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Coming in January 2024 – Changes to the Mandatory Payment Reduction in CMS’ RDS Payments

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Interim Payment


The Centers for Medicare & Medicaid Services (CMS) Retiree Drug Subsidy (RDS) Program is subject to the mandatory reductions in federal spending, or sequestration, in accordance with the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA), as amended. Beginning with plan sponsors' incurred costs reported on or after April 1, 2013, and for the duration of the sequestration period, CMS applies a mandatory two percent (2%) payment reduction to all plan months when calculating an RDS application's final Reconciliation subsidy payment.

Beginning in January 2024, CMS’ RDS Center will implement an update to the sequestration policy, whereby the mandatory two percent (2%) payment reduction will be applied at each interim payment request rather than applying the reduction only to the final payment. 

This change affects Plan Sponsors who choose to submit interim payment requests; Plan Sponsors who submit only one annual payment request during Reconciliation will not be affected. Refer to the Announcement “Important Enhancement to RDS Payment Frequency” on the RDS Public Website for more information on payment frequency. 

Additional information about this change will be provided to the RDS Plan Sponsor community as details become available. Please continue to monitor the RDS Public Website and program emails for the latest updates on this topic. If you have questions about the mandatory payment reduction or need additional information, please contact CMS' RDS Center.

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