More Medicare Part D beneficiaries reaching catastrophic phase, likely setting up calls for reform

Prescription Drugs and Money image
More Part D enrollees are reaching their catastrophic phase, which is likely to lead to calls for reform as government spending increases. (TaxRebate.org.uk)

Medicare Part D beneficiaries are more easily reaching their catastrophic phase, increasing government spending on the program, and possibly setting up calls for reform.

According to a new analysis from Avalere Health, the number of Medicare Part D enrollees without low-income subsidies reaching their catastrophic coverage phase has jumped from 515,000 to about 800,000, a more than 50% increase from 2013 to 2016. 

Beneficiaries enter the catastrophic phase when their out-of-pocket costs exceed $5,000 during their coverage year. After that, beneficiaries pay no more than 5% of total costs, with the government paying 80% and the plan playing 15%.

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And Avalere told FierceHealthcare that the number of enrollees reaching this phase will only go up.

"Drug prices are continuing to go up, and the Affordable Care Act and other legislation is helping enrollees reach this phase more quickly," Kelly Brantley, a vice president at Avalere and one of the authors of the analysis, told FierceHealthcare.

RELATED: Report: Medicare Part B payment increases could offset 340B cuts for many hospitals

Under the ACA, drugmakers are responsible for 50% of Part D drug costs during a beneficiary's coverage gap, which has tamed out-of-pocket spending. The Bipartisan Budget Act of 2018 expanded that to 70%, making it easier to reach the catastrophic phase and leading to more government spending on Part D drugs. 

RELATED: Providers aren't safe from Medicare, Medicaid reform despite Paul Ryan's exit

The ACA temporarily slowed the growth rate of the catastrophic threshold until 2020, after which it is scheduled to spike back up under the pre-ACA rate formula. The combination of the temporary rate fix and ever-increasing government spending on the program is likely to lead to calls for a reform of the system. 

"The more people hitting this phase the more attention it brings to the issue of how to make the Part D program more sustainable," Brantley said. "We're getting closer to the inevitability that the federal government will address this."

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