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Jun 14, 2016

MedPAC Proposes Changes for 42 Million Medicare Beneficiaries Enrolled in Part D

Cost-sharing changes could increase costs for many beneficiaries.

Many of the 42 million Medicare Part D enrollees could be affected if Congress acts on anticipated Medicare Payment Advisory Committee (MedPAC) recommendations to change cost-sharing requirements for beneficiaries of the program. Overall, according to Avalere experts, the changes could mean lower-cost generic and biosimilar drugs for low-income beneficiaries, and higher cost-sharing levels for beneficiaries with higher incomes.

MedPAC—an independent agency that advises Congress on issues affecting Medicare—is expected to release its June report to Congress tomorrow, June 15. In that report, MedPAC will likely recommend a set of proposals to reform the Medicare Part D program. These proposals were unanimously approved by commissioners at MedPAC’s April meeting. Several of the proposed Part D changes, described below, will specifically impact beneficiary out-of-pocket costs. Find more information about all of the proposals here. According to experts at Avalere, of the more than 42 million Part D enrollees in 2016, nearly 12 million are low-income subsidy (LIS) beneficiaries who could experience lower costs for generic drugs or biosimilars. Depending on the final recommendation, this proposal could also include higher cost sharing on branded drugs. The remaining non-LIS beneficiaries would face multiple cost-sharing changes that could actually increase costs for many enrollees.

Changes for Non-LIS Beneficiaries

MedPAC proposed two changes to beneficiary cost-sharing for higher-income, non-LIS enrollees.First, MedPAC recommends implementing an out-of-pocket (OOP) maximum in Part D, which means beneficiaries would not be responsible for any cost sharing in catastrophic coverage after spending a certain amount in a given year. For 2017, the OOP maximum would begin at $4,950 in total out-of-pocket costs on medications. Today, beneficiaries are responsible for five percent of their total drug costs for any spending in the catastrophic portion of the benefit (Figure 1). This proposal would lower out-of-pocket costs for beneficiaries with very high prescription drug costs. Avalere experts note that implementing an OOP maximum is not out of the ordinary, as most other forms of insurance already include OOP caps on enrollee spending as a result of requirements in the Affordable Care Act.

The second cost-sharing change proposed by MedPAC would make it harder for Part D enrollees to reach the catastrophic coverage level of their plan, resulting in higher OOPs. The change impacts how beneficiaries’ true-out-of-pocket costs (TrOOP) are calculated. When beneficiary TrOOP reaches a specified threshold ($4,950 in 2017), a beneficiary enters the catastrophic phase of the Part D benefit. The proposed change to the TrOOP calculation, which is a measure of which beneficiary spending “counts” toward moving beneficiaries through the Part D benefit toward catastrophic coverage. This change would exclude the brand manufacturer coverage gap discounts (shown in green above) from the calculation of TrOOP. According to Avalere, this change would effectively increase beneficiary spending and slow enrollees’ progression toward the catastrophic phase. This would result in fewer beneficiaries ever reaching catastrophic coverage.

A previous Avalere analysis demonstrated how beneficiary costs would change under the new MedPAC TrOOP proposal. In total, beneficiaries would pay $4.1 billion in additional Part D spending over the four years from 2017 through 2020. Furthermore, 715,000 fewer beneficiaries would reach catastrophic coverage each year—a 64 percent reduction in the number of beneficiaries reaching the catastrophic phase.

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