~~
~~Percentage~~
~~Amount Percentage~~
~~Amount~~
~~Percentage~~
~~Totalb~~
~~2010~~
~~19.6~~
~~35.1%~~
~~11.2~~
~~20.1%~~
~~21.1~~
~~37.8%~~
~~3.9~~
~~7.0%~~
~~55.8~~
~~2011~~
~~19.2~~
~~32.7%~~
~~13.7~~
~~23.3%~~
~~22.2~~
~~37.8%~~
~~3.6~~
~~6.1%~~
~~58.7~~
~~2012~~
~~19.7~~
~~32.5%~~
~~15.5~~
~~25.5%~~
~~22.5~~
~~37.1%~~
~~3.0~~
~~4.9%~~
~~60.7~~
~~2013~~
~~19.6~~
~~30.8%~~
~~19.2~~
~~30.1%~~
~~23.2~~
~~36.4%~~
~~1.7~~
~~2.7%~~
~~63.7~~
~~2014~~
~~18.5~~
~~25.9%~~
~~27.2~~
~~38.1%~~
~~24.3~~
~~34.1%~~
~~1.3~~
~~1.8%~~
~~71.3~~
~~2015~~
~~18.1~~
~~23.2%~~
~~33.2~~
~~42.6%~~
~~25.6~~
~~32.8%~~
~~1.1~~
~~1.4%~~
~~78.0~~
~~2016~~
~~17.1~~
~~21.4%~~
~~35.5~~
~~44.4%~~
~~26.4~~
~~33.0%~~
~~1.0~~
~~1.3%~~
~~80.0~~
~~2017~~
~~14.6~~
~~18.2%~~
~~37.6~~
~~46.8%~~
~~27.3~~
~~34.0%~~
~~0.8~~
~~1.0%~~
~~80.3~~
~~2018~~
~~13.5~~
~~16.2%~~
~~40.6~~
~~48.7%~~
~~28.5~~
~~34.2%~~
~~0.8~~
~~1.0%~~
~~83.4~~
~~2019~~
~~11.6~~
~~13.1%~~
~~46.3~~
~~52.4%~~
~~29.8~~
~~33.7%~~
~~0.7~~
~~0.8%~~
~~88.4~~
~~Intermediate Estimate~~
~~2020~~
~~10.2~~
~~11.2%~~
~~46.6~~
~~51.2%~~
~~33.5~~
~~36.8%~~
~~0.7~~
~~0.8%~~
~~91.0~~
~~2021~~
~~10.4~~
~~10.7%~~
~~50.3~~
~~51.7%~~
~~35.9~~
~~36.9%~~
~~0.7~~
~~0.7%~~
~~97.3~~
~~2022~~
~~10.3~~
~~9.9%~~
~~54.8~~
~~52.5%~~
~~38.5~~
~~36.9%~~
~~0.7~~
~~0.7%~~
~~104.3~~
~~2023~~
~~10.8~~
~~9.6%~~
~~59.1~~
~~52.7%~~
~~41.4~~
~~36.9%~~
~~0.8~~
~~0.7%~~
~~112.1~~
~~2024~~
~~11.5~~
~~9.6%~~
~~63.4~~
~~52.9%~~
~~44.2~~
~~36.9%~~
~~0.8~~
~~0.7%~~
~~119.9~~
~~2025~~
~~12.1~~
~~9.5%~~
~~67.3~~
~~53.0%~~
~~46.7~~
~~36.8%~~
~~0.8~~
~~0.6%~~
~~126.9~~
~~2026~~
~~12.7~~
~~9.4%~~
~~72.2~~
~~53.2%~~
~~49.9~~
~~36.8%~~
~~0.9~~
~~0.7%~~
~~135.7~~
~~2027~~
~~13.4~~
~~9.3%~~
~~77.2~~
~~53.4%~~
~~53.2~~
~~36.8%~~
~~0.9~~
~~0.6%~~
~~144.7~~
~~2028~~
~~14.1~~
~~9.1%~~
~~82.5~~
~~53.5%~~
~~56.7~~
~~36.7%~~
~~1.0~~
~~0.6%~~
~~154.3~~
~~2029~~
~~14.7~~
~~9.0%~~
~~88.1~~
~~53.7%~~
~~60.3~~
~~36.7%~~
~~1.1~~
~~0.7%~~
~~164.2~~
Source: CRS analysis based on data in the 2016 and 2020 Medicare Trustees Reports, Table IV.B10.
Notes: Amounts shown are on an incurred basis.
~~a. The direct subsidy amount shown is net of risk-sharing payments.~~
~~b. The total amounts do not include premiums paid by beneficiaries.~~
~~The Medicare Trustees project that total Part D expenditures wil almost double between 2019~~
~~and 2029—from $97.6 bil ion to $190.3 bil ion. (See Table A-1.) Annual per capita Part D benefit~~
~~expenditures also are projected to increase—from $2,057 in 2019 to $3,108 in 2029.245 Over the~~
~~longer term, the Medicare Trustees project that total Part D spending wil grow from 0.45% of~~
~~GDP in 2019 to 0.58% in 2029 and to 0.94% of GDP in 2094.246~~

~~245 Ibid., T able III.D4.~~
~~246 Ibid., T ables III.D4 and III.D6. GDP projection estimates are reported on an incurred basis.~~
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~~Medicare Part D Prescription Drug Benefit~~

~~Appendix A. Historical and Projected Part D~~
~~Operations~~
~~Table A-1. Operation of the Part D Account in the SMI Trust Fund,~~
~~CY2004-CY2029~~
~~(in bil ions of dol ars)~~

~~Income~~
~~Expenditures~~
~~Trust Fund~~
~~Transfers~~
~~Interest~~
~~Balance~~
~~General~~
~~from~~
~~and~~
~~Benefit~~
~~Admin.~~
~~Net~~
~~at End~~
~~Year Premiums~~
~~Revenue~~
~~States~~
~~Other~~
~~Total~~
~~Payments~~
~~Expenses~~
~~Total~~
~~Change~~
~~of Year~~
~~Historical Data~~
~~2004~~
—
~~$0.4~~
—

~~$0.4~~
~~$0.4~~
—
~~$0.4~~
—
—
~~2005~~
—
~~1.1~~
—

~~1.1~~
~~1.1~~
—
~~1.1~~
—
—
~~2006~~
~~$3.5~~
~~39.2~~
~~$5.5~~
~~$0.0~~
~~48.2~~
~~47.1~~
~~$0.3~~
~~47.4~~
~~$0.8~~
~~$0.8~~
~~2007~~
~~4.1~~
~~38.8~~
~~6.9~~
~~0.0~~
~~49.7~~
~~48.8~~
~~0.9~~
~~49.7~~
~~0.0~~
~~0.8~~
~~2008~~
~~5.0~~
~~37.3~~
~~7.1~~
~~0.0~~
~~49.4~~
~~49.0~~
~~0.3~~
~~49.3~~
~~0.1~~
~~0.9~~
~~2009~~
~~6.3~~
~~47.1~~
~~7.6~~
~~0.0~~
~~61.0~~
~~60.5~~
~~0.3~~
~~60.8~~
~~0.1~~
~~1.1~~
~~2010~~
~~6.5~~
~~51.1~~
~~4.0~~
~~0.0~~
~~61.7~~
~~61.7~~
~~0.4~~
~~62.1~~
~~-0.4~~
~~0.7~~
~~2011~~
~~7.7~~
~~52.6~~
~~7.1~~
~~0.0~~
~~67.4~~
~~66.7~~
~~0.4~~
~~67.1~~
~~0.3~~
~~1.0~~
~~2012~~
~~8.3~~
~~50.1~~
~~8.4~~
~~0.0~~
~~66.9~~
~~66.5~~
~~0.4~~
~~66.9~~
~~0.0~~
~~1.0~~
~~2013~~
~~9.9~~
~~51.0~~
~~8.8~~
~~0.0~~
~~69.7~~
~~69.3~~
~~0.4~~
~~69.7~~
~~0.0~~
~~1.0~~
~~2014~~
~~11.4~~
~~58.1~~
~~8.7~~
~~0.0~~
~~78.2~~
~~77.7~~
~~0.4~~
~~78.1~~
~~0.1~~
~~1.1~~
~~2015~~
~~12.8~~
~~68.4~~
~~8.9~~
~~0.0~~
~~90.0~~
~~89.5~~
~~0.3~~
~~89.8~~
~~0.3~~
~~1.3~~
~~2016~~
~~13.8~~
~~82.4~~
~~10.0~~
~~0.0~~
~~106.2~~
~~99.5~~
~~0.5~~
~~99.9~~
~~6.3~~
~~7.6~~
~~2017~~
~~15.5~~
~~73.2~~
~~11.4~~
~~0.1~~
~~100.2~~
~~100.1~~
~~-0.1~~
~~100.0~~
~~0.2~~
~~7.8~~
~~2018~~
~~15.9~~
~~67.8~~
~~11.7~~
~~0.1~~
~~95.4~~
~~94.7~~
~~0.5~~
~~95.2~~
~~0.2~~
~~8.0~~
~~2019~~
~~15.8~~
~~70.2~~
~~12.3~~
~~0.5~~
~~98.7~~
~~97.1~~
~~0.5~~
~~97.6~~
~~1.2~~
~~9.2~~
~~Intermediate Estimates~~
~~2020~~
~~16.1~~
~~76.4~~
~~12.6~~
~~0.1~~
~~105.1~~
~~106.3~~
~~0.7~~
~~106.9~~
~~−1.8~~
~~7.3~~
~~2021~~
~~17.1~~
~~86.5~~
~~13.4~~
~~0.1~~
~~117.1~~
~~115.6~~
~~0.7~~
~~116.3~~
~~0.8~~
~~8.2~~
~~2022~~
~~18.9~~
~~90.3~~
~~14.4~~
~~0.1~~
~~123.7~~
~~122.3~~
~~0.7~~
~~123.0~~
~~0.8~~
~~8.9~~
~~2023~~
~~20.4~~
~~94.3~~
~~15.5~~
~~0.1~~
~~130.4~~
~~129.0~~
~~0.7~~
~~129.7~~
~~0.6~~
~~9.5~~
~~2024~~
~~22.1~~
~~100.8~~
~~16.8~~
~~0.1~~
~~139.7~~
~~138.4~~
~~0.7~~
~~139.1~~
~~0.7~~
~~10.2~~
~~2025~~
~~23.6~~
~~106.1~~
~~18.0~~
~~0.1~~
~~147.8~~
~~146.6~~
~~0.6~~
~~147.2~~
~~0.6~~
~~10.8~~
~~2026~~
~~25.8~~
~~112.7~~
~~19.2~~
~~0.2~~
~~157.9~~
~~156.6~~
~~0.6~~
~~157.2~~
~~0.7~~
~~11.5~~
~~2027~~
~~27.0~~
~~121.0~~
~~20.5~~
~~0.2~~
~~168.6~~
~~167.2~~
~~0.6~~
~~167.8~~
~~0.8~~
~~12.3~~
~~2028~~
~~29.4~~
~~128.1~~
~~21.9~~
~~0.2~~
~~179.6~~
~~178.1~~
~~0.7~~
~~178.8~~
~~0.8~~
~~13.1~~
~~2029~~
~~31.6~~
~~135.9~~
~~23.4~~
~~0.2~~
~~191.2~~
~~189.6~~
~~0.7~~
~~190.3~~
~~0.9~~
~~14.0~~
Source: 2020 Medicare Trustees Report, Table III.D3.
Notes: Sums may not equal totals due to rounding. Some of the fluctuation in year by year spending is due to
~~the payment structure of the Part D program. For example, in 2006, plan bids and therefore payments were~~
~~higher than actual spending; the $4 bil ion in reconciliation payments resulted in lower per capita Part D spending~~
~~in 2007 and 2008. The Medicare Trustees expect that in 2019, incurred reinsurance spending wil be higher than~~
~~plan bids, leading to “significant” reconciliation payments to plans in 2020.~~
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67

~~Medicare Part D Prescription Drug Benefit~~

~~Appendix B. Drug Rebates and PBMs in Medicare~~
~~Part D~~
~~Part D plan sponsors typical y work with pharmacy benefit managers (PBMs) to negotiate price~~
~~concessions from drug manufacturers. PBMs also create networks of contracted retail pharmacies~~
contracted retail pharmacies that dispense prescriptions for Part D plans for set reimbursement. that dispense prescriptions for Part D plans for set reimbursement. PBMs generally~~PBMs general y~~ do not take do not take
delivery of drugs, with the exception of in-house mail-order or specialty pharmacies.delivery of drugs, with the exception of in-house mail-order or specialty pharmacies. ~~247~~
203 Part D price concessions primarily take the form of rebates—price reductions provided after the Part D price concessions primarily take the form of rebates—price reductions provided after the
point of sale—from a list price for a brand-name drug.point of sale—from a list price for a brand-name drug.~~248~~204 Plan sponsors and PBMs can secure Plan sponsors and PBMs can secure
rebates for including a brand-name drug on a plan formulary or for placing the drug on a rebates for including a brand-name drug on a plan formulary or for placing the drug on a
favorable cost-sharing tier. The final value of a rebate favorable cost-sharing tier. The final value of a rebate ~~may~~can be tied to sales volume of a drug and be tied to sales volume of a drug and
may be aggregated and paid to the PBM in may be aggregated and paid to the PBM in ~~instal ments~~installments. .
PBMs have the most leverage to negotiate rebates when there are competing drugs on the market PBMs have the most leverage to negotiate rebates when there are competing drugs on the market
for treating a condition. They have less abilityfor treating a condition. They have less ability to negotiate rebates for sole-source drugs or drugs to negotiate rebates for sole-source drugs or drugs
in the six protected classes, where in the six protected classes, where al all drugs must be covered. ~~drugs must be covered. Rebates have risen from 10.4% of~~
~~total Part D drug costs in 2008 to an estimated 25.3% in 2018.249~~
When Part D plan sponsors contract with PBMs under a pass-through pricing arrangement, the When Part D plan sponsors contract with PBMs under a pass-through pricing arrangement, the
sponsor reimburses the PBM the same amount that the PBM paid the pharmacy for a given drug. sponsor reimburses the PBM the same amount that the PBM paid the pharmacy for a given drug.
If the sponsor uses a PBM lock-in contract, the PBM may negotiate to compensate pharmacies at If the sponsor uses a PBM lock-in contract, the PBM may negotiate to compensate pharmacies at
a lower price for a drug than the price the PBM has guaranteed to the plana lower price for a drug than the price the PBM has guaranteed to the plan~~.250~~—a practice that is known as spread pricing.205 However, under However, under
Part D regulations, any difference between the PBM and pharmacy reimbursement must be Part D regulations, any difference between the PBM and pharmacy reimbursement must be
reported to CMS as an administrative cost and enrollee cost sharing must be based on the lower reported to CMS as an administrative cost and enrollee cost sharing must be based on the lower
~~pharmacy price~~pharmacy price. The Part D rules act as a disincentive to use spread pricing in the Part D program. .
A 2019 Government Accountability Office (GAO) study found that PBMs performed 74% of A 2019 Government Accountability Office (GAO) study found that PBMs performed 74% of
drug benefit management services for Part D plans. PBM compensation primarily consisted of drug benefit management services for Part D plans. PBM compensation primarily consisted of
fees from plan sponsors, with PBMs retaining less than 1% of rebates they negotiated for Part D fees from plan sponsors, with PBMs retaining less than 1% of rebates they negotiated for Part D
plans as compensation.plans as compensation.~~251~~206 According to the GAO, PBMs earned Part D revenue from a volume- According to the GAO, PBMs earned Part D revenue from a volume-
based fee on PBM-processed claims; a per member, per month fee on plan sponsors; or a based fee on PBM-processed claims; a per member, per month fee on plan sponsors; or a
combination of the two. combination of the two.
~~Plan sponsors mainly have used drug rebates to buy down, or reduce, plan premiums for al~~
~~enrollees, rather to reduce the price of specific drugs at the point of sale. As noted, under the~~

~~247 Some large~~ Part D plans also may impose fees on network pharmacies for not meeting quality and other plan requirements. Over time, the volume of such pharmacy fees has increased dramatically. 203 Some large Part D sponsors own their own PBMs, includingPart D sponsors own their own PBMs, including ~~CVS~~ CVS Caremark, UnitedHealth Group, and a coalition of Caremark, UnitedHealth Group, and a coalition of
BlueBlue Cross/BlueCross/Blue ~~Shield~~ Shield plans. Other sponsors may contract with outside PBMs for services.plans. Other sponsors may contract with outside PBMs for services.
~~248~~ 204 CMS, CMS, “Fraud and Abuse;“Fraud and Abuse; Removal of Safe Harbor Protection for Rebates Involving Prescription Pharmaceuticals Removal of Safe Harbor Protection for Rebates Involving Prescription Pharmaceuticals
and Creation of Newand Creation of New ~~Safe~~ Safe Harbor Protection for Certain Point-of-Sale Reductions in Price on Prescription Harbor Protection for Certain Point-of-Sale Reductions in Price on Prescription
Pharmaceuticals and Certain Pharmacy Benefit Manager Service Fees,” 84 Pharmaceuticals and Certain Pharmacy Benefit Manager Service Fees,” 84 Federal Register, February, February 6, 2019, p. 6, 2019, p.
2340, at https://www.federalregister.gov/documents/2019/02/06/2019-01026/fraud-and-abuse-removal-of-safe-harbor-2340, at https://www.federalregister.gov/documents/2019/02/06/2019-01026/fraud-and-abuse-removal-of-safe-harbor-
protection-for-protection-for-~~rebat es~~rebates-involving-prescription-pharmaceuticals. 205 HHS OIG, ~~-involving-prescription-pharmaceuticals.~~
~~249 CMS, “T he 2018 Annual Report of the Boards of T rustees of the Federal Hospital Insurance and Federal~~
~~Supplementary Medical Insurance T rust Funds,” June 5, 2018, T able IV.B8, p. 143, at https://www.cms.gov/Research-~~
~~Statistics-Data-and-Systems/Statistics-T rends-and-Reports/ReportsTrustFunds/Downloads/T R2018.pdf.~~
~~250 HHS OIG,~~ “Memorandum Report: Medicare Part D Pharmacy Discounts for 2008, OEI“Memorandum Report: Medicare Part D Pharmacy Discounts for 2008, OEI -02-10-100120, November -02-10-100120, November
17, 2010, at https://oig.hhs.gov/oei/reports/oei-02-10-00120.pdf. 17, 2010, at https://oig.hhs.gov/oei/reports/oei-02-10-00120.pdf.
~~251~~206 GAO, GAO, “ “Use of Pharmacy Benefit Managers and Efforts to Manage DrugUse of Pharmacy Benefit Managers and Efforts to Manage Drug Expenditures and UtilizationExpenditures and Utilization ,” ,”
https://www.gao.gov/assets/710/700260.pdf. https://www.gao.gov/assets/710/700260.pdf.
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6857

Medicare Part D Prescription Drug Benefit

According to CMS, Part D pharmacy price concessions, net of all pharmacy incentive payments, grew more than 107,400% between 2010 and 2020.207 Under the CMS interpretation of Part D negotiated price, plan sponsors have some latitude to include price CMS interpretation of Part D negotiated price, plan sponsors have some latitude to include price
concessions at the point of sale or to report them to CMS later as DIR.concessions at the point of sale or to report them to CMS later as DIR.
In a 2005 In a 2005 Federal Register notice of final rules to implement the Part D program, CMS said it notice of final rules to implement the Part D program, CMS said it
expected plan sponsors would pass through a high percentage of any drug price concessions in expected plan sponsors would pass through a high percentage of any drug price concessions in
negotiated prices at the point of sale.negotiated prices at the point of sale.~~252~~208 However, in a 2018 However, in a 2018 Federal Register ~~proposal~~notice,, CMS CMS
~~noted~~ said that less than 1% of sponsors had passed through price concessions at retail pharmacies.that less than 1% of sponsors had passed through price concessions at retail pharmacies.~~253~~
~~Instead, sponsors collect and apply the~~ 209 The vast majority of price concessions, including manufacturer vast majority of price concessions, including manufacturer
rebates and pharmacy feesrebates and pharmacy fees, are collected after the point of sale and after the point of sale and ~~report them~~reported to CMS as DIR. to CMS as DIR.~~254~~210 In addition, plan sponsors generally have not included the value of pharmacy fees, which reduces plans’ costs for dispensing drugs, in the Part D negotiated price. Overall, DIR, which consists mainly of rebates, has risen from the equivalent of 12.9% of total Part D drug costs in 2013 to an estimated 33.6% of drug costs in 2023.211
The way in which plan sponsors apply and report price concessions—in negotiated prices or as The way in which plan sponsors apply and report price concessions—in negotiated prices or as
DIR—has an impact on beneficiary out-of-pocket spending, plan premiums, and Medicare DIR—has an impact on beneficiary out-of-pocket spending, plan premiums, and Medicare
spending.spending.
 Specifically, • When plan sponsors do not apply rebates and other price concessions to When plan sponsors do not apply rebates and other price concessions to
negotiated prices at the point of sale, enrollees prescribed more expensive brand- negotiated prices at the point of sale, enrollees prescribed more expensive brand-
name drugs may pay cost sharing, such as coinsurance, based on a plan’s higher name drugs may pay cost sharing, such as coinsurance, based on a plan’s higher
pharmacy price, rather than the lower net price that includes rebates and other pharmacy price, rather than the lower net price that includes rebates and other
price concessions that plan sponsors receive after the point of sale. Higher cost price concessions that plan sponsors receive after the point of sale. Higher cost
sharing means a greater burden on beneficiaries, and it also means more sharing means a greater burden on beneficiaries, and it also means more
beneficiaries accumulate out-of-pocket spending sufficient to reach the beneficiaries accumulate out-of-pocket spending sufficient to reach the
catastrophic portion of the Part D benefit, where Medicare subsidizes a higher catastrophic portion of the Part D benefit, where Medicare subsidizes a higher
share of drug costs and sponsors’ financial risk is reduced. share of drug costs and sponsors’ financial risk is reduced.
• When plan sponsors submit bids to CMS each June to provide Part D benefits for When plan sponsors submit bids to CMS each June to provide Part D benefits for
the following plan year, they must provide CMS with an estimate of expected the following plan year, they must provide CMS with an estimate of expected
DIR. The DIR reduces sponsors’ projected costs for offering the Part D benefit. DIR. The DIR reduces sponsors’ projected costs for offering the Part D benefit.
That, in turn, reduces plan premiums, which are based on the average of plan That, in turn, reduces plan premiums, which are based on the average of plan
bids. Sponsors have a financial incentive to keep premiums low, because they are bids. Sponsors have a financial incentive to keep premiums low, because they are
a key factor considered by beneficiaries when selecting Part D plans. Because a key factor considered by beneficiaries when selecting Part D plans. Because
~~Medicare subsidizes about 75% of premiums, lower premiums also reduce~~
~~Medicare spending in this area of the benefit.~~
~~During the past several years, CMS has put forth proposals to alter the Part D bidding and~~
~~payment system to address concerns about rising drug prices, rising reinsurance costs, and~~
~~growing enrollee out-of-pocket costs. For example, in a 2018 Federal Register notice, CMS~~
~~asked for comment on whether to alter the definition of negotiated prices to (1) include al~~
~~pharmacy price concessions received by a plan sponsor for a covered Part D drug and (2) reflect~~

~~252 CMS,~~ 207 CMS, “Medicare Program; Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs; Policy and Regulatory Revisions in Response to the COVID-19 Public Health Emergency; Additional Policy and Regulatory Revisions in Response to the COVID-19 Public Health Emergency,” 87 Federal Register, May 9, 2022, p.1411, https://www.federalregister.gov/d/2022-09375/p-1411. 208 CMS, “42 C.F.R. Parts 400, 403, 411, 417, and 423 Medicare Program; Medicare Prescription Drug Benefit; Final “42 C.F.R. Parts 400, 403, 411, 417, and 423 Medicare Program; Medicare Prescription Drug Benefit; Final
Rules,”Rules,” 70 70 Federal Register, January 28, 2005, p. 4244, at https://www.federalregister.gov/documents/2005/01/28/05-, January 28, 2005, p. 4244, at https://www.federalregister.gov/documents/2005/01/28/05-
1321/medicare-program-medicare-prescription-drug-benefit1321/medicare-program-medicare-prescription-drug-benefit . .
~~253~~ 209 According to CMS, According to CMS, in recent years less than 1% of plans have passedin recent years less than 1% of plans have passed through any price concessions to beneficiaries through any price concessions to beneficiaries
at the point of sale, and the amount that is passed through is lessat the point of sale, and the amount that is passed through is less than 1% of the total price concessions those plans than 1% of the total price concessions those plans
receive. CMS,receive. CMS, “Modernizing Part D and Medicare“Modernizing Part D and Medicare Advantage to Lower DrugAdvantage to Lower Drug Prices and ReducePrices and Reduce Out of Pocket Out of Pocket
ExpendituresExpenditures,” 83 83 Federal Register, November 30, 2018, p. 62174, at https://www.federalregister.gov/documents/, November 30, 2018, p. 62174, at https://www.federalregister.gov/documents/
2018/11/30/2018-25945/modernizing-part-d-and-medicare-advantage-to-lower-drug-prices-and-reduce-out2018/11/30/2018-25945/modernizing-part-d-and-medicare-advantage-to-lower-drug-prices-and-reduce-out -of-pocket--of-pocket-
expenses. expenses.
~~254~~210 Ibid. Ibid.
211 2023 Medicare Trustees Report, Table IV.B8, p. 150. Congressional Research Service Congressional Research Service

6958 Medicare Part D Prescription Drug Benefit Medicare subsidizes about 75% of premiums, lower premiums also reduce Medicare spending in this area of the benefit. During the past several years, CMS has put forth proposals to alter the Part D bidding and payment system to address concerns about rising drug prices, greater use of DIR, rising reinsurance costs, and enrollee out-of-pocket costs. For example, in a 2018 Federal Register notice, CMS asked for comment on whether to alter the definition of negotiated prices to (1) include all pharmacy price concessions received by a plan sponsor for a covered Part D drug and (2) reflect

~~Medicare Part D Prescription Drug Benefit~~

the lowest possible reimbursement a network pharmacy would receive, in total, for a particular the lowest possible reimbursement a network pharmacy would receive, in total, for a particular
drug. drug. ~~255~~212 No rule was published No rule was published~~.256~~
~~On February 6, 2019, CMS published a proposed rule to bar most prescription drug rebates in~~
~~Part D plans by ending federal anti-kickback protections for rebates.257 CMS chose not to publish~~
~~a final rule when the comment period ended. On July 24, 2020, President Trump signed an~~
~~executive order directing the HHS Secretary to complete the rulemaking.258~~ at that time.213 In May 2022, CMS issued a final rule, effective in plan year 2024, that changes the definition of a Part D negotiated price to the lowest possible reimbursement a network pharmacy is to receive for a particular drug, taking into account pharmacy price concessions such as fees.214 On November 20, On November 20,
2020, HHS issued a final rule to bar most drug rebates2020, HHS issued a final rule to bar most drug rebates in Medicare Part D, ~~, effective in plan year 2022.259 If the final~~
~~rule takes effect, it is forecast to reduce cost sharing for some Part D enrollees who are sicker or~~
~~are taking more expensive brand-name drugs but to increase plan premiums for al enrol ees and~~
~~possibly to increase costs to the Medicare program.260~~

~~Author Information~~

~~Suzanne M. Kirchhoff~~

~~Analyst in Health Care Financing~~

~~255 CMS, “Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce~~ effective in plan year 2022.215 Implementation of the rule was delayed until 2026 as part of the Infrastructure Investment and Jobs Act (P.L. 117-158), subsequently was delayed until 2027 as part of the Bipartisan Safer Communities Act (P.L. 117-159), and was further delayed until 2032 as part of the 2022 IRA. The IRA includes provisions that will affect drug prices and plan payment, including negotiation of certain Part D-covered drugs, mandatory rebates from manufacturers that raise prices above the rate of consumer inflation, and changes in Part D cost sharing. These changes are expected to have a large effect on drug pricing, including possible rebates and discounts. The 2023 Medicare Trustees Report projects that DIR will fall substantially as a share of Part D spending in coming years, largely due to the CMS regulations on negotiated prices and pharmacy payment, and the IRA provisions. The Medicare Trustees expect DIR to decline from the equivalent of 35% of Part D drug costs in 2023 to 14% by 2032.216 212 CMS, “Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce Out of Pocket Out of Pocket
ExpendituresExpenditures,” 83 83 Federal Register, November 30, 2018, p. 62174, at https://www.federalregister.gov/documents/, November 30, 2018, p. 62174, at https://www.federalregister.gov/documents/
2018/11/30/2018-25945/modernizing-part-d-and-medicare-advantage-to-lower-drug-prices-and-reduce-out2018/11/30/2018-25945/modernizing-part-d-and-medicare-advantage-to-lower-drug-prices-and-reduce-out -of-pocket--of-pocket-
expenses. expenses.
~~256~~213 Ibid, Ibid, 62174. 62174.
~~257 CMS, “Fraud and Abuse; Removal of Safe Harbor Protection for Rebates Involving Prescription Pharmaceuticals~~
~~and Creation of New Safe Harbor Prot ection for Certain Point-of-Sale Reductions in Price on Prescription~~
~~Pharmaceuticals and Certain Pharmacy Benefit Manager Service Fees,” 84 Federal Register, February 6, 2019, p.~~
~~2340, at https://www.federalregister.gov/documents/2019/02/06/2019-01026/fraud-and-abuse-removal-of-safe-harbor-~~
~~protection-for-rebates-involving-prescription-pharmaceuticals. T he proposed rule would add an exception to the~~
~~definition of “discount” so that manufacturer rebates would no longer be protected under the safe harbor. In addition,~~
~~the proposed rule would create a new safe harbor under which manufacturers could provide drug price reductions to~~
~~Part D or Medicaid managed care plans under certain conditions.~~
~~258 White House, “ Executive Order on Lowering Prices for Patients by Eliminating Kickbacks to Middlemen ,” July 24,~~
~~2020, at https://www.whitehouse.gov/presidential-actions/executive-order-lowering-prices-patients-eliminating-~~
~~kickbacks-middlemen/.~~
~~259 CMS, “ Fraud And Abuse; Removal Of Safe~~ 214 CMS, “Medicare Program: Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs; etc.,” May 9, 2022, https://www.regulations.gov/document/CMS-2022-0012-4335. 215 CMS, “Fraud And Abuse; Removal Of Safe Harbor Protection For Rebates Involving Prescription Pharmaceuticals Harbor Protection For Rebates Involving Prescription Pharmaceuticals
And Creation Of NewAnd Creation Of New ~~Safe~~ Safe Harbor Protection For Certain Point-Of-Sale Reductions In Price On Prescription Harbor Protection For Certain Point-Of-Sale Reductions In Price On Prescription
Pharmaceuticals And Certain Pharmacy Benefit Manager Service Fees,” November 20, 2020, at https://www.hhs.gov/Pharmaceuticals And Certain Pharmacy Benefit Manager Service Fees,” November 20, 2020, at https://www.hhs.gov/
sites/default/files/rebate-rule-discountsites/default/files/rebate-rule-discount -and-pbm-service-fee-final-rule.pdf. (Rule has not yet been published-and-pbm-service-fee-final-rule.pdf. (Rule has not yet been published in the in the
FederalFederal Register.) AccordingRegister.) According to the rule, “to the rule, “ Several of the positive and negative transfers are imperfect offsets of one Several of the positive and negative transfers are imperfect offsets of one
another. For example, the analyses commissioned for this rule estimated that another. For example, the analyses commissioned for this rule estimated that ~~th e~~the amount saved by reducing amount saved by reducing cost sharing cost sharing
exceeds the cost of any increase in premiums for beneficiaries overall. However, more beneficiaries wouldexceeds the cost of any increase in premiums for beneficiaries overall. However, more beneficiaries would pay more pay more
for premiums, if premiums rise, than they would save in costfor premiums, if premiums rise, than they would save in cost sharing, suggestingsharing, suggesting that outthat out -of-pocket impacts are likely -of-pocket impacts are likely
to vary by individualto vary by individual and the greatest benefit of these transfers accrues to sicker beneficiaries (e.g., those with more and the greatest benefit of these transfers accrues to sicker beneficiaries (e.g., those with more
drugdrug ~~spending~~ spending and/or those usingand/or those using high cost drugs).” high cost drugs).”
~~260 CBO, “ Incorporating the Effects of the Proposed Rule on Safe Harbors for Pharmaceutical Rebates in CBO’s~~
~~Budget Projections—Supplemental Material for Updated Budget Projections: 2019 to 2029 ,” May 2019, Incorporating~~
~~the Effects of the Proposed Rule on Safe Harbors for Pharmaceutical Rebates in CBO’s Budget Projections—~~
~~Supplemental Material for Updated Budget Projections: 2019 to 2029 .~~
~~Congressional Research Service~~

70

~~Medicare Part D Prescription Drug Benefit~~

~~Disclaimer~~
~~This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan~~
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~~under the direction of Congress. Information in a CRS Report should n ot~~ 216 2023 Medicare Trustees Report, p. 150. Congressional Research Service 59 Medicare Part D Prescription Drug Benefit Appendix B. IRA Drug Price Negotiation in Part D The 2022 law known as the Inflation Reduction Act (IRA; P.L. 117-169) requires the Secretary of the Department of Health and Human Services (HHS) to negotiate prices for certain single-source chemical drugs and biologics covered under Medicare Parts D and B.217 To be selected for negotiation, a chemical drug cannot have a marketed generic substitute and must have been approved by the Food and Drug Administration (FDA) for at least 7 years, while a biologic cannot have a marketed biosimilar substitute and must have been licensed by FDA for at least 11 years. In addition, the product must be among the 50 qualifying single-source drugs with the highest gross spending in Part B or Part D. The Secretary must negotiate maximum fair prices (MFPs) for 10 drugs that come into effect in 2026, 15 additional drugs for each of 2027 and 2028, and 20 additional drugs for 2029 and each following year. For the first two years (2026 and 2027), the program applies only to Part D drugs. The IRA excludes the following drugs from negotiation: • low-spend drugs (i.e., drugs with Medicare spending of less than $200 million; indexed for inflation in subsequent years); • plasma-derived products; • orphan drugs designated for only one rare disease and for which the only FDA- approved indication is for such disease;218 and • certain products made by small biotech firms (through 2028).219 The Secretary may delay negotiation of qualifying biologic products for up to two years when the Secretary determines there is a high likelihood that a biosimilar will soon enter the market.220 In August 2023, HHS announced the first 10 drugs selected for negotiation under the Program, with negotiated prices to become effective in 2026.221 In October 2023, the Secretary announced that all nine manufacturers of the selected drugs had agreed to participate in negotiations. 222 217 Biologics are pharmaceuticals derived from a living organism that can be many times the size of a conventional (small-molecule or chemical) drug and have a more complex structure. A biosimilar is a follow-on to a biologic that is “highly similar,” notwithstanding minor differences in clinically inactive components. There are no clinically meaningful differences between a biosimilar and the reference biologic product in terms of safety, purity, and potency of the product. The Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) provided a period of exclusivity for manufacturers of certain biologic brand-name drugs and biosimilar products. 218 The Orphan Drug Act covers drugs intended to treat rare conditions, generally defined as those affecting fewer than 200,000 people in the United States, or those affecting more than 200,000 people but for which there is no reasonable expectation that the costs of developing the drug will be recouped in the United States. (21 USC 360bb). Under the provisions of the Orphan Drug Act, an orphan drug may be indicated for use in multiple diseases or conditions. The IRA’s orphan drug exception is thus not inclusive of all orphan drugs. 219 See IRA §11001. 220 IRA §11002 221 HHS, “Medicare Drug Price Negotiation Program: Selected Drugs for Initial Price Applicability Year 2026,” August 29, 2023, https://www.hhs.gov/about/news/2023/08/29/hhs-selects-the-first-drugs-for-medicare-drug-price-negotiation.html. HHS Assistant Secretary for Evaluation and Planning, “—Inflation Reduction Act Research Series—Medicare Enrollees’ Use and Out-of-Pocket Expenditures for Drugs Selected for Negotiation under the Medicare Drug Price Negotiation Program,” Revised September 13, 2023. CMS was required to choose the 10 drugs from the negotiation-eligible pool of 50 based on their total spending rank. 222 HHS, “Biden-Harris Administration Moves Forward with Medicare Drug Price Negotiations to Lower Prescription Drug Costs for People with Medicare,” October 3, 2023, https://www.hhs.gov/about/news/2023/10/03/biden-harris-administration-moves-medicare-drug-price-negotiations-lower-prescription-drug-costs-people-medicare.html. Congressional Research Service 60 Medicare Part D Prescription Drug Benefit The Secretary and manufacturers are to engage in negotiations on MFPs for the selected drugs from October 1, 2023 to August 1, 2024. During the negotiation period, the Secretary is to consider factors including each manufacturer’s research and development costs for the drug, production cost, any federal financial support for development of the drug, data on patents and on existing and pending exclusivities. The Secretary is to publish the negotiated MFPs for 2026 no later than September 1, 2024. Each subsequent year under the program, MFPs are to take effect two years after new drugs are selected for negotiation. The IRA sets a ceiling on the MFP, based on the lesser of • the weighted average net price of the drug or biologic under Part D (and starting in 2028, average Part B prices);223 or • a percentage of the nonfederal average manufacturer price (non-FAMP). The non-FAMP is a wholesaler price, minus certain discounts, that is used in calculating a maximum price for drugs by the “big four” federal purchasers: the Department of Veterans Affairs, the Department of Defense, the Public Health Service, and the Coast Guard. The MFP ceiling is 75% of the non-FAMP for a drug that has been approved for less than 16 years or 40% of the non-FAMP for a drug that has been approved for at least 16 years.224 An MFP is calculated across all dosage forms and strengths of a drug and is in effect until the first year beginning at least nine months after a generic or biologic substitute for a drug is marketed. Part D plans must carry all drugs with an MFP in their formularies. Author Information Suzanne M. Kirchhoff Analyst in Health Care Financing 223 For Part B drugs, the average price is the ASP from the previous year. For Part D, the average price is based on data form the most recent year available. 224 Starting in 2030, the IRA includes a third MFP ceiling, which is to be 65% of the non-FAMP for a selected drug that has been approved or licensed for at least 12 years but fewer than 16 years. Congressional Research Service 61 Medicare Part D Prescription Drug Benefit Disclaimer This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other be relied upon for purposes other
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