The Benefits of Capping Medicare Part D Out-of-Pocket Costs Vary Substantially Across Drugs

Although delayed as a result of the COVID-19 public health emergency, there are persistent and ongoing efforts to reform the Medicare Part D benefit. Since its June 2016 Report to Congress, the Medicare Payment Advisory Commission (MedPAC) continues to recommend changes to the Part D benefit design, including eliminating the coverage gap and creating a maximum out-of-pocket (MOOP) cap on beneficiary cost-sharing that will be financed by a combination of plan, manufacturer and Medicare individual reinsurance payments as well as through greater flexibility for plans to manage formularies.

A number of organizations such as the American Action Forum have supported similar reforms, many of which have found their way into the Senate Finance Committee Prescription Drug Pricing Reduction Act of 2019 (PDPRA) and the House Lower Drug Costs Now Act of 2019. If the PDPRA is enacted, enrollees would be responsible for 25% of cost-sharing after the deductible, until they accrue $3,100 in out-of-pocket spending, at which point enrollees would enter the catastrophic phase and would have no additional cost-sharing. Payment for drugs in the catastrophic phase would be shared by Part D plans, manufacturers and Medicare individual reinsurance payments.

In a new analysis titled “The Benefits of Capping Medicare Part D Out-of-Pocket Costs Will Vary Substantially Depending on the Drugs That Beneficiaries Use,” Manatt Health simulates the potential impacts of the PDPRA on cost-sharing for enrollees and payments by Part D plans, manufacturers and Medicare. The report finds that the PDPRA, if implemented, could reduce average out-of-pocket drug costs for Part D enrollees, but with substantial variation across types of drugs.

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