Issue Brief: OOP Costs Among Medicare Part D Enrollees Reaching the Catastrophic Threshold

Summary

As policymakers consider reforms to the Part D benefit to address rising out-of-pocket (OOP) costs by adding a maximum OOP cap, an Avalere analysis examines the types of beneficiaries mostly likely to be helped by such a policy.

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Avalere’s analysis focused on the nearly 800,000 beneficiaries who reached catastrophic in 2017 and were not eligible for the low-income subsidy (LIS) or enrolled in an employer-group waiver plan (EGWP).¹ This group incurred an average of just over $4,000 in OOP costs in 2017.

The analysis finds that non-LIS beneficiaries who reached the catastrophic phase early in the year faced higher average annual OOP expenditures due to ongoing cost sharing in the catastrophic. For example, non-LIS enrollees who reached the catastrophic in the first 3 months of the year averaged more than $6,600 in OOP costs in 2017. Among this group, beneficiaries who filled at least one script after reaching the catastrophic in the first 3 months of the year incurred more than $2,000 in OOP costs on average after reaching the catastrophic. The analysis also finds that many non-LIS beneficiaries with the highest OOP expenditures face substantial OOP costs that are concentrated in a short period of time ($1,000 or $2,500 per month)—often in the first few months of the year. While an annual OOP cap would substantially limit overall OOP costs for many beneficiaries who reach the catastrophic, a portion of these beneficiaries could continue to face affordability challenges due to high OOP costs that are concentrated in a short period of time. These individuals might benefit from additional policies that reduce their high monthly expenditures. Additional affordability reforms could, for example, spread OOP costs over additional months or limit OOP spending on a monthly or per-script basis.

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Notes

EGWPs are Part D plans offered by employers to their retirees that often have more generous benefits with lower cost-sharing requirements than standard Part D plans. LIS beneficiaries receive premium and cost-sharing assistance from the government and do not have any cost sharing in the catastrophic phase of the benefit. As such, Avalere’s analysis focuses on the nearly 800,000 non-LIS, non-EGWP beneficiaries who reached the catastrophic in 2017 and who would mostly likely benefit from an OOP cap.