On April 1, 2024, the Centers for Medicare & Medicaid Services (CMS) announced the Cost Threshold and Cost Limit amounts that apply to Plan Sponsors participating in CMS' Retiree Drug Subsidy (RDS) Program, with qualified prescription drug plans that end in 2025, as well as the parameters for Medicare Part D plans in 2025. Pursuant to 42 CFR 423.886(b)(3), the cost threshold and cost limit for qualified retiree prescription drug plans are updated using the Annual Percentage Increase.
The 2025 Cost Threshold and Cost Limit amounts are as follows:
| Plan Year Ending | Cost Threshold | Cost Limit |
|---|---|---|
| 2025 | $590 | $12,150 |
For more detailed information on the new RDS Cost Threshold and Cost Limit amounts for 2025, and the Medicare Part D Benefit Parameters, please review CMS' 2025 Announcement, pages 121 - 122.
For detailed information about the RDS Cost Threshold and Cost Limit amounts for previous plan years, refer to Cost Threshold And Cost Limit By Plan Year on CMS' Retiree Drug Subsidy website.
Impact of Adjustments
The year in which a Plan Sponsor's RDS plan year ends, as specified in the Plan Sponsor's application, determines the applicable Cost Threshold and Cost Limit amounts for that application. This principle applies to both calendar year plans and non-calendar year plans. The newly announced Cost Threshold and Cost Limit amounts are used in determining the amount of subsidy payments for RDS plan years ending in 2025.
Plan Sponsors of RDS plans ending in 2025 that were using the 2024 Cost Threshold and Cost Limit as a basis for submitting costs to CMS' RDS Center should adjust the interim cost data in their next cost submission to reflect the new 2025 Cost Threshold and Cost Limit amounts.
Please keep in mind that final cost reports, whether submitted for purposes of reconciling interim payments or submitted by Plan Sponsors through the annual payment process, must reflect the applicable Cost Threshold and Cost Limit amounts that correspond to the application plan year end date.
In accordance with 42 CFR 423.884(d)(5)(iii)(C), the valuation of defined standard prescription drug coverage for a given plan year is based on the initial coverage limit cost-sharing and out-of-pocket threshold for defined standard prescription drug coverage under Part D in effect at the start of such plan year, not taking into account the value of any discount or coverage provided during the coverage gap.). Pursuant with 42 CFR 423.884(d)(5)(iii)(D), any actuarial attestation submitted to CMS' RDS Center within 60 days after the publication of the adjusted amounts can be based on either the adjusted amounts, or the previous year's amounts. Any actuarial attestation submitted more than 60 days after the publication of the adjusted amounts must apply the adjusted amounts.
If you need more information, contact CMS' RDS Center.