Medicare Part D Basics and Policy Options for Redesign - June 14, 2021
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Medicare Part D Basics and Policy Options for Redesign June 14, 2021
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Panelists
Leigh Purivs, MPA Juliette Cubanski, Ph.D.
Director Deputy Director
Health Care Costs and Access Program on Medicare Policy
AARP Kaiser Family Foundation
@leighdrugwonk @jcubanski
Moderator
Stacie B. Dusetzina, Ph.D. Sarah Dash, MPH
Associate Professor of Health Policy
President & CEO
Vanderbilt University School of
Alliance for Health Policy
Medicine
@DusetzinaS @SarahJDash
@leighdrugwonk Leigh Purivs, MPA Director Health Care Costs and Access AARP
INTRODUCTION TO MEDICARE PART D Leigh Purvis, Director, Health Care Costs & Access AARP Public Policy Institute
QUICK BACKGROUND • Created by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 and implemented in 2006 • Provides voluntary outpatient prescription drug coverage (with a late-enrollment penalty) • Includes a Part D Low-Income Subsidy (“Extra Help”) program that helps with premiums and cost-sharing for enrollees with limited incomes and assets AARP PUBLIC POLICY INSTITUTE | AARP.ORG/PPI © 2021 AARP ALL RIGHTS RESERVED June 16, 2021 9
HOW DOES PART D COVERAGE WORK? • Provided through stand-alone prescription drug plans (PDPs) and Medicare Advantage prescription drug plans (MA-PDs) that include drug coverage and other Medicare-covered benefits • Plans must meet defined requirements but can vary in terms of premiums, deductibles, cost-sharing, formularies, utilization management, and pharmacy network AARP PUBLIC POLICY INSTITUTE | AARP.ORG/PPI © 2021 AARP ALL RIGHTS RESERVED June 16, 2021 10
PLAN AVAILABILITY AND ENROLLMENT • Average Medicare beneficiary has a choice of nearly 60 Medicare Part D plans in 2021 (30 PDPs and 27 MA-PDs) • Half of all Part D enrollees are enrolled in stand-alone PDPs and the other half are in MA-PDs, with a slightly larger number of enrollees in MA-PDs • Enrollment is highly concentrated: the top 5 plan sponsors account for 74% of Part D enrollment • Roughly one in four enrollees (~13 million) are in the Part D Low-Income Subsidy (LIS) program AARP PUBLIC POLICY INSTITUTE | AARP.ORG/PPI © 2021 AARP ALL RIGHTS RESERVED June 16, 2021 11
PREMIUMS AND COST-SHARING CAN ADD UP
• Average monthly premium charged by PDPs and MA-PDs
(weighted by enrollment) has fluctuated recently and is now $26
• However, average masks sizable premium increases among
some plans with high enrollment
• Enrollees can also face substantial cost-sharing for certain drugs
• Maximum cost-sharing for non-preferred drugs is $100
(copay) and 50% (coinsurance)
AARP PUBLIC POLICY INSTITUTE | AARP.ORG/PPI © 2021 AARP ALL RIGHTS RESERVED June 16, 2021 12IS PART D A SUCCESS STORY?
• Nearly 90% of older adults have prescription drug coverage
• The vast majority of Medicare beneficiaries report high satisfaction with Part D
• Perhaps a little bit too satisfied; they aren’t switching plans even when it
would benefit them
AARP PUBLIC POLICY INSTITUTE | AARP.ORG/PPI © 2021 AARP ALL RIGHTS RESERVED June 16, 2021 13WILL THE HONEYMOON CONTINUE?
• Recent trends could have serious health and financial
implications for enrollees who are not in a position to
absorb increased costs
• Most Medicare beneficiaries live on modest
incomes and resources
• Median income is just under $30,000
• 1 in 4 have less than $8,500 in savings
AARP PUBLIC POLICY INSTITUTE | AARP.ORG/PPI © 2021 AARP ALL RIGHTS RESERVED June 16, 2021 14@jcubanski Juliette Cubanski, Ph.D. Deputy Director Program on Medicare Policy Kaiser Family Foundation
Medicare Part D Basics Alliance for Health Reform June 16, 2021 Juliette Cubanski, PhD, MPP, MPH Deputy Director, Program on Medicare Policy, KFF @jcubanski
Figure 17
Medicare Part D Standard Benefit Design in 2021
Share of costs paid by: Enrollees Plans Medicare Manufacturers
5%
Catastrophic $12,000
coverage phase $11,000 15% 80%
$10,048 total /
$10,000 $6,550 out of pocket
$9,000
$8,000
Coverage gap
phase $7,000 25% 70% 5%
$6,000
$5,000
$4,000 $4,130
Initial coverage $3,000
phase $2,000 25% 75%
$1,000
100% $445
Deductible $0Figure 18
Medicare Part D standard benefit parameters have increased over
time
Total drug spending at catastrophic threshold $10,048
Out-of-pocket threshold for catastrophic coverage
Initial coverage limit
Deductible
$6,550
$5,100
$4,130
$3,600
$2,250
$250 $445
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2020
NOTE: Where applicable, estimates are rounded to nearest whole dollar.
SOURCE: KFF, based on Part D benefit parameters, 2006-2021.Figure 19
Most Part D enrollees have relatively low out-of-pocket drug costs, but
a small share pay thousands of dollars out of pocket each year
Average Out-of-Pocket Spending by Medicare Part D Enrollees in 2018
$3,135
$487
$72
Enrollees receiving Enrollees not receiving Enrollees with out-of-pocket
low-income subsidies low-income subsidies spending above the catastrophic
threshold
Number of enrollees:
13.9 million 32.2 million 1.1 million
SOURCE: KFF analysis of a 20% sample of 2018 Medicare prescription drug event claims from the CMS Chronic Conditions Data Warehouse.Figure 20
Overall Medicare Part D spending has increased over time, and
spending will continue to grow in the future
$200
Total Part D Spending (in billions): Actual Projected $190
$178
$180
$167
$160
$157
$146
$138
$140 $129
$121
$120 $102 $112
$105
$98
$100 $90 $93 $94
$82
$80
$66 $69 $73
$54 $58 $63
$60 $50
$44
$40
$20
$0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
SOURCE: 2016-2020 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance
Trust Funds, Table IV.B10.Figure 21
Spending for catastrophic coverage (“reinsurance”) now accounts for close
to half of total Medicare Part D spending, up from 14% in 2006
Reinsurance Direct Premiums Low-income Retiree drug
subsidy subsidy subsidy $102.3
$92.7 $94.4 $97.5 1%
$89.6
$81.8 29%
$72.9
$66.0 $68.5
$62.5
$57.9 14%
$53.9
$50.3
$44.3 14%
9%
34%
8% 45%
8%
14%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
SOURCE: 2016-2020 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance
Trust Funds, Table IV.B10.Figure 22
Since 2015, at least 1 million Medicare Part D enrollees have had out-
of-pocket spending above the catastrophic coverage threshold
1,118,945
1,002,700 1,016,580 1,016,660
891,720
681,860
516,580
483,640
407,240 424,260 397,680 380,380
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
NOTE: Estimates exclude enrollees who receive low-income subsidies.
SOURCE: KFF analysis of 2007-2018 prescription drug claims data from the CMS Chronic Conditions Data Warehouse.Figure 23
After a period of relatively slow growth, average Medicare Part D
enrollee costs are projected to increase at a faster rate in the coming
decade
2006-2010 2010-2019 2019-2029 (projected)
2006-2010 2010-2019 2019-2029 (projected)
6.0% 5.5%
5.0% 3.7%
4.0%
3.0%
2.0%
2.0%
1.0%
0.0%
SOURCE: KFF analysis of Medicare spending data from the 2020 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and
Federal Supplementary Medical Insurance Trust Funds, Table V.D1.@DusetzinaS Stacie B. Dusetzina, Ph.D. Associate Professor of Health Policy Vanderbilt University School of Medicine
Options for Medicare Part D Redesign
Stacie B. Dusetzina, PhD
Associate Professor of Health Policy
Ingram Associate Professor of Cancer Research
Vanderbilt University School of MedicineReform Proposals
• S.2543 – The Prescription Drug Pricing Reduction Act of 2019 (Senate
Finance Bill)
• H.R. 3 – the Elijah E. Cummings Lower Drug Costs Now Act
• H.R. 19 – the Lower Costs, More Cures Act of 2021
26Benefit Today
27Redesign Proposals – General Overview
• Eliminates the coverage gap.
• New out-of-pocket limit for patients.
• Plans are responsible for 75% of spending between the deductible
and out-of-pocket limit.
• Plans and manufacturers face higher spending after the out-of-pocket
limit; Medicare reinsurance is lowered from 80% to 20%.
28Simplified Benefit Under Redesign
Plans 75% Plan 60%
Manufacturer 20%
Patients 25%
Medicare 20%
Brand Spending < $10,045
Initial Coverage Phase Catastrophic Coverage Phase
29Differences by Bills Previously Introduced
Medicare Part D
coverage phase H.R. 3 S. 2543 H.R. 19
Patient: 25% Patient: 20% Patient: 15%
Plan: 65% Plan: 73% Plan: 75%
Initial coverage Manufacturer: 10% Manufacturer: 7% Manufacturer: 10%
Patient: 0% Patient: 0% Patient: 0%
Medicare: 20% Medicare: 20% Medicare: 20%
Plan: 50% Plan: 66% Plan: 70%
Catastrophic coverage Manufacturer: 30% Manufacturer: 14% Manufacturer: 10%
Out-of-pocket limit $2,000 $3,100 $3,100
Source: https://www.commonwealthfund.org/publications/explainer/2021/may/medicare-part-d-
redesign 30Bottom Line
• Medicare Part D redesign bills agree on key details:
• Simplify the benefit for patients;
• Cap out-of-pocket spending;
• Lower Medicare reinsurance spending.
• Small differences in the percentage paid by manufacturers or plans by
phase across bills.
• Manufacturer contributions range from 7%-10% in the initial phase and from
10% to 30% in the catastrophic phase.
• Plan contributions range from 65% to 75% in the initial phase and 50% to 70%
in the catastrophic phase.
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