The misnamed Inflation Reduction Act (IRA) reared its ugly head this year by creating instability in the Medicare Part D Program.  On July 29, 2024, the Centers for Medicaid and Medicare Services (CMS) announced the Part D base beneficiary premium and the national average monthly bid amount for Medicare Advantage and standalone prescription drug plans for 2025.  These two figures are used to determine the monthly premium for a Medicare plan’s basic benefit option, which will be set in the fall of 2024.  The IRA accounted for base premium increases but not individual plan premium increases, which has led to significant increases in costs for individual plans.

The CMS announcement came six months after the January 31, 2024 proposed payment rule update for 2025 Medicare Advantage and Part D.  According to a Berkley Research Group (BRG) analysis, Medicare Advantage beneficiaries could see their supplemental benefits reduced or cost-sharing increase by an average of $33 monthly in 2025.  Even worse, CMS’s proposed rates for Medicare Advantage plans in 2025 will not offset rising medical costs.  The BRG analysis projected that medical costs would rise between 4 percent and 6 percent in 2025, and the CMS proposal would cut plan benchmark payments by 0.16 percent.

But even without that analysis, CMS has a poor track record for predicting rates.  In 2024, CMS announced “stable premiums” for July and downplayed the increase in bid amounts and the base premium.  Plan-level data released in October exposed that standalone Part D plan premiums increased by 21 percent on average.  While the base premium decreased, the average bid amount increased by 85 percent from 2023 to 2024, driving up premiums for standalone Part D plans.

CMS reported that the national average bid amount increased by 179 percent, from $64.28 in 2024 to $179.45 in 2025.  With this number being larger than the previous year, premiums for standalone Part D plans are likely to increase more in 2025 than they did in 2024.

In an attempt to mitigate the cost of the increased premiums, CMS announced a voluntary demonstration program to limit premium increases by creating new subsidies to insurance companies that would apply a uniform reduction of $15 to the base beneficiary premium for all plans, limiting year-over-year total premium increases to $35, and limiting risk to plans by widening the risk corridors.  There is no price tag on this proposal.  The IRA has allowed insurance companies continue to raise premiums, increasing overall healthcare costs for consumers.  The CMS announced that all standalone Part D plans are eligible for the benefits, but the increased costs will ultimately be passed on to patients and taxpayers.  

Government interference in the healthcare marketplace has not lowered prices.  The CMS proposals for Medicare plans in 2025 are another example of how the Biden-Harris administration has destabilized Medicare Part D and undermined the Medicare program.