Here is what you’ll find in this week’s newsletter!
Important links 🔗 - the best articles we found this week about the Medicare Market along with links to Jared’s recent LinkedIn posts.
Deep Dive 📚 - The Part D Redesign, Two Years In: Bids, Premiums, and Risk
Sponsor Snapshot 🚀 - brought to you by VRI
It’s only a 5 minute read, but it will make you 10x smarter.
Here are IMPORTANT LINKS 🔗 for the week:
Does Medicare pay for long-term care? Many people get it wrong — and it may cost them later - (link)
IMC's Voice of the Coalition: A Conversation with Jared Strock - (link)
Medicare spent hundreds of millions of dollars on ineligible drugs, audit finds - (link)
Medicare Advantage satisfaction dips amid margin rebuild efforts - (link)
CMS Cracks Down on Massive $3.4 Billion Medical Equipment Supplier Fraud Scheme - (link)
Samsung Health Recognized for Connected Care Innovation with Medicare App Library Inclusion and Recognition of Excellence for its support of “Kill the Clipboard” - (link)
Why is MyChart becoming a cyber target? - (link)
The Republican origins of Medicare for all - (link)
Ominous outlook for Medicare drug spending - (link)
New House Bill Could Let Medicare Enrollees Contribute to HSAs- (link)
Jared’s recent LinkedIn posts:
DEEP DIVE 📚
The Part D Redesign, Two Years In: Bids, Premiums, and Risk
When the Inflation Reduction Act's Part D redesign took effect in 2025, the pitch to beneficiaries was simple: no more donut hole, and a hard $2,000 annual cap on out-of-pocket drug costs.
Two plan years in, the promise held, but the bill didn't disappear. It moved. This is where.
The new structure
The redesigned Part D benefit collapsed the old four-phase design (deductible, initial coverage, coverage gap, catastrophic) into three phases starting in 2025:
Deductible phase — beneficiary pays 100% up to the deductible
Initial coverage phase — beneficiary pays 25% coinsurance; the plan sponsor typically covers 65–75% depending on drug type; manufacturers cover roughly 10% of applicable drugs through the new Manufacturer Discount Program (MDP)
Catastrophic phase — once a beneficiary's out-of-pocket spending hits the annual cap ($2,000 in 2025, $2,100 in 2026), their cost-sharing drops to zero.
The old Coverage Gap Discount Program gave way to the new Manufacturer Discount Program, but the more consequential change was on the government's side: CMS's reinsurance share in the catastrophic phase, which was previously 80%, dropped sharply, though not to a single flat number: it's now 20% for applicable drugs (those covered under the Manufacturer Discount Program) and 40% for non-applicable drugs.
Either way, that gap didn't disappear. It landed on Carriers in the form of risk. Federal Part D subsidies actually grew sharply alongside it, from $27.5 billion in 2023 to $51.7 billion in 2025. What changed is how the government pays: reinsurance covered actual costs after the fact; the new direct subsidy pays off a plan's own bid, win or lose. Sponsors are the ones holding the bag if that bid is wrong.
The bid numbers tell the real story
CMS's national average monthly bid amount (NAMBA) (what it actually costs sponsors to provide the basic Part D benefit) shows the shift in stark terms:
Year | NAMBA | YoY change |
|---|---|---|
2023 | $34.71 | — |
2024 | $68.24 | +97% |
2025 | $179.45 | +163% |
2026 | $239.27 | +33% |
2027 | $296.05 | +24% |
Source: CMS Annual Release of Part D National Average Monthly Bid Amount and Other Part C & D Bid Information
That's a 753% increase in plan sponsor cost expectations between 2023 and 2027, almost entirely attributable to sponsors absorbing the risk that used to sit with the federal government and, to a lesser extent, beneficiaries.
Why beneficiaries didn't feel it (yet)
If plan costs rose sixfold, why didn't premiums?
Because Congress anticipated this.
The IRA caps annual growth in the base beneficiary premium (BBP) at 6% per year through 2029, regardless of what's happening to underlying plan costs. The actual BBP moved modestly: $38.99 in 2026 to $41.33 in 2027, a 6% increase, which is the maximum allowed.
But CMS is required to publish what the premium would have been without that cap, and the gap is the clearest evidence of cost-shifting in the entire redesign:
Year | Actual BBP (capped) | Uncapped BBP (no stabilization) |
|---|---|---|
2024 | ~$34.70 | $39.35 |
2025 | $36.78 | $55.98 |
2026 | $38.99 | $75.38 |
2027 | $41.33 | $94.06 |
Source: CMS Annual Release of Part D National Average Monthly Bid Amount and Other Part C & D Bid Information
By 2027, the stabilization mechanism is suppressing nearly half of what the premium would otherwise be. That gap is being absorbed by sponsors through bids and, increasingly, through tighter formularies and utilization management, not disappearing.
Note: the BBP cap only covers the basic benefit. Enhanced and alternative plans charge a supplemental premium on top of that, for extra coverage, and the supplemental premium isn't touched by the stabilization provision.
Where beneficiaries actually landed
The headline $2,000 (now $2,100) cap masks how little beneficiaries typically spend to reach it.
A Milliman actuarial analysis of individual-market claims data from 2023 through early 2025 found that Part D beneficiaries reaching the catastrophic phase spent an average of only about $1,200 out of pocket to get there (well under the nominal cap) because of how manufacturer discount amounts and accumulation rules interact with the benefit structure.
The analysis excludes Employer Group Waiver Plan (EGWP) members and covers drug cost-sharing only, not premiums.
For the individual market, this means the redesign's real-world beneficiary protection kicked in earlier than the sticker number suggests.
More beneficiaries, hitting the cap sooner
The redesign's cost shift isn't landing on a static population.
Stand-alone Part D enrollment has grown from 22.1 million in August 2023 to 25.1 million as of August 2026.
Source: MMI+ Med Advantage Insights Web App 👉 MMI+ is now $49/month for your first 3 months (offer ends Sept 15)
At the same time, the number of stand-alone PDP offerings decreased 31% (-167) from 2025 to 2026, and decreased 47% (-319) from 2024.
More beneficiaries are landing in fewer stand-alone plans.
Considering the 2024 Low-Income Subsidy eligibility expansion, stand-alone Part D LIS enrollment reached 4.3 million in 2026.
LIS enrollees are disproportionately likely to reach the catastrophic phase, since they face little to no cost-sharing along the way.
A larger, more subsidy-eligible population reaching a $0-beyond-the-cap benefit means sponsor liability isn't just growing per beneficiary. It's growing in volume, compounding the bid pressure mentioned above.
What this means for the market
Stand-alone PDPs are under the most pressure. CMS took the unusual step of rejecting some stand-alone PDP bids in the 2026 cycle over unusually high premium increases. That followed a voluntary Premium Stabilization Demonstration CMS introduced back in July 2024 for the 2025 plan year (reducing the BBP by $15 for participating plans that year, later scaled to $10 for 2026, and capping year-over-year total premium growth) specifically to keep the standalone market from destabilizing during the redesign's rollout. CMS announced on July 28, 2026, that its analysis of 2027 bids showed insurers had gained enough experience with the redesigned benefit to support their bid assumptions without it, and the voluntary Premium Stabilization Demonstration is ending.
As the economics for Carriers has become more difficult, we’ve seen nearly all plans remove commissions from their Part D products. This will likely continue.
MA-PD bundling looks more attractive to plans. Spreading Part D risk across a plan that also earns MA rebates is a more viable model than stand-alone PDP economics right now.
Formulary tightening. Expect continued narrowing on non-negotiated, high-cost drugs as sponsors manage catastrophic-phase exposure.
The 6% BBP cap eventually goes away. It expires after 2029 under current law. Absent further congressional action, the suppressed premium growth shown in the table above doesn't disappear, it's deferred.
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