CMS Finalizes 2026 Medicare Changes

The Centers for Medicare & Medicaid Services (CMS) has released its final Calendar Year (CY) 2026 Medicare Advantage and Part D Redesign Program Instructions, detailing significant updates to the Medicare Part D prescription drug program. These changes represent the continued implementation of the Inflation Reduction Act (IRA) and will impact how seniors access and pay for medications.

Impact on Seniors

These changes will affect Medicare beneficiaries in several ways:

Lower Costs for Some Medications: The new selected drug subsidy program should help reduce costs for medications that have undergone price negotiations.
Slightly Higher Cost-Sharing Thresholds: The Part D annual deductible and out-of-pocket threshold are increasing modestly, which may affect some beneficiaries’ spending.
Continued Protection in Catastrophic Phase: Seniors will continue to pay no cost-sharing once they reach the catastrophic phase.
Greater Plan Differentiation: CMS is ensuring that enhanced alternative plans offer at least 10% more value than basic plans, helping seniors make more informed choices.
Employer Coverage Considerations: Retired seniors with employer drug coverage should verify if their coverage remains “creditable” under the new standards to avoid late enrollment penalties.

Key Medicare Program Updates for 2026

Medicare Part D Benefit Structure

The standard Part D benefit for 2026 will maintain its redesigned structure introduced in 2025, with a few important updates:

Annual deductible will increase to $615 (from $590 in 2025)
Annual out-of-pocket threshold rises to $2,100 (from $2,000 in 2025)
Selected drugs (those with negotiated prices under the Medicare Drug Price Negotiation Program) will receive a 10% government subsidy in the initial coverage phase
During the catastrophic phase, CMS will provide 40% reinsurance for selected drugs

Selected Drug Subsidies

Beginning in 2026, CMS will implement a new “selected drug subsidy” program for medications that have undergone price negotiations. The government will pay 10% of the negotiated price for these drugs during the initial coverage phase, helping to lower costs for both plans and beneficiaries.

Medicare Drug Price Negotiation Program

For the first time, maximum fair prices (MFPs) negotiated under the Medicare Drug Price Negotiation Program will take effect on January 1, 2026. Part D plans must include these selected drugs on their formularies, though limited exceptions exist for removing them when generic or interchangeable biological alternatives become available.

Creditable Coverage Standards

CMS has revised the methodology for determining whether employer prescription drug coverage is “creditable” (meaning it’s at least as good as Medicare Part D). For 2026, group health plans may use either:

The existing simplified determination methodology, or
A new revised methodology requiring plans to pay at least 72% of participants’ prescription drug expenses (increased from 60%)

Conclusion

The changes represent the continuing evolution of the Medicare Part D program under the Inflation Reduction Act, with the goal of enhancing benefit design while controlling costs for both beneficiaries and taxpayers. Seniors should review their prescription drug coverage options during the Annual Enrollment Period to ensure they select the most appropriate plan for their needs in 2026.

Complete information on the changes can be found here on the CMS website.