2024 Medicare landscape: key Part D changes on the horizon

It’s safe to say that 2023 was a turbulent year for Medicare Advantage (MA) plans. Significant changes emerged last year, including risk adjustment model revisions, Star Ratings methodology modifications, increased scrutiny around the use of AI and other technologies, and elevated costs amid soaring utilization and provider contract renegotiations. Together, these headwinds have created top- and bottom-line challenges that serve as the backdrop for what looks to be another dynamic year in 2024.

Already in January of this year, the Centers for Medicare & Medicaid Services (CMS) finalized its interoperability and prior authorization ruling, and many plans are deep into planning for the forthcoming changes to Medicare Part D mandated by the Inflation Reduction Act (IRA), which I’ll explore in more detail below. ?

To date, CMS has released several pieces of guidance on the Part D redesign, but many details are yet to come. As we await more information, including the Advance Notice expected from CMS by February 1, I’d like to share a few of my initial thoughts on these Part D changes for plan year 2025.[1]

1.?????? Key provisions include a $2,000 annual cap on patient out-of-pocket costs and shifts in catastrophic coverage. Medicare Part D plans will see their share of costs in the catastrophic phase increase from 15% to 60% for both brands and generics. These changes to coverage requirements, compounded with the utilization trends and risk adjustment changes rolling into 2025, require incredibly complex modeling to create sound estimates of the financial impacts that, in turn, inform leadership decisions.

?2.?????? Plans are already working to digest the Medicare Prescription Payment Plan (MPPP) Part 1 guidance. The MPPP, which implements the IRA’s “smoothing” provision, is intended to shield Part D beneficiaries from high out-of-pocket costs at the pharmacy counter. Although not finalized, it is clear that this change will create material financial, operational and experience impacts for health care organizations. The scope and complexity of operational changes required to implement the MPPP are vast, and these changes have the potential to create significant issues for members if not executed with precision.

?Here is just a sample of the key requirements that plans will need to address to avoid significant operational and experience impact:

?a.?????? Point-of-sale notification:?Members likely to benefit from?the MPPP must also receive?notification from their plan at the?pharmacy point of sale; plans?must confirm notification was?provided.

b.?????? Program opt-in:?Plans must?evaluate eligibility and enable?members to opt into the program?prior to and during the plan year?via phone, web, mail or fax.

c.?????? Pharmacy payment:?Plans must?pay the pharmacy the enrollee’s?cost-sharing amount in addition to?the plan’s portion of payment.

d.?????? Participant payments:?Plans must?offer multiple means of payment,?including bank draft, credit card,?cash, and check, via online?payment portal, call center, and?mail.?

?As health plans prepare for implementation of these requirements, taking an enterprise-level, member-centric approach will be paramount — not only to mitigate risk, but also to create differentiated experiences that will attract members in out years.?

With 2024 promising to be another rocky year for the Medicare landscape, my team and I are following every development closely. Stay tuned for more insights as additional rules and guidance emerge from CMS. In the meantime, please feel free to reach out if you have any questions.

?The views reflected in this article are the views of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.

[1] “Part D Improvements,” CMS website, https://www.cms.gov/inflation-reduction-act-and-medicare/part-d-improvements, 18 January 2024.