Archived Insight | May 24, 2019

Medicare Part D Drug Benefit Program Changes for 2020

The Medicare Part D standard benefit design parameters will be higher in 2020, the Centers for Medicare & Medicaid Services (CMS) recently announced.

While the deductible will increase by less than 5 percent, the out-of-pocket threshold will increase dramatically: 24 percent.

The reason for the jump in the out-of-pocket threshold, sometimes known as the TrOOP, is the expiration of a provision of the Affordable Care Act (ACA) that slowed the growth of the TrOOP between 2014 and 2019.

In 2020 and beyond, the TrOOP will be determined using a pre-ACA calculation. Plan sponsors that contract with a Medicare Part D Prescription Drug Plan or Medicare Advantage-Prescription Drug Plan (also known as EGWPs) will likely receive lower payments from CMS as a result of this change, meaning that these plans will be more expensive.

CMS also announced that the Retiree Drug Subsidy (RDS) amounts it pays to sponsors of group health plans that provide prescription drug coverage to Medicare-eligible retirees will be higher in 2020. 

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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.

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