Part D catastrophic threshold to spike in 2020, hiking out-of-pocket costs: KFF report

A document that reads 'Medicare Part D'
A new Kaiser Family Foundation report examines Part D costs for 2020. (Getty/designer491)

Medicare Part D beneficiaries could see their out-of-pocket costs go up next year before they reach the catastrophic phase of the benefit, a new analysis shows. 

Kaiser Family Foundation (KFF) researchers examined how policy changes could impact the Part D market for the 2020 plan year and found that the catastrophic threshold is set to increase substantially, leading to higher out-of-pocket costs for certain beneficiaries. 

The catastrophic threshold for 2020 will rise from $5,100 in 2019 to $6,350, KFF found. That’s an increase of $1,250, or 25%.  

Beneficiaries who take only brand-name drugs will pay for a quarter of that increase out of their pockets, while the rest will be covered by drugmaker discounts. Beneficiaries who take only generic drugs will pay the entire increase out of pocket, according to the report. 

RELATED: Part D rebates grew but not enough to offset price spikes, OIG finds 

The report projects that out-of-pocket costs for beneficiaries who take only brand-name drugs will increase from $2,275 in 2019 to $2,652 in 2020, or close to $400. The researchers said that the large increase is due to the expiration of a provision within the Affordable Care Act that slowed the growth of the catastrophic threshold. 

“In the absence of a change in law, Medicare Part D enrollees can expect to face an increase in their out-of-pocket drug costs in 2020,” the researchers wrote. 

Based on 2017 claims data—the most recent available—the report says 4.9 million Part D beneficiaries who do not receive low-income subsidies reached the coverage gap, and 1 million reached the catastrophic coverage threshold. 

Had the threshold increased in 2017, fewer than 1 million people would have qualified for catastrophic coverage, meaning more people would be paying out of pocket in the coverage gap. 

The findings are notable in part, the researchers said, because some legislators are actively seeking ways to cap beneficiaries’ out-of-pocket costs. The drug pricing plan backed by House Speaker Nancy Pelosi would do so, alongside shifting some of the liability for costs for beneficiaries who do reach the catastrophic threshold. 

“Proposed changes to the Part D benefit design would help to mitigate out-of-pocket drug cost increases for Medicare beneficiaries, particularly for those with high drug costs who currently face no limit in their annual out-of-pocket expenses—with Part D plan sponsors and drug manufacturers potentially picking up much of the additional costs,” the researchers wrote.