// . //  Insights //  Shaping A Robust Medicare Part D Strategy For 2025

With the conclusion of the 2024 Medicare bid season, Medicare Advantage and Part D (MAPD) plans, along with standalone Part D Plans (PDPs), are now preparing for the fall enrollment period and strategizing for 2025.

Reflecting on transformative changes to the Part D program in 2024

The contract year 2024 bid season featured several significant changes to the Part D program:

  • The Inflation Reduction Act (IRA) introduced transitional changes to the Part D benefit design, bridging the gap between the 2023 and 2025 benefit designs. This included the removal of member coinsurance in the catastrophic phase of the benefit, and capping insulin and vaccine member copays at $35 and $0, respectively.
  • Part D plans are now prohibited from clawing back payments to pharmacies in the form of pharmacy DIR.
  • Insulin manufacturers announced major reductions in list prices, which may have led to rebate reductions in some instances.

These changes resulted in a meaningful increase to the Part D direct subsidy amount compared to 2023, with moderate increases to the Low-Income Premium Subsidy Amounts (LIPSAs) in most regions. With even more impactful changes to Part D benefit designs expected in 2025, MAPD and PDP plans can expect an even larger increase in the direct subsidy relative to what we saw for 2024.

Anticipating key developments for Medicare Part D in 2025

As MAPD and PDP plans pivot to creating their initial 2025 financial projections and Part D product strategies, there are several key items to watch out for this fall and early next spring:

  1. In October or November, CMS will release several public use files that will allow health plans to understand how they are positioned relative to their competitors for 2024. These files will also give potential clues about where competitors may be headed in 2025. The CMS landscape files will include premium changes and more importantly, confirmation of market exits and entries.
  2. Also in the fall, the Centers for Medicare and Medicaid Services (CMS) will release 2024 formulary and benefit files containing information for each carrier at the plan benefit package (PBP) level. As MAPD and PDP plans take on increased liability in Part D in 2025, formulary design will become increasingly important. The change in the benefit will shift more costs to plans above the $2,000 maximum out-of-pocket limit, and carriers will need to consider whether the change in the benefit structure necessitates changes to their formulary. It will be critical for Part D plans to monitor competitor formulary adjustments to keep products both competitive and financially sound.
  3. CMS has confirmed they will update the RxHCC risk score model for 2025. As a much larger portion of Part D revenue will be risk-adjusted in 2025, understanding the impact of the RxHCC model change for MAPD and PDP plans will be necessary for plans to truly assess the potential financial impacts in 2025. As CMS has indicated that the updated risk model will not be made available until the release of the Advance Notice in early 2024, it will be a challenge for plans to truly assess the impact of the Part D changes for 2025 until the start of the bid pricing season. It has been confirmed, however, that the number of HCCs and the conditions that map to those categories will not change relative to the 2024 model.

Setting a comprehensive Medicare Part D strategy

These major developments will allow MAPD and PDP plans to begin developing initial 2025 strategies for formulary, product placement, and risk adjustment. Strategy development will continue through the spring as CMS releases the Advance Notice, the updated RxHCC model, the Final Announcement, and 2025 PDE guidance to solidify the nuances of the IRA benefit changes. Part D plans will also need to remain vigilant for any additional price announcements from manufacturers, as well as any legislative or regulatory developments.