Growing Number Of Unsubsidized Part D Beneficiaries With Catastrophic Spending Suggests Need For An Out-Of-Pocket Cap

Abstract

Medicare Part D has no cap on beneficiaries' out-of-pocket spending for outpatient prescription drugs, and, unlike Medicare Parts A and B, beneficiaries are prohibited from purchasing supplemental insurance that could provide such a cap. Historically, most beneficiaries whose annual Part D spending reached the catastrophic level were protected from unlimited personal liability by the Low-Income Subsidy (LIS). However, we found that the proportion of beneficiaries whose spending reached that level but did not qualify for the subsidy-and therefore remained liable for coinsurance-increased rapidly, from 18 percent in 2007 to 28 percent in 2015. Moreover, average total per person per year spending grew much more rapidly for those who did not qualify for the LIS than for those who did, primarily because of differences in price and utilization trends for the drugs that represented disproportionately large shares of their spending. We estimated that a cap for all Part D enrollees in 2015 would have raised monthly premiums by only $0.40-$1.31 per member.

Association of Branded Prescription Drug Rebate Size and Patient Out-of-Pocket Costs in a Nationally Representative Sample, 2007-2018

“…This could be because coinsurance is more commonly used in Medicare plans and because Medicare Part D plans typically do not have annual out-of-pocket maximums. 40 Indeed, findings from Trish et al 40 suggest that increases in list prices may have contributed to the increased numbers of individuals in Medicare who reached catastrophic out-of-pocket spending levels. Nevertheless, the increase in costs associated with rebates also grew among individuals covered by commercial insurance, potentially due to increased uptake of high-deductible health plans among this population.…”

Incorporating Prescription Drug Utilization Information Into the Marketplace Risk Adjustment Model Improves Payment Accuracy and Reduces Adverse Selection Incentives

“…That is, patients only receive the RXC coefficient if they take one of a subset of drugs used specifically to treat that condition. For example, medications to treat multiple sclerosis are expensive, averaging around $5,698 per month (Trish, Xu, & Joyce, 2018). While an RXC for multiple sclerosis was added to the model, only a subset of prescription drugs used to treat it were included in the RXC.…”

Looking Back at US Pharmacy’s Past to Help Discern Its Future

“…72 At the same time, Medicare beneficiaries without low-income subsidies in catastrophic coverage, though representing a small portion of the Medicare population, still lack a cap on prescription drug spending. 73 Overall, the projection of Christensen and Farris 4 regarding increase in proportion of prescriptions covered by insurance was borne out thanks in large part to an expanded insurance coverage to include those previously uninsured.…”