Medicare Part D has undergone significant changes in 2026, affecting reimbursement structures and financial responsibilities for Long-Term Care (LTC) patients. While the 2026 Medicare Part D changes aim to improve affordability and shift some financial responsibility to drug manufacturers, they also introduce a more complex reimbursement model for pharmacies. Could these complexities potentially impact patients' access to medications in long-term care settings?

Key Changes Affecting LTC Patients:

1. $2,000 Annual Out-of-Pocket Cap

Starting January 1, 2025, Medicare Part D introduces a $2,000 annual cap on out-of-pocket prescription drug costs. This cap applies to all enrollees, including those in LTC settings, effectively eliminating the previous “donut hole” phase. Once the cap is reached, beneficiaries pay no further cost-sharing for covered drugs for the remainder of the year.

2. Elimination of the Coverage Gap

The traditional coverage gap, where beneficiaries were responsible for a larger share of drug costs, has been eliminated. In 2025, the standard Part D coverage structure comprises:

Deductible Phase: Beneficiaries pay 100% of the drug costs until the deductible is met.

Initial Coverage Phase: Beneficiaries pay 25% coinsurance for covered drugs.

Catastrophic Coverage Phase: After reaching the $2,000 out-of-pocket threshold, beneficiaries pay no cost-sharing.

3. Medicare Prescription Payment Plan (MPPP)

The MPPP allows LTC patients to spread their out-of-pocket costs evenly over the year, which is particularly helpful for those on high-cost medications.

4. Changes in Reinsurance Payments

Medicare’s share of total drug costs in the catastrophic phase has been adjusted:

• Brand-name drugs: Medicare pays 20% (down from 80%).
• Generic drugs: Medicare pays 40% (down from 80%).
• Manufacturer Discount Program (MDP): Shared Financial Responsibility

Effective January 1, 2026, the Manufacturer Discount Program (MDP) replaces the previous Coverage Gap Discount Program (CGD). This program ensures that drug manufacturers contribute to the cost of medications, lowering out-of-pocket expenses for patients.

• Initial Coverage Phase: Manufacturers provide a 10% discount on applicable drugs.
• Catastrophic Coverage Phase: Manufacturers’ responsibility increases to 20% of drug costs.
• Medicare and Part D Plan Contributions in Catastrophic Phase

Financial responsibilities in the catastrophic phase are now divided as follows:

• Medicare: 20%
• Part D Plan: 60%
• Manufacturer: 20%

This shared responsibility structure ensures that LTC patients are protected from excessive medication costs, with their maximum annual out-of-pocket capped at $2,000.

Implications for LTC Facilities and Pharmacies

Updated Billing Practices: LTC pharmacies must adapt to the new reimbursement structures to ensure accurate billing and compliance.

Staff Training: Pharmacy staff should be trained on the updated Medicare Part D regulations to assist LTC patients effectively.

Medication Management: The elimination of the coverage gap and shared manufacturer/Medicare contributions enable LTC facilities to better manage medication costs and provide consistent access to essential treatments.

Looking Ahead

These changes represent a significant shift in Medicare Part D for LTC patients. By reducing out-of-pocket expenses, simplifying coverage, and distributing financial responsibility between Medicare, Part D plans, and manufacturers, these reforms make medication access more manageable for residents of LTC facilities. At the same time, some pharmacies are re-evaluating which facilities they can serve and how to maintain financial stability, particularly regarding cash flow, given the more complex reimbursement model.

At Avacare Pharmacy, we are focused on staying ahead of these changes by optimizing our operations, supporting facilities with streamlined pharmacy services, and ensuring consistent medication access for residents. Our goal is to help LTC facilities navigate the evolving landscape efficiently, providing tailored solutions that balance cost management with high-quality care. Staying informed and adapting pharmacy practices will be key to maximizing the benefits of these updates.

References:

1. Centers for Medicare & Medicaid Services. (2025). Final CY 2026 Part D redesign program instructions. U.S. Department of Health & Human Services. https://www.cms.gov/files/document/final-cy-2026-part-d-redesign-program-instruction.pdf

2. Cubanski, J., & Neuman, T. (2025). Medicare Part D premiums are decreasing for many stand-alone drug plans in a number of states in 2026. Kaiser Family Foundation. https://www.kff.org/medicare/medicare-part-d-premiums-are-decreasing-for-many-stand-alone-drug-plans-in-a-number-of-states-in-2026/

3. Centers for Medicare & Medicaid Services. (2025). 2026 Medicare Part D bid information and Part D premium stabilization demonstration parameters. U.S. Department of Health & Human Services. https://www.cms.gov/newsroom/fact-sheets/2026-medicare-part-d-bid-information-and-part-d-premium-stabilization-demonstration-parameters