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Medicare Part D

Medicare Part D Changes May Impact Creditable Coverage Status of Employer Plans

The Baldwin Group
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Updated: April 24, 2024
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2 minute read

The Inflation Reduction Act of 2022 (IRA) includes several cost-reduction provisions affecting Medicare Part D plans, which may impact the creditable coverage status of employer-sponsored prescription drug coverage beginning in 2025.

Employers that provide prescription drug coverage to individuals who are eligible for Medicare Part D must inform these individuals and the Centers for Medicare & Medicaid Services (CMS) whether their prescription drug coverage is creditable, meaning that the employer’s prescription drug coverage is at least as good as Medicare Part D coverage.

CMS’ Draft Part D Redesign Program Instructions state that given the significant changes that the IRA made to Medicare Part Done of the methods for determining whether employer-sponsored prescription drug coverage is creditable will no longer be valid as of calendar year 2025. These draft program instructions are subject to change, and CMS will issue final program instructions for 2025 after considering the public comments received in response to the draft program instructions.

There is no penalty or fee to the employer to the extent any prescription coverage offered that is non-creditable in nature. Non-creditable prescription drug coverage can still be a valuable benefit for employees. However, individuals need to know whether their prescription drug coverage is creditable or non-creditable. If the coverage is non-creditable and Medicare-eligible individuals fail to enroll in Part D during their initial enrollment period, they may be subject to a higher Part D premium if they enroll in Part D at a later date.

More information and resources related to the IRA’s changes to the Medicare Part D program are available on the CMS Part D Improvements webpage.


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