Key Facts About Medicare Part D Enrollment and Costs in 2023

The Medicare Part D program provides an outpatient prescription drug benefit to older adults and people with long-term disabilities in Medicare who enroll in private plans, including stand-alone prescription drug plans (PDPs) to supplement traditional Medicare and Medicare Advantage prescription drug plans (MA-PDs) that include drug coverage and other Medicare-covered benefits. This brief analyzes Medicare Part D enrollment and costs in 2023 and trends over time, based on data from the Centers for Medicare & Medicaid Services (CMS).

This analysis highlights the substantial growth of Medicare Advantage drug plans in the marketplace for Part D drug coverage, where enrollment overall is concentrated in a handful of large plan sponsors. Average premiums and deductibles for drug coverage are much lower in MA-PDs than in stand-alone PDPs. Cost-sharing requirements for covered drugs in MA-PDs and PDPs are different, making comparisons of out-of-pocket drug costs difficult. While lower premiums can make MA-PDs attractive to enrollees, coverage in a Medicare Advantage plan also comes with limits on provider networks and utilization management restrictions that do not apply in traditional Medicare.

More than half of all Medicare Part D enrollees are in Medicare Advantage drug plans

A total of 50.5 million people with Medicare are currently enrolled in plans that provide the Medicare Part D drug benefit, including plans open to everyone with Medicare (stand-alone PDPs and MA-PDs), and plans for specific populations (retirees of a former employer or union and Medicare Advantage Special Needs Plans, or SNPs).

In 2023, more than half of all Medicare Part D enrollees (56%, or 28.3 million) are enrolled in MA-PDs and 44% (22.2 million) are enrolled in stand-alone PDPs, continuing a trend of declining enrollment in PDPs and increasing enrollment in MA-PDs, reflecting enrollment growth in Medicare Advantage plans overall (Figure 1, Table 1). Between 2019 and 2023, the number of MA-PD enrollees increased by 47% (9 million more MA-PD enrollees), while enrollment in PDPs decreased by 12% (3 million fewer PDP enrollees). In 2023, there are 6.1 million more Medicare beneficiaries with drug coverage under MA-PDs than PDPs.

Part D enrollment is concentrated in 3 national firms – UnitedHealth, CVS, and Humana – with a combined 57% of all Part D enrollees

The top three firms – UnitedHealth, CVS Health, and Humana – cover close to 6 in 10 of all Medicare beneficiaries enrolled in Part D in 2023 (57%), the same share as in 2022 (Figure 2).

Apart from Kaiser Permanente, which does not offer stand-alone PDPs, the top Part D plan sponsors offer both PDPs and MA-PDs. For most firms, Part D enrollment is more concentrated in one market than the other; for example, CVS Health, Centene, and Cigna have greater enrollment in PDPs than MA-PDs, while UnitedHealth and Humana have more MA-PD enrollees than PDP enrollees (Figure 3).

Six in 10 beneficiaries receiving the Part D Low-Income Subsidy are enrolled in Medicare Advantage drug plans

In 2023, 13.4 million Part D enrollees (27% of all Part D enrollees) receive premium and cost-sharing assistance through the Part D Low-Income Subsidy (LIS) program. These additional financial subsidies, also called “Extra Help,” pay Part D premiums for eligible beneficiaries (as long as they enroll in stand-alone PDPs designated as premium-free “benchmark” plans) and reduce cost sharing. The Inflation Reduction Act expands eligibility for full Part D LIS benefits beginning in 2024.

Consistent with overall Part D enrollment trends, LIS enrollment in PDPs has declined over time while increasing in MA-PDs; MA-PDs now enroll 62% of all LIS enrollees (8.3 million) (Figure 4, Table 1). As LIS enrollment in MA-PDs has increased, enrollment in Special Needs Plans (SNPs), a type of Medicare Advantage plan, has also increased. Nearly 4 in 10 LIS enrollees (39%, or 5.2 million) are enrolled in SNPs in 2023, up from 4% in 2006. SNPs limit enrollment to beneficiaries with certain characteristics, including those who are dually enrolled in Medicare and Medicaid (D-SNPs), which account for most SNP enrollees; those with certain chronic conditions (C-SNPs); and those who require an institutional level of care (I-SNPs).

The average monthly premium for Part D drug coverage is 4 times more in PDPs than in MA-PDs

The enrollment-weighted average monthly premium for PDPs is $40 in 2023 and has remained within a few dollars of this amount for several years (Figure 5, Table 2). The average monthly PDP premium is substantially higher than the enrollment-weighted average monthly portion of the premium for drug coverage in MA-PDs ($10 in 2023). (The total average premium for MA-PDs, including all Medicare-covered benefits, is $15 per month in 2023.) MA-PD sponsors can use rebate dollars from Medicare payments to lower or eliminate their Part D premiums, so the average premium for drug coverage in MA-PDs is heavily weighted by zero-premium plans. Rebates to Medicare Advantage plans are at historically high levels, having more than doubled between 2018 and 2023. In 2023, 73% of MA-PD enrollees are in plans that do not charge a monthly premium (up from 54% in 2018), while all stand-alone PDPs charge a monthly premium. The average enrollment-weighted premium for Part D coverage for the 27% of MA-PD enrollees in plans that charge a monthly premium is $38 in 2023, similar to the average monthly premium for PDPs.

The weighted average annual Part D deductible is 7 times larger in PDPs than in MA-PDs

In 2023, a large majority of PDP enrollees (86%) are in plans that charge a deductible, with three-fourths of PDP enrollees in plans that charge the standard amount of $505 in 2023. Conversely, just over 1 in 5 MA-PD enrollees (22%) are in plans that charge the standard Part D deductible, while 60% are in plans that charge no drug deductible. These enrollment patterns explain the wide divergence between PDPs and MA-PDs in the enrollment-weighted average Part D deductible amount. For PDPs, the average Part D deductible in 2023 is $411, seven times larger than the average drug deductible in MA-PDs ($58) (Figure 6). Just as MA-PDs can use rebate dollars to lower the Part D portion of the plan premium, they can also use rebate dollars to reduce Part D cost-sharing amounts, including deductibles.

Part D enrollees typically face no or low monthly copays for generic drugs but substantially higher copays or coinsurance for other drugs

The typical five-tier formulary design in Part D includes tiers for preferred generics, generics, preferred brands, non-preferred drugs (which can include both brands and generics), and specialty drugs. Both stand-alone PDP and MA-PD enrollees face much higher cost-sharing amounts for brands and non-preferred drugs than for drugs on a generic tier (Figure 7). PDP enrollees are more likely to face a mix of copayments and coinsurance for different formulary tiers, while MA-PD enrollees typically face copayments for all tiers except the specialty tier. (This analysis does not compare which specific drugs are covered on each tier in PDPs and MA-PDs, which, in addition to the cost-sharing amounts that plans charge, would also influence enrollees’ out-of-pocket costs.)

• A larger share of MA-PD enrollees than PDP enrollees pay $0 for generics, whether on a preferred tier or on the standard generic tier.
• For preferred brands, 65% of MA-PD enrollees and 21% of PDP enrollees face copayments for preferred brands of $45 to $47 (the maximum copayment amount permitted by CMS), while 40% of PDP enrollees are in plans that charge coinsurance of 25% or less, compared to less than 1% of MA-PD enrollees.
• For non-preferred drugs, most MA-PD enrollees (91%) are in plans that charge copayments while virtually all PDP enrollees are in plans that charge coinsurance. Over half (53%) of all MA-PD enrollees are in plans that charge $100 for non-preferred drugs, the maximum copayment amount allowed by CMS. Half of PDP enrollees are in plans than charge 40% to less than 50% for non-preferred drugs and 24% are in plans that charge a 50% coinsurance rate, the maximum coinsurance allowed.
• A larger share of MA-PD enrollees than PDP enrollees are in plans that charge the maximum 33% coinsurance rate for specialty tier drugs. For specialty tier drugs, defined by CMS as those that cost at least $830 per month in 2023, a much larger share of enrollees in MA-PDs (76%) than PDPs (14%) are in a plan that charges the maximum 33% coinsurance, while a much larger share of enrollees in PDPs (76%) than MA-PDs (3%) are in a plan that charges the minimum 25% coinsurance. Plans that waive some or all of the standard deductible – which is the case for most MA-PDs – are permitted to set the specialty tier coinsurance rate above 25%.

Given the different cost-sharing structures adopted by MA-PDs and PDPs, particularly for non-preferred drugs, it can be difficult to compare the actual out-of-pocket costs that beneficiaries would face for different types of drugs across plan types. It can also be difficult to know how a coinsurance rate will translate into actual out-of-pocket costs without knowing the underlying list price of a drug.