CMS Modifies Part D Premium Stabilization Demonstration
- Katie Barone
- Aug 8
- 2 min read
Originally published by Avalere Health
On July 28, CMS released the Part D national average monthly bid amount (NAMBA) and base beneficiary premium (BBP) for contract year (CY) 2026. The NAMBA, which represents the average of Part D plan bids, increased by 33% from 2025 (to $239.27). The BBP, which represents the average Part D plan premium for basic benefits, increased by 6% from 2025 (to $38.99). Under the Inflation Reduction Act, the increase in the BBP is limited to 6%. Without this limitation the BBP would have increased by 105% to $75.38.
These increases are, in part, driven by Part D redesign’s beneficiary out-of-pocket (OOP) cap ($2,100 in CY 2026 vs. $8,000 true OOP limit in 2024). Limits in beneficiary OOP costs are expected to increase the utilization of prescription medications, particularly after the beneficiary has reached the OOP cap.
While beneficiary utilization and costs are anticipated to rise, some plans are better positioned than others to manage the resulting increase in plan liability. Medicare Advantage Prescription Drug plans (MA-PDs), unlike Prescription Drug Plans (PDPs), have more tools (e.g., medical cost offsets) to absorb the increased liability associated with Part D redesign, which may result in more stable premiums, more expansive formularies, and fewer utilization management restrictions for MA-PDs.
Recognizing this dynamic, in 2025 CMS introduced the Voluntary Part D Premium Stabilization Demonstration, which allows standalone PDPs to receive additional subsidies to further lower plan premiums. The voluntary demonstration provided an additional subsidy to reduce the BBP and limit year-over-year premium increases to no more than $35. It also narrowed the upper thresholds of the risk corridors.
In a press release, CMS announced changes to the parameters of the demonstration starting in CY 2026, stating that these changes “are facilitating the program’s return to operating under regular market conditions.” These changes include:
Decreasing the base beneficiary premium reduction from $15 to $10
Increasing the limit on year-over-year Part D premium increases from $35 to $50
Eliminating the narrowed risk corridor thresholds
More immediately, the reduced beneficiary premium subsidies offered through the demonstration could impact beneficiary plan enrollment choices for CY 2026. Over time, changes to the demonstration could also shape future plan terminations, premium changes, and formularies.
The combination of a higher NAMBA and cuts to the Part D Premium Stabilization Demonstration could further destabilize the PDP market, potentially making standalone PDPs less affordable for beneficiaries, especially those eligible for the Low-Income subsidy program. These changes to the PDP market could drive higher enrollment in MA-PDs in CY 2026.
Mark Newsom, Managing Director, Policy, highlighted that, “We have seen a pattern where MA-PDs have slightly more generous formularies, slightly less utilization management, and significantly lower Part D premiums compared to PDPs. These are powerful incentives for a beneficiary to choose Medicare Advantage.”
Given the increase in the NAMBA, it will be important to pay close attention to how changes in plan premiums, plan offerings, and terminations for CY 2026 materialize when the landscape and formulary files are released. CMS will be releasing more detailed files on CY 2026 Part D plan offerings and formularies in the coming months.