Some may face affordability challenges after Part D redesign
Challenges could result from the timing of their prescription fills and their income, the report finds.
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Medicare Part D may be the target of reforms, but a new analysis from consulting firm Avalere has found that beneficiaries may still face challenges when it comes to affording their medications.
The Inflation Reduction Act (IRA) included several changes to the Part D benefit design that improves affordability for Part D enrollees. Beginning in 2024, the IRA establishes a beneficiary out-of-pocket (OOP) cap at the catastrophic threshold, estimated to be about $3,233 in OOP costs, not including manufacturer coverage gap discounts. In 2025, the act redesigns the Part D benefit to cap beneficiary OOP costs at $2,000, and changes plan and manufacturer liability throughout the benefit.
Part D plans will also be required to allow any Part D enrollee to spread their OOP costs over the course of the plan year – known as "OOP smoothing" – beginning in 2025.
Even with these reforms, some beneficiaries may still face affordability challenges resulting from the timing of their prescription fills and their income, the report found. Those most at risk of continued affordability challenges could include beneficiaries with limited income who do not receive cost sharing support through the low-income subsidy (LIS); those who, in 2024, have high OOP costs in a short period of time before the OOP smoothing program launches; and those who, in 2025, incur most of their OOP costs later in the plan year (due to a new diagnosis, for example) when the horizon of time for smoothing OOP costs is reduced.
WHAT'S THE IMPACT
The analysis found that 1.5 million non-LIS enrollees are projected to have OOP spending high enough to reach the OOP cap at the catastrophic threshold for 2024. Furthermore, almost 800,000 non-LIS beneficiaries are projected to have OOP spending on Part D drugs that represents more than 10% of their annual income in 2024, even with their OOP costs capped at the catastrophic threshold.
Most of these beneficiaries (80%) have income between 150% and 300% of the federal poverty level (FPL), just above the LIS eligibility threshold.
Of the 1.5 million non-LIS beneficiaries projected to reach the OOP cap in 2024, about 270,000 enrollees (18%) are expected to incur their OOP costs in the first 3 months of the year. Because OOP smoothing will not yet be implemented, these beneficiaries may face affordability challenges due to incurring high OOP costs – more than $1,000 per month – in a short period of time, found Avalere.
Greater shares of enrollees who qualify for Medicare based on disability (24%), beneficiaries who are younger than 65 (29%), and those who are Black (23%) or Hispanic (26%) are projected to reach catastrophic in the first three months of the year compared to the average across all non-LIS enrollees who reach catastrophic (17%).
The highest number of non-LIS beneficiaries who are projected to reach the OOP cap at the catastrophic threshold in 2024 include those taking asthma drugs (482,000 beneficiaries), blood thinners (458,000), immunology therapies (316,000), cancer therapies (240,000), and HIV drugs (216,000).
For 2025, the analysis projects that 2.6 million non-LIS beneficiaries will have OOP spending high enough to reach the $2,000 OOP cap. Even with the $2,000 OOP cap, more than 200,000 non-LIS beneficiaries are projected to have OOP spending in excess of 10% of their annual income in 2025.
Since the OOP smoothing program allows beneficiaries to spread costs over the remaining months of the plan year, Avalere examined instances where enrollees may have more limited benefit from smoothing because they incur a majority of their OOP costs in the last few months of the plan year. It found that of the roughly 4.2 million non-LIS beneficiaries projected to have greater than $1,500 in OOP spending in 2025, around 20,000 enrollees are projected to have large OOP spending (i.e., more than $1,250) in the last three months of the year.
Across all non-LIS beneficiaries projected to have OOP spending of more than $1,500 in 2025, greater shares of racial/ethnic minority groups, including Asian, Black, and Hispanic beneficiaries, are projected to incur the majority of their OOP costs in the last 3 months of the year, the report found.
THE LARGER TREND
Starting this year, the Department of Health and Human Services will begin negotiations with drug companies to lower the price of Part D drugs in Medicare.
The 10 Part D drugs that will be negotiated will be published on September 1, according to Centers for Medicare and Medicaid Services Administrator Chiquita Brooks-LaSure. On September 1, 2024, CMS will publish the fair prices for these drugs, she said.
Starting on January 1, 2026, Medicare beneficiaries can expect to buy the drugs at the negotiated lower prices. If a drug company tries to set its drug price beyond the cost of living for Medicare beneficiaries, the manufacturer will be required to reimburse the extra charge beyond the cost of living, said HHS.
Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com
