Keeping watch on Medicare: Access prescription drug plans and premiums
The Inflation Reduction Act (IRA) significantly changed the popular Medicare drug programs.[1] While an IRA policy goal is to reduce the out-of-pocket drug spending, beneficiaries may experience higher drug plan premiums and have fewer drug plans to choose from.[2]
Although the IRA passed in 2022, the law’s provisions taking effect for the first time this year may exacerbate challenging market dynamics for insurers and plan sponsors. A DLA Piper assessment of how the number and types of Medicare plans changed over the last three years poses potential considerations for policymakers as 2025 plans are carried out.
The state of the drug plan market as the IRA comes into effect
Prior to implementation of key IRA provisions that affect drug plans’ risk and cost, plans both exited and entered the market. We evaluated those historical shifts in plan access and premiums to inform policymakers about potential risks to plan access and affordability as the IRA is implemented. Notably, we found in our assessment that low-income and counties outside of metro areas had the fewest Part D plans to choose from in 2024 and the greatest growth in premiums. We found there is significant variation in premium growth between plans and areas of the country.
The IRA became law in 2022, but some provisions will be first implemented in 2025 (eg, out-of-pocket cap on drug spending for Medicare beneficiaries, Medicare Part D benefit redesign), and others in 2026 (eg, first year of Medicare Drug Price Negotiation Program, or MDNP, negotiated prices). Insurers offering drug plans in Part D will likely face greater responsibility for higher-cost beneficiaries with a reduction in federal subsidy with the IRA. To manage these costs, Part D plan sponsors can increase premiums, reduce benefits, or exit the market.[3] The resulting market dynamics from these changes could increase the cost of drug coverage (premium price) or make fewer plans available, as has already been seen this year. In fact, to blunt the anticipated growth in premiums in 2025, the Biden-Harris Administration announced a demonstration program that paid Part D health plan sponsors an additional subsidy. It cost the federal government $5 billion to stabilize base premium growth in participating standalone Medicare prescription drug plans (PDPs).[4]
Breaking down Medicare plan costs
Medicare Advantage Prescription Drug plans (MA-PDs), which tend to have lower drug costs and incur fewer losses relative to PDPs, have been steadily growing in membership since the inception of the Medicare Part D program. PDP plans have simultaneously been declining in number and in membership.[5] MA-PD plans offer lower cost-sharing relative to PDPs and enhanced benefits such as dental care.[6] As the IRA is implemented, more PDPs may exit the market, leaving fewer options for patients.[7] In fact, 35 percent fewer PDPs are available in the Part D market in 2025 relative to 2024.[8]
In this assessment, we evaluate access to Medicare Drug Plans (PDP and MA-PD) and premiums in 2024 compared to 2021 to anticipate how plan access will affect different parts of the US. We differ from other reports by considering county-specific characteristics (ie, income, urbanicity) and by comparing trends over time. In our next assessment, we will compare the 2025 plan offerings and premiums to these existing trends from 2024.
We found that, while Part D plan premium growth has been modest on average in 2024 relative to the prior period, there were sizeable differences in premiums, plans available, and their growth between plan types and in different areas of the country. Policymakers may consider whether the continued erosion of the PDP market is in the best interest of Medicare beneficiaries or the federal government and determine policy solutions to address this decline if there is a desire to retain plan choice.
Our Medicare plan assessment
All information in the assessment is taken from the publicly available Centers for Medicare and Medicaid Services (CMS) plan files and US Census Bureau data. The assessment examines how the number and types of plans have changed from 2021 to 2024. We selected 2021 as the base year for comparison, as there was an exit of seven PDPs in 2022. The PDP market remained fairly constant to 2024. This is an informative analog, as there will be a decline of similar magnitude in 2025 – with seven PDPs leaving the market as the benefit design changes in the IRA take effect – which we will analyze in our next report.[9]
Our approach to the assessment
We removed the plans that were in US territories, special needs plans, and non-initial coverage plans. Within the PDPs, we identified benchmark plans where people receiving the federal low-income subsidy could enroll without having to pay a premium.[10] We created county groups based on income (according to the Census Bureau) and community type (based on Rural-Urban Continuum Codes), defining “metro,” “metro-adjacent,” and “nonmetro-adjacent” counties associated with the plans geographic areas. PDPs are set up in regions that can encompass one or more states. MA-PD regions are at the sub state level. When we evaluated access to plans by county, one plan could encompass multiple counties and would be counted each time as being available in that county. We then compared plan access and premiums in Q1 2024 and Q1 2021.
Findings: Medicare plan access and premium costs
- While premium growth between 2021 and 2024 was modest on average (8 percent), it included significant increases for PDPs (45 percent) and major declines in the MA-PDs premiums (-23 percent). (Chart 1)
- While Part D premiums were higher on average in nonmetro areas relative to metro areas, there were fewer MA-PDs outside of metro areas and their premiums were lower relative to PDPs. (Table 1)
- There were fewer Part D plan choices outside of metro areas. The average number of PDPs per county was similar across all county types, but there were fewer MA-PDs outside of metro areas. (Table 2)
- Benchmark plans (PDP-Low Income Subsidy, or PDP-LIS) had the lowest availability of any plan type at less than three plans per county, similarly in metro and nonmetro areas. (Table 2)
- There were fewer plans available in the lowest-income counties relative to the highest income counties, again related to different access to MA-PD. (Chart 2)
- Premiums grew the most on average for the lowest-income counties, with the highest growth rate in PDP premiums (including benchmark PDPs) in the lowest-income counties. There are fewer MA-PD plans available in lowest-income counties relative to higher-income counties. (Table 3)
- The states with the largest premium increases for PDPs had more plans exit in their markets relative to the states with the smallest increases in PDP premiums, with PDPs premiums costing $22 less on average in 2024 in the lowest-increase states relative to the highest-increase states. (Tables 4A and 4B)
Chart 1: Average Medicare Part D premium growth by plan type from 2021 to 2024 (percent change 2024 vs. 2021)
Table 1: Average 2024 Medicare Part D premiums by plan type and urban-rural classification (percent change in county of plans in 2024 vs. 2021 in parentheses)
Geography of county |
All plans |
MA-PD |
PDP |
PDP-LIS |
Metro |
$34.75 (6%) |
$13.15 (24%) |
$61.53 (48%) |
$35.00 (34%) |
Metro-adjacent |
$38.29 (7%) |
$14.26 (25%) |
$60.21 (45%) |
$35.25 (34%) |
Nonmetro |
$43.23 (13%) |
$16.73 (21%) |
$58.18 (41%) |
$36.37 (30%) |
Table 2: Average number of Part D plans per county in 2024 by plan type (percent change in county of plans in 2024 vs. 2021 in parentheses)
Geography of county |
All plans |
MA-PD |
PDP |
PDP-LIS |
Metro |
50.3 (-1%) |
28.6 (48%) |
20.2 (-33%) |
2.7 (-65%) |
Metro-adjacent |
43.4 (-1%) |
21.7 (78%) |
20.1 (-33%) |
2.8 (-64%) |
Nonmetro |
35.0 (-5%) |
13.7 (110%) |
20.4 (-31%) |
3.0 (-61%) |
We matched the county data of the plan location with its income drawn from Census Bureau data. We then divided all the counties into five groups with the highest income counties on average in Quintile 1 and the lowest average income counties in Quintile 5. We found that the number of plans available in each county declined with declining income. (Chart 3)
We also examined the change in premiums by county. We found that premium growth was highest in the lowest-income county quintiles, with the highest premium growth in these low-income counties in PDPs and LIS-eligible PDPs.
Chart 2: Average number of plans available by quintile of income by county
Table 3: Part D premiums in 2024 and growth relative to 2021 (in parentheses), by quintile of income in the county
Income in county by quintile |
All plans |
MA-PD |
PDP |
PDP-LIS |
1 (highest-income quintile) |
$37.45 (10%) |
$15.24 (-21%) |
$61.06 (46%) |
$37.72 (29%) |
2 |
$38.23 (7%) |
$16.01 (-22%) |
$59.54 (42%) |
$37.64 (29%) |
3 |
$38.43 (6%) |
$14.65 (-28%) |
$59.30 (42%) |
$37.52 (30%) |
4 |
$38.73 (8%) |
$13.44 (-23%) |
$60.2 (46%) |
$37.58 (36%) |
5 (lowest-income quintile) |
$39.18 (11%) |
$13.08 (-22%) |
$60.75 (49%) |
$37.51 (41%) |
State-level assessment
As PDP premiums grew more on average relative to MA-PDs, and the PDP market saw the most plan exits, we evaluated PDP plan premiums in states. We found that the ten states with the largest PDP premium increases in 2024 relative to 2021 had an average monthly premium of $22 greater than the states with the smallest PDP premium increases in 2024, or an average increase of 66 percent. We found that, in those states, more PDPs exited: There were ten PDPs fewer per state in 2024 relative to 2021. In the 10 states with the smallest premium increases, there were 7 PDPs fewer per state in 2024 relative to 2021 and an average premium increase of 27 percent.
Table 4A: Ten states with the largest increases in 2024 PDP premiums and the number of plans exiting relative to 2021 (* indicates the state is also among the highest ten states in total premium growth, note that one PDP region may cross multiple states)[11]
State |
PDP premium 2024 |
Percent change PDP premium vs. 2021 |
PDPs in 2024 |
Exits of PDPs vs. 2021 |
California* |
$83.27 |
82% |
22 |
-10 |
Georgia |
$68.46 |
73% |
20 |
-12 |
Nevada* |
$63.27 |
65% |
20 |
-9 |
Mississippi* |
$59.18 |
65% |
18 |
-9 |
New York |
$73.93 |
63% |
15 |
-13 |
New Hampshire |
$63.31 |
63% |
20 |
-8 |
Maine* |
$63.31 |
63% |
20 |
-8 |
Indiana |
$58.47 |
61% |
20 |
-10 |
Kentucky |
$58.47 |
61% |
20 |
-10 |
Ohio |
$60.63 |
59% |
20 |
-10 |
Average |
$65.23 |
66% |
20 |
-10 |
Table 4B: Ten states with the smallest increases in 2024 PDP premiums and the number of plans exiting relative to 2021 (PDP regions encompass multiple states)
State |
PDP premium 2024 |
Percent change PDP premium vs. 2021 |
PDPs in 2024 |
Exits of PDPs vs. 2021 |
Idaho |
$56.98 |
27% |
20 |
-8 |
Utah |
$56.98 |
27% |
20 |
-8 |
Montana |
$54.91 |
27% |
21 |
-7 |
South Dakota |
$54.91 |
27% |
21 |
-7 |
North Dakota |
$54.91 |
27% |
21 |
-7 |
Wyoming |
$54.91 |
27% |
21 |
-7 |
Minnesota |
$54.91 |
27% |
21 |
-7 |
Nebraska |
$54.91 |
27% |
21 |
-7 |
Iowa |
$54.91 |
27% |
21 |
-7 |
New Mexico |
$55.15 |
25% |
21 |
-6 |
Average |
$43.66 |
27% |
20 |
-7 |
Key findings from the Medicare assessment
This assessment establishes a baseline of Medicare Part D plans and premiums as of 2024. As the IRA is implemented in 2025, premiums will likely rise as a result of changing financial obligations and less competition due to plan exits. There will likely be offsetting effects in 2025 from the CMS premium stabilization program, which may not continue into future years.
We found in our baseline assessment that prior to the IRA, low-income and nonmetro areas already had less access to plans and have since seen higher premium growth over time. We found that the states with the highest premium growth also have had the most PDP plan exits, so monitoring the effects in those geographies where access is already degrading is key. As the IRA is implemented, we will monitor these trends to evaluate how beneficiaries’ health and finances may be affected by the change in law.
Next steps
Our next assessment will examine the 2025 plan, premium, and enrollment data, considering changes in specific geographies. If access continues to degrade in the highest-need areas of the country CMS, Congress and policymakers may consider approaches to address the potential challenges identified here. This could include a reallocation of subsidies or other approaches to bolster and support the competitive market.
[1] The IRA directs the government to set prices for a select and growing set of medicines through the Medicare Drug Price Negotiation Program (MDNP) each year beginning in 2026. The IRA also established a new structure in the Medicare drug benefit (Part D) that will increase the amount of costs paid by insurers for higher-need patients, a penalty on manufacturers for drug price increases over the inflation rate, and a $2,000 cap on out-of-pocket expenses for covered Part D drugs. Part D drugs are typically picked up in a pharmacy and are self-administered (like pills, creams, or self-injections).
[2] https://jamanetwork.com/journals/jama-health-forum/fullarticle/2814988.
[3] Ford C, Westrich K, Buelt L, Loo V. Payer reactions to the implementation of the Inflation Reduction Act: forecasting future changes to Medicare Part D plans. Presented at: AMCP Nexus 2023; October 16-October 19, 2023; Orlando. Article accessed at https://www.ajmc.com/view/payers-expect-the-inflation-reduction-act-to-financially-impact-medicare-part-d-plans.
[4] CMS announcement https://www.cms.gov/newsroom/fact-sheets/cms-releases-2025-medicare-part-d-bid-information-and-announces-premium-stabilization-demonstration and CBO analysis https://www.cbo.gov/publication/60804 and CBO presentation https://www.medpac.gov/wp-content/uploads/2024/08/Tab-K-Part-D-status-January-2025-SEC.pdf.
[5] https://www.medpac.gov/wp-content/uploads/2023/10/Structural-issues-in-Part-D_Nov24_SEC.pdf.
[6] 10 Reasons Why Medicare Advantage Enrollment is Growing and Why It Matters KFF, 2024 https://www.kff.org/medicare/issue-brief/10-reasons-why-medicare-advantage-enrollment-is-growing-and-why-it-matters/, and Commonwealth Fund “Traditional Medicare or Medicare Advantage: How Older Americans Choose and Why” 2022 accessed https://www.commonwealthfund.org/publications/issue-briefs/2022/oct/traditional-medicare-or-advantage-how-older-americans-choose.
[7] Avalere https://avalere.com/insights/how-may-the-ira-shift-part-d-market-dynamics.
[8] https://www.kff.org/medicare/issue-brief/a-current-snapshot-of-the-medicare-part-d-prescription-drug-benefit/.
[9] https://www.kff.org/medicare/issue-brief/a-current-snapshot-of-the-medicare-part-d-prescription-drug-benefit/.
[10] These plans were identified as those that were marked as those that had Part D basic premium amounts below the regional benchmark in CMS Prescription Drug data and excluded those that were marked as ‘Sanctioned.’ https://www.cms.gov/medicare/coverage/prescription-drug-coverage.
[11] While Part D premiums across all plan types grew eight percent on average in the US, certain states saw larger increases in premiums from 2021 to 2024. We identified the ten states with the largest increase in premiums (2024 vs. 2021). Average Part D Premium increase in 2024 vs. 2021 across all plan types, nine states plus Washington, DC, with largest increases: Rhode Island, 57 percent; Alaska, 48 percent; California, 37 percent; Vermont, 33 percent; Maryland, 33 percent; Nevada, 27 percent; Maine, 25 percent; Mississippi, 24 percent; Kansas, 21 percent; and Washington, DC, 20 percent.