The Inflation Reduction Act of 2022 (IRA) continues to reshape the Medicare Part D program through calendar years 2026 and 2027, with provisions designed to reduce beneficiaries’ costs that may also affect employer-sponsored prescription drug coverage.
Calendar Year 2026
- Indexed annual out-of-pocket limit (OOP): The annual OOP threshold is capped at $2,100 for 2026, reflecting an inflation adjustment to the $2,000 cap introduced in 2025.
- Revised liability framework: Part D includes revised liability to reflect negotiated prices taking effect for selected drugs in 2026.
- Revised creditable coverage method: For 2026 only, non-retiree drug subsidy (RDS) plans may use either the prior simplified method or a revised simplified method to determine whether their coverage is creditable.
Calendar Year 2027
- Coverage gap formally eliminated: The Part D coverage gap or “donut hole” was eliminated in 2025 and is codified in the redesigned benefit.
- Annual OOP limit: The annual OOP cap remains in effect and continues to be indexed annually; once the limit is reached, enrollees have no additional cost sharing for covered drugs.
- Prior creditable coverage method expires: For 2027 and beyond, non-RDS plans can no longer use the prior simplified determination method; only the revised simplified method may be used.
Employer Considerations
Employers that sponsor prescription drug coverage for Medicare‑eligible individuals should become familiar with these developments, particularly as they relate to creditable coverage determinations. Employers and their benefit advisors may also consider monitoring prescription drug cost trends and reviewing existing cost‑management strategies, as appropriate.
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