Medicare Part D Plans Face Increased Financial Risk and Declining Options for Beneficiaries
Medicare's stand-alone prescription drug plans (PDPs) are experiencing significant challenges, including higher premiums and a substantial reduction in available options for beneficiaries. Between 2023 and 2026, the number of PDPs decreased by 55%, from 804 to 360 plans. This decline is partly attributed to the Inflation Reduction Act of 2022 (IRA), which restructured Part D benefits. The IRA increased the generosity of standard benefits, improving affordability for many but also leading to higher drug spending. Additionally, the IRA shifted greater financial liability to Part D plan sponsors, making their benefit costs less predictable. In 2025, Medicare significantly reduced its reinsurance payments to plans while increasing direct-subsidy payments, forcing plans to bear risk on 60% of brand-name drug spending above the out-of-pocket (OOP) cap, compared to 15% previously. This change, coupled with a lowered OOP cap, has created uncertainty for plans regarding future prescription fills and overall costs. ...