IRA Reforms To Medicare Part D Reinsurance Were Associated With Plan Exits And Higher Premiums, 2024-25

The Inflation Reduction Act (IRA) of 2022 altered the financing of prescription drug purchases for more than fifty-five million Medicare beneficiaries. Before 2025, the federal government contributed 80 percent of expenditure after a beneficiary exceeded a threshold, but beginning in 2025, this share was reduced to 20 percent. We studied the effect of the reinsurance reforms on exit, premium, and benefit design for free-standing Medicare Part D plans. We found that after the reforms, previous reinsurance payments became a strong predictor of plan exit. In a first look at the 2025 Medicare Part D Premium Stabilization Demonstration, we found that plans with higher pre-IRA reinsurance were more likely to receive the demonstration's targeted subsidy. However, plans with higher pre-IRA reinsurance increased premiums substantially in 2024 and 2025, even after the demonstration subsidies. Finally, we found no significant relationship between pre-IRA reinsurance and benefit design outcomes (for example, coverage and out-of-pocket spending). Together, our findings highlight the role of reinsurance reform in recent Part D market volatility.