Insights,

IRA Impact: Medicare Part D Beneficiaries Reaching the $2,000 Out-of-Pocket Threshold

The Inflation Reduction Act (IRA) includes several provisions that will impact the price of prescription drugs and Medicare Part D enrollees’ spending. Beginning in 2025, the Part D benefit is redesigned with a $2,000 out of pocket (OOP) max for enrollees combined with increased plan and manufacturer liability throughout the benefit. The Part D “Coverage Gap” will be eliminated, with manufacturers responsible for pre-catastrophic phase discounts of 10% and catastrophic phase discounts of 20%. Part D plans will be responsible for 65% of pre-catastrophic spending and 60% of catastrophic spending. ADVI Strategic Analytics and Value Economics (SAVEs) utilized the 100% Part D Event (PDE) data from 2017-2021 to examine the number of enrollees with OOP spending in excess of $2,000 to better understand how many enrollees may benefit from the newly established OOP maximum, and how manufacturers may be affected by the 20% discount in the catastrophic phase.

Findings

ADVI SAVES analyzed Part D Event (PDE) data from 2017 to 2021 and found that 3% of the Part D population has OOP expenses of $2,000 or more. This proportion has been remarkably stable over the past five years despite changing drug prices, new medications, and the COVID-19 impact on healthcare utilization in 2020.

Table 1 – Historical Proportion of Part D Beneficiaries With >=$2000 Patient Spending in a Year

Table 2 below shows some of the patient demographics of the total Part D population compared to the non-LIS patients whose OOP costs exceed $2,000 in 2021. Part D beneficiaries who exceed $2,000 in OOP costs are disproportionately white and enrolled in PDP plans.

Table 2 – Demographic Breakdown of Beneficiaries With >=$2000 Patient Spending in 2021

** PDP = Stand-alone Prescription Drug Plan; MCO = Manage Care Organization other than PPO

ADVI also analyzed the timing of when beneficiaries reached the $2,000 OOP amount during the plan year. The timing of beneficiaries meeting the threshold impacts the amount of prescription drug costs that plans, Medicare, and manufacturers will need to cover under the new benefit design. Figure 1 below shows the breakdown of non-LIS patients reaching the OOP threshold by month. In 2021, nearly 50% of patients did not meet the $2,000 threshold until August.

Figure 1 – Cumulative Percent of Part D Non-LIS Beneficiaries That Reach $2,000 Threshold in 2021

Implications

  • The proportion of beneficiaries spending more than $2,000 out-of-pocket has been relatively stable over the past five years (~3%).
  • Among the 1.5M patients whose out-of-pockets costs equal or exceed $2,000, most do not meet the threshold until 8 or 9 months into the plan year.
  • White people make up a disproportionally high percentage of beneficiaries over the $2,000 threshold. Whether this is due to more frequent usage of Part D medications, better access and availability of care, or other factors requires further exploration.
  • Despite half of Medicare Part D beneficiaries being enrolled in stand-alone PDP plans and half enrolled in a Medicare Advantage plan, over two-thirds of Part D beneficiaries meeting the $2,000 OOP threshold are enrolled in PDP plans.

Future Research

ADVI SAVES continues to evaluate the implications of the IRA for our clients. Our access to 2021- and 2022-Part B and D Medicare claims enables us to determine the list of potential drugs subject to negotiation as well as analyze patient populations to create manufacturer liability models.

If you have questions or are interested in learning more about this data, please contact Caitlin Sheetz (Caitlin.sheetz@advi.com) or your ADVI account manager.