While the 2026 Medicare Part D prescription hierarchical condition category (RxHCC) model has already been finalized, this paper commissioned by the Pharmaceutical Research and Manufacturers of America (PhRMA) evaluates potential model enhancements for the 2027 model. The Centers for Medicare and Medicaid Services is expected to propose and finalize the new model in early 2026.

With direct subsidy payments significantly increasing following the Inflation Reduction Act, effective risk adjustment has become even more important to ensure Part D plan sponsors are appropriately compensated for the varying risk levels in their enrolled population. The paper identifies limitations in the current RxHCC model, which relies on data from three years prior to the payment year, and proposes two key enhancements to improve prediction accuracy.

This paper was commissioned by PhRMA.