The Inflation Reduction Act took effect on August 16, 2022. This law had a significant impact on Medicare Part D prescription drug coverage. It was going to make improvements that would keep prescription drug costs stable and lower drug costs.
With the implementation of the $2,000 cap on Part D out-of-pocket costs, drug plans faced an increase in their share of costs. There were concerns that plans would raise premiums as a way to limit their exposure. Any significant increase in premiums for Part D stand-alone plans could drive beneficiaries toward Medicare Advantage. To help prevent this, the Centers for Medicare and Medicaid Services introduced the Voluntary Part D Premium Stabilization Demonstration. The most visible feature of this was limiting premium increases to $35 in 2025 and $50 in 2026.
Then, this past summer, CMS announced the end of this demonstration. In a September press release, CMS noted that the prescription drug program would remain stable in 2027, and the total average monthly Part D premium would increase less than $1, from $35.09 in 2026 to $36 in 2027.
But is that really happening? Here’s what I found.
A Look at 2027 Part D Drug Plans
To say I was a bit skeptical about what CMS said in the press release would be an understatement. So, like everyone, I waited anxiously for the Medicare Plan Finder to incorporate the 2027 drug plan information. The data are now there, so I started my annual survey. Every year since 2023, I have reviewed stand-alone plans in three ZIP codes – one each in Fort Lauderdale, Milwaukee and Los Angeles. This year, my focus was on the stability of the market and the premium increases, the professed benefits of the IRA.
The number of plans continues to drop
CMS said the program “would remain stable.” But, based on what I have found, it hasn’t exactly been stable. In 2023, Los Angeles had 26 plans, Fort Lauderdale and Milwaukee, each 23. There has been a whittling away over the years. Next year, two more plans will be exiting selected regions. Heading into 2027, there will be 11 plans in Fort Lauderdale, 10 in Los Angeles and eight in Milwaukee.
Monthly premiums are increasing
- There will be no zero-premium Part D plans in these three ZIP codes, which likely means there are none in the country. Fort Lauderdale is losing two, Los Angeles one and Milwaukee six.
- In Fort Lauderdale, nine plans are increasing monthly premiums from $5.30 – $109 and one plan will drop its premium $5.40. There will be five plans with premiums over $100, one over $200, and one plan cracking the $300 ceiling. On the other end of the spectrum, there are three plans under $20.
- In Los Angeles, eight plans will cost more, from $0.60 – $77.20, and two will cost less, $13.90 and $0.40. This ZIP code will have five plans over $100, three plans over $200, and two plans under $20.
- In Milwaukee, every plan will increase premiums, from $5.30 to $75.20.Two plan premiums will be between $100 and $200 and five will be under $20.
But CMS Said Average Premium Increases Would Be Less Than $1
Grade-school math taught me that, to calculate an average, you add all the numbers and divide by the total count of items. The premium increases for the 29 plans average out to $25.65, a far cry from the $1 CMS touted in the press release.
How can this be? It took quite some digging but I think I figured out how CMS came up with that number. CMS predicts enrollment numbers (how many will sign up for a plan) and then creates a weighted average. It’s a given that most everyone wants to migrate to the cheapest plan. So, if one million drug plan members move to a $5 plan and only 100 choose the one with highest premium, the average price will fall.
That’s nice to know but you must pay the sticker price and not the weighted average premium so prepare to spend more. Based on my old-school calculations, plans in Fort Lauderdale will increase an average of $33.70, in Los Angeles $22.36 and in Milwaukee $19.66.
Tips to Survive Open Enrollment
- Open and study your Annual Notice of Changes. Every plan sends one to all members by the end of September. Pay attention to what is happening to your plan in 2027.
- Check out other plans that are available to you. The ANOC cannot tell you whether your drugs are covered, how much you’ll pay at the pharmacy, or if you need to find a new pharmacy. You can check the Medicare Plan Finder for this information. Log in through your medicare.gov account and find your options. Perhaps a different plan might be a better choice.
- If you received a Notice of Termination, act now. Your plan is going away and the insurance company is not offering an option for 2027. Even though the special enrollment period to get a new plan carries into next year, if you don’t enroll in one before December 7, you won’t have drug coverage January 1.
- Resist the temptation to drop your drug plan and switch to Medicare Advantage. Any increase in monthly expenses is difficult so Advantage can be tempting. You would certainly pay less in monthly premiums but there would be other obstacles. The two most significant ones: finding physicians in-network and dealing with prior authorization.
- Now, take a deep breath. Open Enrollment starts in one week, October 15.
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