Medicare Part D Turns 20: Is It Moving in the Right Direction?
By Penn Quarter Partners
Over the next few weeks, families are going to be comparing Medicare prescription drug plans to ensure that their loved ones have the coverage that best fits their individual needs. With these open enrollment season deliberations now a part of our everyday lives, it’s hard to believe that there was once a time in which there was steadfast, even passionate opposition to the creation of the Medicare Part D program.
Many thought it was an expensive boondoggle to integrate prescription drug coverage into Medicare. Some believed it should be a government entitlement instead of what Congress created, a regulated competitive market comprised of private plans. Politicians campaigned on promises to destroy Part D once they got elected.
The critics were, as history shows, quite wrong. Over its two decades, Medicare Part D has made affordable drug coverage a reality for tens of millions of enrollees. Congress’s fallback safeguard — the creation of a government-run drug plan for regions with fewer than two private plan choices — never had to be implemented as, at one point, over a thousand Part D plans were operating throughout the country and that competition drove greater value and affordability for seniors. Not surprisingly, these successes were reflected in consistently high (90%+) satisfaction rates among beneficiaries.
This year, as the program reaches its 20th birthday, is an opportune time for policymakers to take stock of where Part D stands today and whether it is still fulfilling its mission to make seniors healthier and more financially secure.
It’s undeniable that there have been some ups and downs in recent years.
Due to significant consolidation within the health payer industry, the level of consumer choice and market competition within Part D has been moving in the wrong direction. This year, the number of standalone prescription drug plans was projected to shrink by 22 percent, continuing a downward trajectory that has seen the number of plan choices available to consumers fall from 1,000-plus to just over 800 in 2023 and less than 400 this year.
And with reduced competition, enrollee premium costs are going up — from $38.10 on average in 2025 to $50.41 in 2026.
The Inflation Reduction Act, enacted in August 2022, was a mixed bag for Part D.
On the positive side, the law established an annual cap on beneficiaries’ out-of-pocket costs and allowed those costs to be spread over the course of a year, creating better financial predictability. These reforms delivered true affordability-focused value for seniors.
But the law also created the Medicare Drug Price Negotiation Program, injecting price controls into what had been a successful market-based model. Unfortunately, Americans have since been reminded that controlling prices and reducing costs are not the same thing. An analysis of Part D plans found that they shifted their coverage of drugs selected for negotiation from a fixed copay to coinsurance, leading to double-digit cost increases for enrollees on those medications.
Efforts by Part D plans to control access to medications also have intensified. An IQVIA analysis found that, in 2025, 47 percent of all attempts to fill a prescription for a new branded medicine using Part D coverage were initially denied. Patients had to undergo administrative delays to gain access to the medicine their health care provider prescribed.
As Medicare Part D begins its third decade, decisionmakers in the executive and legislative branches would do well to carefully focus on program success and ways to address concerning trends to provide affordable access to needed medicines for the tens of millions of Americans who rely on Medicare in the years to come.
Important starting points could include thorough analyses of the real-world impacts of the IRA on innovation and access, and the effects of consolidation and vertical integration in the health insurance marketplace on patients and consumers.
Penn Quarter Partners is proud to advise companies that are navigating the continuing evolution of Medicare Part D and the Medicare Drug Price Negotiation Program and collaborating with stakeholders to advocate for robust prescription drug coverage that offers optimal access and affordability.
We welcome a conversation on this and other health policy issues at info@pennquarterpartners.com.
