Medicare Part D coverage affected by insurer exits: Study

The Inflation Reduction Act, or IRA, contained several provisions aimed at lowering prescription drug prices, including a $2,000 annual out-of-pocket spending cap for Medicare Part D beneficiaries, which went into effect in 2025. While the cap eased cost burdens for patients, it simultaneously put additional financial liability and plan design constraints on insurers, sparking concerns that some insurers would exit the market altogether.

Mass General Brigham researchers explored this issue in a research letter published in JAMA. They found that from 2018 to 2023, 0.1% to 2.3% of beneficiaries lost their Part D insurer the following year. In 2024, 7.5% (2.9 million) of beneficiaries lost their Part D insurer the following year.

In addition, 8.9% (2.8 million) of the 31.1 million beneficiaries in enhanced plans and 1.3% (89,572) of the 7.1 million beneficiaries in standard plans lost their plan coverage.

"This increase could be associated with changes to Medicare Part D from the IRA, which increased Part D plan sponsor financial liability," the research letter stated.

"These IRA provisions were designed to lower out-of-pocket costs for Part D beneficiaries, but increased Part D plan exits could lead to more limited coverage options and less competitive Part D marketplaces."

In addition to the new $2,000 cap on out-of-pocket expenses, the IRA provisions made Medicare Part D plans responsible for 65% of plan liability for low-income subsidy beneficiaries, up from zero prior to 2025.  

With insurers exiting the marketplace, researchers suggested that the loss of coverage could motivate patients to shop for better plans. However, it could also lead to lapses in coverage and disruptions with medications.

The results showed that these changes particularly impacted standalone Part D plans, which could lead to more beneficiaries switching to Medicare Advantage.

"These insurer exits will contribute to decreased competition, which may lead to decreased patient choice and eventually higher out-of-pocket costs," said lead author Christopher L. Cai, MD, general internal medicine fellow with Brigham and Women's Hospital's Program on Regulation, Therapeutics and Law

"Congress may need to take steps to stabilize the situation. This could include lowering the legal ceiling on annual deductibles, which is currently $590, or introducing a public Part D standalone option to promote competition."

The researchers noted that they could not measure whether Part D beneficiaries impacted by insurer exits opted to enroll in an alternate plan after losing coverage. What's more, Part D plan trends could change in the future if the IRA is amended or discontinued, or if Congress implements policy reforms.

Jill McKeon has covered healthcare cybersecurity and privacy news since 2021.