24 November 2025
Keeping watch on Medicare: Drug plans, premiums, and availability under the Inflation Reduction Act
Key points
- In 2026, there are fewer prescription drug plans in Medicare Part D and higher premiums, even when offset by a multi-billion-dollar government premium subsidy; this degradation of the Part D market is likely attributable to the Inflation Reduction Act (IRA).
- The exodus of standalone drug plans (PDPs) and rising premiums for the remaining plans indicates that beneficiaries face higher costs and fewer choices if they remain in a PDP, or that they may switch to an integrated Medicare Advantage drug plan (MA-PD) if available.
- People living in rural areas have fewer options to enroll in an MA-PD and therefore are more often enrolled in a PDP; those beneficiaries are disproportionately affected by the Part D market decline relative to people living in urban or suburban areas.[1]
- The IRA is fueling the exodus of drug plans from the marketplace. As a result, policymakers should be aware of the patient impact, particularly the outsized impact on rural health, and consider the effect on health across the United States.
Background
Several aspects of the IRA contribute to the decline in Part D market competition and growing costs. The IRA requires Medicare Part D drug plans to take on more expenses, particularly for higher-cost beneficiaries with serious medical conditions. The government has also set prices for ten highly used medicines for the 2026 plan year through the Medicare Drug Price Negotiation Program (MDNP), which is likely to result in a decline in rebates from drug manufacturers to Part D plans.
To manage these growing costs, Part D plan sponsors may increase premiums, reduce the number of drugs on formulary (or charge more in co-pay and coinsurance), or exit the market to focus on more profitable insurance segments.[2][3] In fact, drug plans are already exiting, raising premiums, raising costs, and making formularies more restrictive, which leaves beneficiaries with fewer choices and often higher costs.[4][5]
As expected, drug plans have exited the market as the IRA has been implemented, leaving fewer options for beneficiaries.[6] Just above half of the number of PDPs that were available last year (709) are available in 2026 (360).[7] Moreover, the 2025 initial premium submissions showed a 179-percent increase in the national average bid amount.
As a response to concerns about how this would affect enrollment in PDPs, a sizeable subsidy pilot program from the federal government has kept drug plan premiums down. The program offers participating plans a direct subsidy to reduce premiums and makes the plans less responsible financially for losses. However, that program – which is masking the effect of the IRA on plan premiums – will expire after three years.[8][9]
In this assessment, we evaluate access to Medicare Drug Plans (PDPs and MA-PDs) and premiums in 2026 compared to 2025, 2024, and 2021 (prior to the IRA). We also compare urban (metro) to suburban (metro-adjacent) and rural (non-metro) counties and trends over time. We found that there are sizeable differences in premiums and their growth between plan types, that rural areas have seen a much larger decline in Part D plans, and that beneficiaries are left to choose from plans with higher premiums.
In a previous assessment, we demonstrated that plans were creating more narrow formularies and increasing cost sharing in 2025.[10] With this plan departure, beneficiaries may not only pay more in premiums, but they may also not be able to find a plan they can afford that covers their drugs.
Approach
We identified Part D PDPs, MA-PDs, and PDP benchmark plans (PDP-LIS), where people receiving the federal low-income subsidy can enroll without having to pay a premium.[11][12] We created county groups based on community type (per US Department of Agriculture rural-urban continuum codes), defining “metro” (urban), “metro-adjacent” (suburban), and “non-metro-adjacent” (rural) counties. We examined and compared plan access and premiums in January 2021 (prior to the IRA), 2024, 2025, and 2026.
Findings
Plan access and premium costs
- The average premium in rural (non-metro) counties is $10 greater than in urban (metro) counties in 2026 ($43 vs. $33).
- Premiums are $35 to $47 higher for PDPs relative to MA-PDs in 2026 across county types. (Chart 1)
- Rural counties experienced the greatest premium growth in 2026, an 11-percent increase relative to 2021, where urban counties saw a 2-percent decline. The greater average premium growth in rural counties is the result of a 7-percent increase in MA-PD premiums and 46-percent higher PDP premiums. Meanwhile, in urban counties, MA-PD premiums declined by 5 percent, likely due to greater competition among plans. (Chart 1)
- PDP-LIS premiums are the lowest available, with a roughly 78-percent decline in premiums since 2021, likely due to the federal subsidy. (Chart 1)
- MA-PD premiums are lower relative to PDPs; however, in rural counties, MA-PD premiums are $7 higher than MA-PD premiums in urban counties. (Chart 1)
- PDPs are offered statewide so the average number of PDPs per county is similar across all county types; however, there were fewer MA-PDs outside of urban counties. (Table 2)
- Benchmark plans available with no premium to low-income subsidy beneficiaries (PDP-LIS) have the lowest availability of any plan type, at two to three plans per county. (Table 2)
- In rural counties, the PDP exit was not matched by growth in MA-PD plans, leaving fewer Part D plans overall. (Table 2) In both urban and rural counties, the average number of PDPs declined by 19 between 2026 and 2021 (64-percent decline); however, MA-PD plans grew by an average of 13.1 per county (98-percent growth) in urban counties and by 5.4 per county (80-percent growth) in rural counties. For urban counties, that means the number of plans on average declined by 14 percent and in rural counties by 36 percent.
- The average premium is highly influenced by plan type. MA-PD plans have grown relative to PDPs. MA-PDs also have lower premiums; however, these plans are less available to rural beneficiaries, making the average premium available in those areas higher.
Chart 1: Medicare Part D premiums ($) by plan type and urban-rural classification (percent change in premium in 2026 vs. 2021 in parentheses)
Table 2: Average number of Part D plans per county in 2026 by plan type (percent change in county of plans in 2026 vs. 2021 in parentheses)
| Geography of county | All plans | MA-PD | PDP | PDP-LIS |
| Metro (urban) | 37.2 (-14 percent) |
26.5 (98 percent) | 10.8 (-64 percent) | 2.4 (-69 percent) |
| Metro-adjacent (suburban) | 30.8 (-22 percent) |
19.9 (114 percent) | 10.9 (-64 percent) | 2.5 (-67 percent) |
| Non-metro (rural) | 23.0 (-36 percent) |
12.7 (80 percent) |
10.9 (-63 percent) |
3.0 (-61 percent) |
Chart 2: Part D plans by county type (count offered in year) (change in 2026 compared to 2021 in callout boxes)
Key findings
Due to the effects of the IRA, DLA Piper found that rural counties in 2026 have less access to plans and have seen higher premium growth. It is particularly important to monitor the effects in rural counties where access to care is already limited. Monitoring these trends will be key to evaluating how patient health may be affected by the IRA and considering remedies to preserve the benefit and patient access.
Next steps
Our next assessment will examine the 2026 CMS formulary data, considering the coverage and cost sharing for commonly used medicines – including those ten drugs selected for the MDNP with government negotiated prices in effect in 2026.
Appendix
Assessment
To keep an eye on access to medicines and plans in Medicare as the IRA continues to be implemented, DLA Piper has established a program within the firm’s Advanced Analytics and Government Affairs and Public Policy teams to monitor changes in plan offerings – including premiums, coverage of necessary medications, and affordable copays – in different parts of the country. All information in the assessment is taken from the publicly available Centers for Medicare and Medicaid Services (CMS) plan files and Census Bureau data.
PDPs and MA-PDs explanation
There are two types of drug plans available to Medicare beneficiaries:
- PDPs, which offer coverage for drugs only, and beneficiaries continue to receive other medical care through the fee for service Medicare benefit
- MA-PDs, which cover drugs as well as doctor and hospital care
MA-PDs have been growing in membership since the inception of the Medicare Part D program, while PDP plans have been declining in membership.[13] MA-PD plans often offer lower cost sharing relative to PDPs and enhanced benefits such as dental care, which can appeal to beneficiaries.[14] PDP regions cover an entire state or multiple states, where MA-PDs offer plans in smaller regions and can exclude certain areas, including rural communities.
IRA timeline
The IRA was signed into law in 2022, with key provisions implemented in 2025 (out-of-pocket cap on drug spending for Medicare beneficiaries, Medicare Part D benefit redesign) and 2026 (first year of MDNP negotiated prices). The resulting market dynamics from these changes are expected to increase the cost of drug coverage (premium price) or result in fewer plan options available. In fact, to blunt the anticipated growth in premiums in 2025, the Biden-Harris Administration announced a voluntary demonstration program that paid health plans an additional $5 billion subsidy to the federal government to stabilize in base premium growth in participating standalone Medicare PDPs.[15]
For more information, please contact the authors.
[1] KFF, Stand-Alone Drug Plans Cover a Larger Share of Medicare Part D Enrollees Living in the Most Rural Areas Than Medicare Advantage Plans, April 2025.
[2] Ford C, Westrich K, Buelt L, Loo V. Payer reactions to the implementation of the Inflation Reduction Act: forecasting future changes to Medicare Part D plans. Presented at: AMCP Nexus 2023; October 16-October 19, 2023; Orlando. Article accessed at https://www.ajmc.com/view/payers-expect-the-inflation-reduction-act-to-financially-impact-medicare-part-d-plans.
[3] The IRA directs the government to set prices for a select and growing set of medicines through the Medicare Drug Price Negotiation Program (MDNP) each year beginning in 2026. The IRA also established a new structure in the Medicare drug benefit (Part D) that will increase the amount of costs paid by insurers for higher-need patients, a penalty on manufacturers for drug price increases over the inflation rate, and a $2,000 cap on out-of-pocket expenses for covered Part D drugs, which is growing to $2,100 in 2026. Part D drugs are typically picked up in a pharmacy and are self-administered (like pills, creams, or self-injections).
[4] https://jamanetwork.com/journals/jama-health-forum/fullarticle/2814988.
[5] “Keeping watch on the Inflation Reduction Act: Medicare poses Part D formulary access challenges.”
[6] Avalere: https://avalere.com/insights/how-may-the-ira-shift-part-d-market-dynamics.
[7] https://www.kff.org/medicare/issue-brief/a-current-snapshot-of-the-medicare-part-d-prescription-drug-benefit/.
[8] CMS announcement, CBO analysis, and CBO presentation.
[9] CRS report, January 2025 Medicare Part D Premium Demonstration.
[10] “Keeping watch on Medicare: Formulary assessment shows large declines in access for certain rare disease treatments July 2025.”
[11] Removed plans that were in US territories, special needs plans, non-initial coverage plans and plans that did not specify 30 days’ supply of the analyzed drugs. Benchmark plans were identified as those that were marked as those that had Part D basic premium amounts below the regional benchmark in CMS Prescription Drug data and excluded those that were marked as “Sanctioned.”
[12] https://www.cms.gov/medicare/coverage/prescription-drug-coverage.
[13] https://www.medpac.gov/wp-content/uploads/2023/10/Structural-issues-in-Part-D_Nov24_SEC.pdf.
[14] 10 Reasons Why Medicare Advantage Enrollment is Growing and Why It Matters KFF, 2024, and Commonwealth Fund “Traditional Medicare or Medicare Advantage: How Older Americans Choose and Why” 2022 accessed at https://www.commonwealthfund.org/publications/issue-briefs/2022/oct/traditional-medicare-or-advantage-how-older-americans-choose.
