On April 1, 2024, the Centers for Medicare and Medicaid Services (CMS) issued Final Part D Redesign Program Instructions for calendar year 2025. The Final Program Instructions contain a detailed description of, and guidance related to, changes to the Part D benefit newly in place for calendar year 2025 made by the Inflation Reduction Act of 2022 (IRA). Among other things, these changes impact the creditable coverage status of employer-sponsored prescription drug coverage beginning in 2025.

Employers that provide prescription drug coverage to individuals who are eligible for Medicare Part D must inform these individuals and CMS whether their prescription drug coverage is creditable, meaning that the employer’s prescription drug coverage is at least as good as Medicare Part D coverage. Under existing CMS guidance, there are a few different ways for an employer to determine whether its prescription drug coverage is creditable:

Previously, CMS stated in its Draft Part D Redesign Program Instructions that the simplified determination method would no longer be valid as of calendar year 2025, given the significant changes made to Medicare Part D by the IRA.

However, according to the Final Program Instructions, CMS will continue to permit the use of the simplified determination methodology, without modification, for calendar year 2025 for group health plan sponsors who are not applying for the retiree drug subsidy. In future guidance, CMS will reevaluate the continued use of the existing simplified determination methodology or establish a revised one for calendar year 2026.

CMS has issued a fact sheet on the Final Program Instructions that summarizes key policies and provides an overview of changes to the Part D benefit. Additional information and resources on the IRA’s changes to Medicare Part D are available on CMS’ Part D Improvements webpage.