The Medicare Part D program has been undergoing change over the last several years due to a number of factors, including the increasing popularity of Medicare Advantage prescription drug (MAPD) plans, plan consolidations and vertical integration, the shift of pharmacy rebates, or direct and indirect remuneration (DIR), to the point of sale, and, in particular, the passage of the Inflation Reduction Act (IRA). In this paper, we provide a view of how market changes have led to shifts in plan enrollment in early 2024.
Background
What’s changing in 2024?
There are bigger swings in plan enrollment and premiums in 2024 than in the past several years, particularly within the standalone Prescription Drug Plan (PDP) market. Several market forces may have contributed to changes this year:
- Pharmacy DIR: A final rule required all plan sponsors to reflect any concessions paid by pharmacies to plans at the point of sale, beginning in 2024. This likely impacted PDPs more heavily than MAPD plans, as PDPs more commonly used preferred pharmacy networks.
- IRA: While the more significant IRA changes will occur in 2025 and beyond, 2024 plan bids reflected an increase in catastrophic claim liability from 15% to 20%, without a corresponding adjustment to the risk score model. This change may have disproportionately impacted plans with a larger share of high-cost members, such as basic PDPs and dual-eligible special needs plans (D-SNPs). Additionally, cost-sharing caps on insulins and vaccines were reflected in plan bids for the first time in 2024.
- Changes in bidding strategies: A number of carriers filed basic PDP bids above the regional benchmarks, thus leading to large shifts in auto-assigned enrollment, discussed further below.
- Benefit design trends: In the PDP market, an increasing number of plans began using coinsurance on the preferred brand tier. On the other hand, average Part D designs for MAPD plans became slightly richer from 2023 to 2024. This combination may have contributed to enrollment shifts.
Notable shifts
PDP to MAPD
Individual Medicare Part D enrollment increased by approximately 1% from 2023 to 2024, ending the year with more than 45 million members enrolled in the program. As a continuing market trend, MAPD enrollment increased, and PDP enrollment declined. In 2024, approximately 60% of individual Part D members are enrolled in an MAPD plan.
Figure 1: Change in enrollment over prior year (millions)
While the MAPD market continues to grow, we see minimal enrollment shifts between carriers from 2023 to 2024, with three national carriers enrolling more than half of all MAPD members.
Figure 2: Distribution of MAPD enrollment by carrier
Shifts within PDP
The PDP market experienced significant disruption in 2024. Most notably, Centene’s member base increased from approximately a quarter of all PDP members in 2023 to over a third in 2024. All other top PDP carriers saw decreases in enrollment to some extent.
Figure 3: Distribution of PDP enrollment by carrier
Basic plan disruption: Several top carriers bid above the regional low-income benchmarks in 2024, contributing to the reassignment of millions of low-income auto-assigned members throughout the market. CVS lost benchmark qualification in more than half of the 34 regions. Many of these lives were reassigned to Centene, which did not lose benchmark eligibility in any of the 34 regions, contributing to the overall enrollment growth shown above.
Movement among enhanced plans: In 2024, Centene introduced a low-cost enhanced (LCE) plan with monthly premium ranging from $0 to $6.30, with premium less than $1 in 29 of the 34 regions. This makes Centene the lowest premium option in the PDP market and the first $0 PDP in history. All other nationwide carriers offering a LCE plan lost some of their 2023 membership to Centene’s LCE plan offering in 2024. The high-cost enhanced (HCE) plan market saw generally less member disruption than basic and LCE plans in 2024, with many top carriers maintaining the majority of their 2023 membership. However, with premium being a key factor in member selection, some members migrated from HCE plans to LCE plans in 2024, in line with recent historical patterns.
Comparison to prior years
While the change in total PDP enrollment from 2023 to 2024 was similar to prior years, changes within each PDP carrier were much more pronounced than in the past:
- Average annual enrollment changes from 2018 to 2023 ranged from -9% to +6% for the top five PDP carriers, which account for about 90% of PDP enrollment. By comparison, the range of movement for these carriers from 2023 to 2024 was -22% to +36%.
- Centene, which was the fourth-largest PDP carrier in the individual market in 2018 and 2019, is now by far the largest PDP carrier, gaining more than 1.5 million lives from December 2023 to January 2024, and now accounting for over one-third of the entire market.
- The number of low-income subsidy (LIS) lives subject to reassignment in 2024 is significantly higher than in any other year—6.5 times greater than the average in the prior eight years. This caused significant disruption among LIS members.
Looking forward
What are the implications for 2025 enrollment?
As discussed, some of the 2024 changes to enrollment were caused by a combination of pharmacy DIR moving to the point of sale (POS), plans being liable for an additional 5% of catastrophic phase costs, and underlying shifts in bidding strategies. However, these changes are minor compared to the reconstructed Part D benefit design in 2025, with plans responsible for a greater portion of total Part D spending in the catastrophic phase (from 20% in 2024 to 60% in 2025). As a result, the IRA will likely cause even greater market upheaval in 2025. This change could be in the form of MAPD plans continuing to leverage their additional flexibility over PDP plans, cost-sharing increases to counter increases in Part D premiums, and greater year-over-year fluctuations in Part D premiums.
The Inflation Reduction Act will likely cause even greater market upheaval in 2025.
With the IRA’s new benefit design shifting the increasing financial risk from high-cost Part D beneficiaries to plans, the mix of patients selecting a given plan will be more important. While changes in the risk score model and an increase in the direct subsidy will compensate for plan liability increases in aggregate, changes will vary from plan to plan. Many plans may revise their formularies and/or benefit designs in reaction to cost pressures. These new strategies and tactics will lead to new decisions for Part D beneficiaries, and further enrollment shifts may in turn lead to additional reactions by payers in 2026. Due to this chain reaction, it is likely we will not fully understand the impact of the IRA on enrollment and plan competitiveness for several years.