The Centers for Medicare & Medicaid Services (“CMS”) announced preliminary Medicare Part D bid parameters for year 2026 to help plan sponsors finalize plan offerings and prepare for Medicare open enrollment in 2026. 

Notably, the announcement includes various updates to parameters under the Part D Stabilization Demonstration, which was launched last year as a voluntary, nationwide program to minimize disruption to standalone prescription drug plans (“PDPs”) stemming from changes to Part D benefits under the Inflation Reduction Act (“IRA”).

Parameter changes for 2026

As background, in 2025, the CMS implemented one-year parameters under the demonstration to help stabilize beneficiary premiums and reduce sponsors’ liability following passage of the IRA. CMS sought to accomplish these goals by providing further subsidies to standalone PDPs, capping year-over-year premium increases at $35, and narrowing upper tranches of existing risk corridors.

In its announcement, however, CMS made notable changes to these parameters for 2026, thereby limiting the demonstration’s ability to stabilize premiums and costs for eligible plans. CMS says such changes “are facilitating the [demonstration’s] return to operating under regular market conditions” now that “plan sponsors have built experience and are better equipped” to manage how IRA benefit changes impact plan utilization and costs.

The parameter changes for 2026 include:

• Dropping the base beneficiary premium reduction from $15 to $10;
• A $15 increase to the year-over-year limit on a plan’s total Part D premium (increasing the limit from $35 to $50); and
• Removing the narrowed risk corridor thresholds. 

The parameter changes and CMS’s implementation of the demonstration on a going-forward basis have short-term and long-term implications for plan sponsors and beneficiaries in the Part D market.

In the short term, reduced beneficiary premium subsidies and higher permissible annual premium increases could affect beneficiary plan enrollment options for the upcoming year, including by limiting the affordability and viability of standalone PDPs. 

In the long term, additional changes to the demonstration over the next several years could more broadly influence future Part D plan premiums, plan design and terminations, and formulary construction, especially combined with the six percent cap on annual base beneficiary premium increases through 2029 under the IRA. For example, anticipated increases in beneficiary costs and utilization could promote a shift towards plan types that may be better suited to offset resulting increases in plan liability, such as Medicare Advantage prescription drug plans.

Implications for Part D plan sponsors

Part D plan sponsors who have opted to participate in the demonstration for 2026 should assess how the parameter changes may impact standalone PDP plan design for the upcoming year and take proactive steps to account for any impact on plan affordability and sponsor liability.

Part D sponsors with standalone PDPs that participated in the demonstration in 2025 may participate in 2026, including Employer Group Waiver Plans. However, Part D sponsors who did not participate in 2025 are ineligible to participate in 2026, absent limited exceptions. Eligible Part D plan sponsors were required to inform CMS of their intent to participate in the demonstration via the Health Plan Management System by August 4, 2025.

Reed Smith will continue to follow developments with regard to Medicare and Part D prescription drug plans. If you have any questions about this program, please reach out to the author or the health care lawyers at Reed Smith.