42 U.S.C. § 1395w–115 — Subsidies for part D eligible individuals for qualified prescription drug coverage

(a) Subsidy payment. To lower premiums for eligible individuals, limit adverse selection among prescription drug and MA–PD plans, and encourage sponsors and organizations to participate, the Secretary must pay the following subsidies to a PDP sponsor offering a prescription drug plan and to an MA organization offering an MA–PD plan. The overall subsidy for basic coverage is 74.5 percent, except that it is the percentage produced by section 1395w–113(a)(8) for 2024 through 2029 and, for 2030 and later, 100 percent minus the percentage specified in section 1395w–113(a)(9). (1) Direct subsidy. For each eligible individual enrolled in a prescription drug plan or MA–PD plan for a month, the Secretary must pay the plan’s standardized bid amount, adjusted under subsection (c)(1), minus the base beneficiary premium calculated under section 1395w–113(a)(2) or (8), as applicable, and adjusted under section 1395w–113(a)(1)(B). (2) Subsidy through reinsurance. The Secretary must also pay the reinsurance amount described in subsection (b). This section gives advance budget authority and obligates the Secretary to make these payments. (b) Reinsurance payment amount. (1) In general. For an eligible individual enrolled during a coverage year, the reinsurance payment is: (A) For a year before 2025, 80 percent of the allowable reinsurance costs described in paragraph (2) that are attributable to the portion of gross covered prescription drug costs described in paragraph (3) incurred after the individual’s costs exceed the annual out-of-pocket threshold in section 1395w–102(b)(4)(B). (B) For 2025 and later, the sum of— (i) for applicable drugs, 20 percent of the allowable reinsurance costs attributable to that portion of gross covered prescription drug costs incurred after the individual exceeds that annual threshold; and (ii) for covered part D drugs that are not applicable drugs, 40 percent of the allowable reinsurance costs attributable to that portion of gross covered prescription drug costs incurred after the individual exceeds that threshold. “Applicable drug” has the meaning given in section 1395w–114c(g)(2). This section does not define that term. (2) Allowable reinsurance costs. (A) Subject to subparagraph (B), “allowable reinsurance costs” means the part of gross covered prescription drug costs under a plan that the sponsor or organization, or the enrollee or someone acting for the enrollee, actually pays after discounts, chargebacks, and average percentage rebates. The amount may not exceed the part that would have been paid if the plan provided basic prescription drug coverage, or, for supplemental coverage, standard prescription drug coverage. This section does not define “discounts,” “chargebacks,” “average percentage rebates,” “basic prescription drug coverage,” or “standard prescription drug coverage.” (B) When applying subparagraph (A), allowable reinsurance costs include the part of an applicable drug’s negotiated price that a manufacturer paid under the manufacturer discount program in section 1395w–114c. “Negotiated price” is defined in section 1395w–114c(g)(6); this section does not define it. (3) Gross covered prescription drug costs. For an eligible individual enrolled during a coverage year, these are the costs incurred under the plan, excluding administrative costs but including costs directly related to dispensing covered part D drugs during the year and costs related to the deductible. Count the costs whether the individual or the plan pays them, and, for 2025 and later, whether a manufacturer pays them for an applicable drug. Count them whether or not the plan provides more than basic prescription drug coverage. (4) Coverage year defined. A coverage year is a calendar year in which covered part D drugs are dispensed, if the claim and payment for the claim are made within the period after the year ends that the Secretary specifies. (c) Adjustments relating to bids. (1) Health status risk adjustment. (A) Establishment of risk adjusters. The Secretary must establish a method to adjust the standardized bid amount under subsection (a)(1)(A) for differences in the costs of basic prescription drug coverage caused by differences in the actuarial risk of the enrollees served by different plans. The adjustment must not change the total amounts payable to the plans under subsection (a)(1), through the part of the monthly beneficiary premiums described in subsection (a)(1)(B), or through MA monthly prescription drug beneficiary premiums. (B) Considerations. In creating the method, the Secretary may consider similar methods used under section 1395w–23(a)(3) to adjust payments to MA organizations for original Medicare fee-for-service benefits. (C) Data collection. The Secretary must require (i) PDP sponsors to submit drug-claim data that can be linked for each person to part A and part B data, plus other information the Secretary finds necessary; and (ii) MA organizations offering MA–PD plans to submit drug-claim data that can be linked for each person to other data those organizations must submit to the Secretary, plus other information the Secretary finds necessary. (D) Publication. When the Secretary publishes risk-adjustment factors under section 1395w–23(b)(1)(B)(i)(II), the Secretary must publish the risk adjusters under this paragraph for the next year. (2) Geographic adjustment. (A) Subject to subparagraph (B), for section 1395w–113(a)(1)(B)(iii), the Secretary must establish a method to adjust the national average monthly bid amount calculated under section 1395w–113(a)(4) for price differences for covered part D drugs among PDP regions. (B) De minimis rule. If the Secretary decides those regional price differences are de minimis, the Secretary must not make an adjustment under this paragraph. “De minimis” is not defined in this section. (C) Budget neutral adjustment. The adjustment must not change the total payments under this part compared with the payments that would have been made without the adjustment. (d) Payment methods. (1) In general. Payments use a method the Secretary chooses. The Secretary may make interim payments during a year based on the best estimate of what will be payable after all information is obtained. (2) Requirement for provision of information. (A) Requirement. Payment to a PDP sponsor or MA organization depends on furnishing the Secretary, in the form and manner the Secretary specifies, the information needed to carry out this section. (B) Restriction on use. Officers, employees, and contractors of the Department of Health and Human Services may use information provided or obtained under subparagraph (A) only to carry out this section and only as necessary for that purpose. (3) Source of payments. Payments come from the Medicare Prescription Drug Account. (4) Application of enrollee adjustment. Section 1395w–23(a)(2) applies to payments to PDP sponsors under this section in the same way it applies to payments to MA organizations under section 1395w–23(a). (e) Portion of total payments subject to risk (risk corridors). (1) Computation of adjusted allowable risk-corridor costs. (A) “Adjusted allowable risk-corridor costs” for a plan and coverage year means the plan’s allowable risk-corridor costs under subparagraph (B), minus (I) all reinsurance payments under subsection (b) to the plan’s sponsor for the year and (II) all subsidy payments under section 1395w–114 to that sponsor for the year. (B) “Allowable risk-corridor costs” means the plan costs, excluding administrative costs but including costs directly related to dispensing covered part D drugs, that the sponsor or organization actually pays after discounts, chargebacks, and average percentage rebates. The costs may not exceed what would have been paid if the coverage were basic coverage or, for supplemental coverage, basic coverage with the adjustment under section 1395w–111(c)(2). The Secretary must calculate these costs using the maximum copayments allowed under section 1395w–114(a)(1)(D) and (2)(E). (2) Adjustment of payment. (A) No adjustment inside corridor. If adjusted allowable risk-corridor costs are at least the first lower threshold and no more than the first upper threshold established in paragraph (3), the Secretary makes no payment adjustment. (B) Increase above upper limit. (i) Between the first and second upper thresholds. If costs are above the first upper threshold but no more than the second, the Secretary increases the plan’s total payments by 50 percent of the difference between the costs and the first upper threshold. For 2006 and 2007, the percentage is 75 percent or 90 percent if clause (iii)’s conditions are met. (ii) Above the second upper threshold. If costs exceed the second upper threshold, the increase is the sum of 50 percent of the difference between the second and first upper thresholds, plus 80 percent of the difference between the costs and the second upper threshold. For 2006 and 2007, the first percentage is 75 percent or 90 percent if clause (iii)’s conditions are met. (iii) Conditions for the higher 2006 and 2007 percentage. The conditions are met if the Secretary determines that, in that year, at least 60 percent of the covered prescription drug and MA–PD plans have costs above their first upper threshold and those plans include at least 60 percent of eligible individuals enrolled in any such plan. (C) Reduction below lower limit. (i) Between the first and second lower thresholds. If costs are below the first lower threshold but at least the second lower threshold, the Secretary reduces payments, or otherwise recovers money, by 50 percent of the difference between the first lower threshold and the costs. For 2006 and 2007, the percentage is 75 percent. (ii) Below the second lower threshold. If costs are below the second lower threshold, the reduction or recovery is the sum of 50 percent of the difference between the first and second lower thresholds, plus 80 percent of the difference between the second upper threshold and the costs. For 2006 and 2007, the first percentage is 75 percent. (3) Establishment of risk corridors. (A) In general. For each plan year, the Secretary must establish a corridor for each prescription drug plan and MA–PD plan. (i) First lower threshold: the target amount in subparagraph (B) minus the first threshold risk percentage under subparagraph (C)(i) multiplied by that target amount. (ii) Second lower threshold: the target amount minus the second threshold risk percentage under subparagraph (C)(ii) multiplied by that target amount. (iii) First upper threshold: the target amount plus the amount subtracted in clause (i)(II). (iv) Second upper threshold: the target amount plus the amount subtracted in clause (ii)(II). (B) Target amount. The target amount is the total payments for the plan for the year to its PDP sponsor or MA organization, including amounts paid by the Secretary and enrollees, based on the risk-adjusted standardized bid amount. It is reduced by the administrative expenses for the year assumed in that bid. (C) First and second threshold risk percentages. (i) The first percentage is 2.5 percent for 2006 and 2007, 5 percent for 2008 through 2011, and a percentage set by the Secretary for 2012 and later, never below 5 percent. (ii) The second percentage is 5 percent for 2006 and 2007, 10 percent for 2008 through 2011, and a percentage set by the Secretary for 2012 and later that is greater than the first percentage for that year and never below 10 percent. (iii) To help ensure two plans in an area, a PDP sponsor may, under section 1395w–111(b)(2)(E)(ii), submit a bid asking to lower the applicable first or second percentage or raise the percentages used in paragraph (2). (4) Plans at risk for all supplemental coverage. A PDP sponsor and MA organization offering supplemental prescription drug benefits bears all financial risk for providing those supplemental benefits. (5) No effect on monthly premium. A payment adjustment under this subsection does not change the monthly beneficiary premium or the MA monthly prescription drug beneficiary premium. (f) Disclosure of information. (1) In general. Every contract under this part or part C must require that (A) the PDP sponsor or MA organization provide the Secretary with information the Secretary finds necessary to carry out this section; and (B) the Secretary may inspect and audit the sponsor’s or organization’s books and records concerning the cost information, under section 1395w–27(d)(2)(B) as applied by section 1395w–112(b)(3)(C). (2) Restriction on use. Information disclosed or obtained under this section may be used by HHS officers, employees, and contractors only as needed to carry out this section or part E of subchapter XI and to oversee, evaluate, and enforce this subchapter; by the Attorney General and Comptroller General only as needed for health oversight; by the executive directors of MedPAC and MACPAC for the monitoring, recommendations, and analysis described in the statute; and by the Congressional Budget Office Director for analysis of programs authorized under this chapter and performance of duties under the Congressional Budget and Impoundment Control Act of 1974. (3) Additional disclosure restrictions. (A) The executive directors just described may not disclose, for a prescription drug or MA–PD plan: (i) the specific amounts or sources of rebates, discounts, price concessions, or other direct or indirect remuneration; (ii) information submitted with the sponsor’s section 1395w–111(b) bid or organization’s section 1395w–24(a) bid; or (iii) prescription drug event-record information in a form that CMS could not release under 42 C.F.R. § 423.505(m) or a successor rule. (B) The same restrictions apply to disclosures to individual commissioners of MedPAC or MACPAC. (g) Payment for fallback prescription drug plans. Instead of the amounts otherwise payable under this section to a sponsor offering a fallback plan, the amount payable is the amount determined under the plan’s contract under sections 1395w–111(g)(4) and (5). (h) Temporary retrospective subsidy for reduced cost-sharing and deductibles for certain adult vaccines and insulin during 2023. (1) In addition to other payments for plan year 2023, the Secretary must pay a PDP sponsor or MA organization a subsidy equal to the total reduction in cost-sharing and deductibles for individuals under the plan caused by section 1395w–102(b)(8) or (9). (2) Timing. The Secretary must provide the subsidy, as applicable, no later than 18 months after the applicable plan year ends.