// . //  Insights //  2022 Part D Competitive Environment And Emerging Trends


As 2022 draws closer, the Centers for Medicare and Medicaid Services (CMS) has started to release information that allows us to begin forming a picture of what the Part D market will look like for the upcoming year. This information also provides us an opportunity to consider where Medicare Advantage and Part D (MAPD) and Medicare Prescription Drug Plans (PDPs) might direct their focus as they develop their CY2023 Medicare bids. Oliver Wyman's health actuaries have been assessing this data and have seen several themes emerging related to benefit offerings, premiums, and pharmacy networks, many of which are a continuation of trends seen in the market over the past several years.

In this paper, we explore the following:

  • Trends in offering a $0 Part D deductible and $0 preferred generic copays
  • Utilization of preferred pharmacy networks
  • Consolidation and premium shifts in the PDP market
  • Participation in the Senior Savings Model
  • Updates to the RxHCC model for CY2022
  • Potential changes to the Part D benefit and other mechanisms to manage the growth in prescription drug cost in CY2023 and beyond as outlined in the Build Back Better Act

In the context of this paper, “MAPD” plans refers to individual non-SNP MAPD plans, unless specified otherwise.

Executive summary

Overall, we see a definitive increase in the number of MAPD plans offering a $0 Rx deductible, with PDPs also following the trend despite being more constrained by the dynamics of that market. The trend in offering a $0 Rx deductible is certainly regional and requires a geographic-specific look as plans consider their own benefits. We also see $0 generic copays as a focal point for Part D plans to further enhance their benefit. As benefit enhancements are weighed against profitability, we see plans implementing tiered pharmacy networks as a tool to manage cost.

Examining the 2022 Part D landscape, we see a minor reversal in the recent trend of large nationwide carriers offering enhanced PDP plans with a premium under $20. While key carriers still remain, two large players increased premiums in this sub-market to above $20. Further movement is possible in CY2023 as PDPs weigh the large potential enrollment in this submarket against the viability of the product.

The update to the RxHCC model for CY2022, which is used to risk-adjust Part D direct subsidy payments to plans, may shift dynamics within the market, particularly between low income and non-low income populations. Lastly, as we look beyond CY2022, final passage of the Build Back Better Act may meaningfully restructure the Part D benefit and put limits on drug prices, which will have important implications for all Part D plans.

Trends in the Part D Deductible

An increasingly competitive market sees MAPD plans continue to focus on offering attractive Part D benefits. The Part D benefit can be considered “shoppable” by seniors as it is easier for a consumer to anticipate their maintenance drug claims in the upcoming year than it is to anticipate other benefits, such as inpatient claims.

An analysis of CY2020 through CY2022 benefits shows an increase in the proportion of MAPD plans offering a $0 Part D deductible. This is driven by both established plans enhancing Part D cost sharing by moving their deductibles down to $0 and new market entrants providing $0 deductibles to position their products competitively and gain early membership. Given the upward shift seen in the recently released CY2022 star ratings, which will impact CY2023 bids and revenue, it is very likely we will see a continuation of this trend as many MAPD plans will have access to greater Part C rebates that will allow them to buy-down additional Part D coverage.

For those MAPD plans that include a Part D deductible, the overwhelming majority exclude preferred generics at preferred pharmacies from that deductible. Some of these plans may also exclude drugs on other tiers, such as the non-preferred generic or Select Care tiers, from the deductible.

It is important to note that the prevalence of $0 deductibles in MAPD plans tends to be regional. We see certain states where a $0 Rx deductible is very common, such as California, and we see other states where a $0 Rx deductible would be extremely competitive, such as Wyoming. Plan sponsors must consider these regional variations as they respond to the competitive pressures in their specific markets. The map below shows the percent of MAPD plans in each state that are offering a $0 Part D deductible in CY2022.

Plans with a $0 deductible are far less common in the PDP market, driven by the prevalence of low income benchmark plans and low premium enhanced alternative plans. Given PDPs do not have the benefit of Part C rebates to buy down additional coverage, and considering PDPs already operate on limited margins, having a $0 deductible and still maintaining a competitive premium can be challenging. Despite this market dynamic, we are seeing an increasing share of PDPs offering a $0 deductible for CY2022, though most PDP plans continue to include a deductible. When PDPs offer a deductible, they commonly exclude the preferred generic tier.

Zero-Dollar Generic Copays

Providing $0 preferred generic cost sharing at preferred pharmacies is also an increasingly common benefit enhancement in the MAPD market. In fact, from 2020 to 2022, the percentage of MAPD plans offering a $0 preferred generic copay at preferred pharmacies increased by about 18% and in 2022 and will make up about two-thirds of the available plans.

Due to the dynamics of the PDP market noted above, including the prevalence of low income benchmark plans, low premium enhanced plans, and slim margins, the majority of PDPs do not offer a $0 copay on Tier 1.

Preferred Networks

The table below summarizes preferred generic copay amounts by MAPD plan count.

As Part D represents an increasing challenge for MAOs and PDPs to remain both competitive and profitable, many plan sponsors have turned to preferred pharmacy networks over the past several years as a tool to achieve both. Preferred networks allow health plans to vary cost sharing based on where a member fills their prescription, and in turn drive members to pharmacies where the plan has better discounts, pharmacy rebates, or performance measures. The member benefits by having lower cost sharing when a prescription is filled at a pharmacy in the preferred network.

For PDPs, where there are fewer levers to achieve profitability, we see an overwhelming level of participation in preferred networks, with about 97% having a preferred network in CY2022. For MAPD plans, participation is certainly less; however, the plan offerings from CY2020 through CY2022 point to a meaningful reliance on preferred networks as a mechanism to remain profitable and competitive.

For CY2021, CMS introduced the Senior Savings Model, an opt-in model which encouraged MAPD and PDP plans in the individual market to offer Insulin products at reduced cost sharing for non-low income members in the deductible, initial coverage, and coverage gap phases of the Part D benefit. Plan sponsors are not required to include this benefit with all of their plan offerings.

The table below summarizes MAPD network type weighted by membership.

Senior Savings Model

By participating in the model, CMS removes a financial disincentive that would typically prevent plans from offering enhanced Insulin benefits in the coverage gap. Specifically, under the model, the manufacturers' discount payment is still applied to the total gross drug cost rather than the member's copay, and thus, the only increase in plan liability results from the reduction in the member cost sharing received. CMS has also allowed participating plans the option to be subject to more narrow risk corridors in order to limit the risk associated with offering this benefit.

Participation in the model was strong in CY2021 with about 33% of MAPD and 31% of PDP plans offering the new benefit. For CY2022, the model momentum will continue as about 45% of MAPD plans are participating in the model, with over 35% of those plans being new to the model. Of these plans, about 83% offer the benefit at a $35 copay, which is the maximum copay plan sponsors can charge under the model. However, certain plans are offering a copay further reduced beyond the statutory amount, including about 5% of plans offering a $0 copay.

In the PDP market, 258 plans (or about one-third) are participating in the model in CY2022. Though this represents a reduction from the 310 plans participating in the model in CY2021, this is the result of a consolidation of plans in the PDP market, namely the crosswalk of a significant number of Cigna and WellCare plans that previously offered the benefit. Given these plan consolidations, we would not necessarily expect the reduction in the number of plans corresponds to a reduction in the number of members covered under a plan participating in the model. After accounting for plan crosswalks, participation effectively increased to include 51 additional PDP plans. In total, about one-third of PDP plans available in CY2022 will be participating in the model.

PDP Under $20 Premium Market

A recent trend over the last few years in the standalone PDP market has been an increase in the number of plans offering an enhanced benefit for a premium of $20 or below. These plans typically offer the full Part D Defined Standard deductible and less enhanced cost sharing than higher premium PDP plans. This submarket has been dominated by large nationwide carriers who presumably have higher negotiating leverage for purposes of rebates and discounts, and also have a larger base of membership across which to spread administrative costs.

For CY2022, however, there has been a significant decrease in the number of PDP plans at a premium of $20 or less. In fact, the percentage of plans offering a premium of $20 or less decreased from 30% in CY2021 to only 20% for CY2022. When weighted on CY2021 membership, this represents 23% of membership in plans offered in CY2021 and 13% of enrollment in plans offered in CY2022. The decrease in the number of plans at this level of premium is driven by two major factors:

  • There are two national PDPs, Humana and Elixir Insurance Company, that have increased premiums on the majority of their current plan offerings to over $20
  • As previously noted, there has been a significant amount of plan consolidation in the PDP market. For the under $20 premium segment of the market specifically, WellCare is cross-walking a large number of their plans that were under a $20 premium into other plans with a premium below $20 for CY2022. Though this reduces the number of plans, it does not necessarily suggest it would reduce the number of members covered at the level of premium.

In addition to Wellcare, the only remaining players in the under $20 market in CY2022 will be CVS / Aetna and Clear Spring Health, a relatively newer player in the market. This shift is likely driven by the continued reduction in the CMS direct subsidy, drug trends fueled by high-cost specialty medications, and the inability to continually reduce administrative costs year over year.

2022 RxHCC Model

For CY2022, CMS performed a recalibration of the RxHCC model which is used to risk-adjust direct subsidy payments to plans. This recalibrated risk model represents a significant shift in the model coefficients as the base years of diagnoses and drug data used for calibration were rolled forward from 2014 and 2015 to 2017 and 2018. The shift in the prescription drug landscape (i.e., new high-cost cancer medications, amongst others) are reflected in the changes for certain disease state coefficients. Additionally, since the CMS RxHCC model is calibrated to plan costs before rebates, the impact of high-cost medications, which also typically have high rebates, likely overstates the relative financial risk of some groups. Namely, we expect that Part D plans will see a significant increase in risk scores for low-income members, primarily impacting MAPD Special Needs Plans (SNPs). Consequentially, we anticipate a corresponding decrease in Part D risk scores and revenue for non-low income members due to this dynamic. As more weight is shifted to the coefficients rather than demographic factors, we anticipate PDP plans, which are typically coded less effectively, are likely to see less favorable risk scores for their members.

Build Back Better Act

As Congress continues to deliberate the provisions of the Build Back Better Act, there are many components of the legislation with the potential to cause significant shifts in the Part D market. In particular, the most recent version of the bill , released on 11/3/2021 and passed in the House on 11/19/2021, includes a proposed redesign of the Part D benefit that would take effect in 2024 and is expected to have significant implications for beneficiaries, MAOs and PDPs, drug manufacturers, and the federal government. The provisions of the benefit redesign, which are subject to change in the Senate, include:

  • A $2,000 maximum on out-of-pocket costs for seniors
  • Elimination of the coverage gap phase of the benefit and an associated restructuring of the manufacturers’ discount percentage. Under the proposed redesign, the liability for manufacturers of applicable brand medications (as defined in 42 CFR 423.100) would be 10% in the initial coverage phase and 20% in the catastrophic phase; the bill would also extend the manufacturers’ discount to low income members (currently only applies to non-low income members)
  • A reduction in the reinsurance percentage paid by the federal government for catastrophic claims from 80% to 20% for brand drugs and 40% for generic drugs. As noted above, manufacturers of brand drugs would be liable for 20% of the gross cost of the drug and plans would be responsible for the remaining 60% for all drugs in the catastrophic phase of the benefit.
  • A reduction in beneficiary coinsurance in the initial coverage phase from 25% to 23% under the Defined Standard benefit
  • An adjustment to the percentage used to calculate the base beneficiary premium from 25.5% to 23.5%, which would increase the CMS risk-adjusted direct subsidy (all other things being equal)

The bill includes other provisions related to price negotiations for a subset of high-cost drugs, caps on price increases relative to inflation, reduced Insulin costs for beneficiaries (similar to the current Senior Savings Model), as well as a number of other items that would have additional effects on the market. As the bill moves through the Senate, any changes to the specifications will be important to monitor as they will influence the specific impacts to Part D plans.


Part D benefit design is a critical aspect of any product offered by a Medicare Advantage Organization or Medicare Prescription Drug Plan and will continue to be as plan sponsors begin to develop their product portfolios for CY2023. Offering plans that are both competitive and profitable usually involves trade-offs, which requires plan sponsors to give thoughtful consideration to the dynamics of their specific markets in order to optimize their products. In doing so, plan sponsors must assess the current state and trends in Part D benefit offerings and premiums in their specific markets, as well as their own experience in 2021 and the potential drivers of any shifts in enrollment for 2022 following the open enrollment period.

As plans look to the future, they must also be mindful of the potential impact of reforms to the Part D benefit design and prescription drug pricing currently being debated in Congress. These potential changes from Congress are expected to have meaningful impacts related to Part D premiums, benefits, and product strategies.