Even with new reforms to Medicare Part D, some beneficiaries could still face affordability challenges due to the timing of new prescriptions and other factors, a new analysis found.
The report, released earlier this week by consulting firm Avalere, explored the impact of new reforms to the Part D drug benefit such as a cap on out-of-pocket costs passed as part of the Inflation Reduction Act (IRA) last year.
“Even with these reforms, some beneficiaries may still face affordability challenges resulting from the timing of their prescription fills and their income,” the analysis said.
Starting in 2025, Part D benefits will cap out-of-pocket beneficiary costs at $2,000 and change plan and drugmaker liability through the benefit. The plans also have to allow any Part D enrollee to spread out costs over the plan year, also known as smoothing.
Avalere researchers looked at 2020 Medicare prescription drug expenses data to project spending under the changes in 2024 and 2025. In 2024, Avalere estimates that 1.5 million enrollees that don’t qualify for a low-income subsidy will reach the $2,000 cap.
In addition, 18% of these enrollees will reach the cap in the first three months of the year. However, smoothing will not take effect until 2025. These beneficiaries therefore will face affordability challenges for incurring such high costs in a short period of time, the analysis said.
Almost 800,000 non-LIS beneficiaries will also have out-of-pocket spending that represents more than 10% of their annual income in 2024.
“Most of these beneficiaries (80%) have income between 150% and 300% of the federal poverty level, just above the LIS eligibility threshold,” the analysis said.
For 2025, Avalere estimated that 2.6 million non-LIS beneficiaries will hit the cap. Some of the drug classes likely to incur the greatest costs for beneficiaries include blood thinners, cancer therapies and HIV drugs.
While the smoothing requirement is in place in 2025, Avalere looked at what happens if an enrollee incurs most of their out-of-pocket costs in the last few months of the plan year.
“Avalere found that of the roughly 4.2 million non-LIS beneficiaries projected to have greater than $1,500 in [out-of-pocket] spending in 2025, around 20,000 enrollees are projected to have large … spending (i.e., more than $1,250) in the last three months of the year,” the analysis said.
The Part D benefit redesign is one of several reforms adopted as part of the IRA. The law also puts an inflationary cap on any price hikes. It also gives Medicare the power to negotiate for lower prices on a small subset of drugs starting in 2026.