Average Medicare Part D Premiums Could Jump as Much as 57% in 2024: Report

The study, which will be released on Monday, examined stand-alone Part D premiums in the five states with the highest population of residents age 65 and over: California, Florida, Texas, New York, and Pennsylvania. HealthView Services expects to expand the study to include data for all 50 states by year-end. The current analysis did not look at the drug coverage included in many Medicare Advantage plans, which now cover about half of the nation’s roughly 65 million Medicare beneficiaries, but those costs are expected to be included in the updated version.

A spokesperson for the Centers for Medicare and Medicaid Services (CMS) told Barron’s that the agency does not comment on external reports. “Part D premiums and options are stable” for 2024, said the spokesperson.

In July, CMS projected that the average total monthly premium for Medicare Part D would be $55.50 in 2024, a 1.8% decline from 2023.

Yet the report suggests at least some premiums are trending sharply upward. 

This might be a consequence of the Inflation Reduction Act, which shifts the burden of so-called catastrophic drug costs—that is, spending above a certain threshold—from Medicare and patients to the private insurers who provide Part D plans and, to a lesser extent, drug manufacturers. Starting in 2025, the law caps beneficiaries’ drug costs at $2,000 a year, adjusted for inflation. Drug plans’ share of total costs above this spending cap will rise to 60% in 2025 from 20% in 2024. Insurers may be passing those future cost increases along to plan participants in the form of higher premiums, Mastrogiovanni says. 

Tricia Neuman, executive director for Program on Medicare Policy at KFF, a nonprofit health policy research organization, says she was not all that surprised to see another analysis show an increase in premiums for stand-alone Part D drug plans, a finding that’s consistent with KFF’s research.

AHIP, a national association of health insurance providers, did not respond to a request for comment.

The CMS spokesperson said a host of new changes in the Medicare Part D program may affect the costs that people with Medicare prescription drug coverage will pay, and that these changes increase the value of the basic Part D benefit and make prescription drugs more affordable at the pharmacy counter.

“It is important for people with Medicare to compare their options and consider the total expected costs under a plan, and not only the premium,” the spokesperson said.

Beneficiaries with high drug spending stand to pay less once the $2,000 spending cap takes effect in 2025. In 2020, 1.4 million Part D enrollees had annual out-of-pocket drug spending of $2,000 or more, according to KFF.

But HealthView Services’ study suggests that many beneficiaries may pay more in the form of higher premiums, at least in the short term. Mastrogiovanni says he expects Part D premium increases to revert to their long-term inflation rate of 5% a year in 2026.

Medicare Part D premiums vary greatly by state and plan selection. Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League, found that her Part D drug plan premium was set to rise 48% next year, from $12.70 to $18.80. Johnson, who lives in Central Virginia, found a plan for just $5.30 a month that covers her medications better and is switching to that for 2024. 

Now is a good time for beneficiaries to look at their drug coverage. Medicare’s annual open enrollment period ends on Dec. 7. Through then, beneficiaries can pick a new drug plan for coverage starting Jan. 1, 2024. 

Look at total projected costs: It’s possible that a plan with a higher premium could offer more comprehensive coverage of your medications and result in lower total costs than a plan with lower premiums.

You can compare plans on the Plan Finder tool at medicare.gov.

CMS encourages Medicare recipients to find out whether they qualify for the Medicare Savings Programs and the Low-Income Subsidy Program (Extra Help), the spokesperson said, as these programs help those eligible afford their premiums and out-of-pocket costs for prescription drugs. Up to 3 million people could benefit from the Extra Help program now but aren’t currently enrolled, according to the spokesperson.

Write to Elizabeth O’Brien at [email protected]