My Part D Premium Went Up By 48%. Does Medicare Allow This?
Q: My Part D plan premium went up by 48% in 2024. I remember reading that the new Inflation Reduction Act restricted the amount that our drug plan premiums would increase this year. What happened?
A: A recent analysis by the nonpartisan Kaiser Family Foundation digs into the new provision of law that capped annual growth in the Part D “base” beneficiary premium at 6%. But in 2024 monthly premiums for prescription drug coverage are substantially higher for prescription drug plans — an estimated five times higher on average compared to Medicare Advantage plans that cover prescription drugs.
The Kaiser analysis states that the law applies to the “base” beneficiary premium that Medicare negotiates with drug plans but the law did not apply the cap to the individual plan premium that drug plan enrollees really pay. Many Medicare Part D enrollees faced substantially higher Part D premium increases this year, while enrollees in Medicare Advantage plans with Part D coverage saw little, if any, change in premiums.
The Part D “base” premium is calculated using standardized bids that drug and Medicare Advantage plans submit to cover basic Part D benefits in 2024, but quite likely is not what most beneficiaries pay. Part D plans have wide leeway to vary premiums by plan, and the premium that enrollees pay may be higher or lower than the base premium. Kaiser experts estimate that the average enrollment-weighted monthly premium for Part D stand-alone plans in 2024 is $48 per month. That’s up 21% from $40 in 2023.
On the other hand, monthly premiums for Medicare Advantage plans remained stable with little change. Medicare Advantage plans can use rebate dollars from Medicare payments to lower or eliminate Part D premiums, but there is no equivalent system for Part D plans.
TSCL feels this rule discriminates unfairly against beneficiaries who get their Part D coverage through a free-standing drug plan instead of through Medicare Advantage plans with drug coverage. Beneficiaries who are enrolled in these Medicare Part D plans are not getting equal access to protection from premium rate hikes. TSCL is concerned that without a corresponding 6% cap on premium increases that beneficiaries pay, Part D plan premiums would quickly become unaffordable in coming years if this problem isn’t addressed. Part D plans will be taking on a higher share of costs in 2025 when the Inflation Reduction Act limits out-of-pocket costs to $2,000. Without equal protection from premium hikes, enrollees in free-standing Part D plans might be hit with cost shifts that don’t affect Medicare Advantage plans in the same way.
TSCL is looking for ways to provide stronger protection from Part D premium increases and will be working with members of Congress who support such efforts.
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Sources: “Medicare Part D In 2024: A First Look At Prescription Drug Plan Availability, Premiums, and Cost Sharing,” Juliette Cubanksi, Anthony Damico, Kaiser Family Foundation, November 8, 2023.
