While Medicare Part D has made prescription drugs more affordable for people with Medicare, many beneficiaries continue to face affordability challenges, in part because there is no hard cap on out-of-pocket spending under Part D. A new resource from the Kaiser Family Foundation examines the financial burden this places on Part D enrollees who rely on high-cost medications.

There are several different phases of part D coverage that beneficiaries pass through during the year. In each, the beneficiary pays a different percentage of the total cost of the needed medication. This structure puts Part D enrollees without low income subsidies who rely on specialty tier drugs—which Medicare defines as drugs that cost more than $670 per month in 2019—at particularly high risk of facing significant out-of-pocket costs.

In the initial coverage period, Part D plans are allowed to charge between 25% and 33% coinsurance for specialty tier drugs before enrollees reach the coverage gap, where they pay 25% for all brands. Once a beneficiary reaches the annual total out-of-pocket threshold ($5,100 in 2019) they move into the catastrophic coverage phase, where they stay for the remainder of the year.

During this period, enrollees pay lower coinsurance (5%) for their covered drugs. However, for individuals who take high-priced medications, this relatively small percentage can translate into significant out-of-pocket costs. According to the Kaiser Family Foundation, in 2019 the cost of certain specialty-tier drugs in the catastrophic phase alone is over $5,000.

Because there is no hard cap on spending in the Part D benefit, enrollees who need expensive medications can face substantial out-of-pocket costs—which may lead to unfilled prescriptions, poor medication adherence, and worse outcomes.

Medicare Rights continues to support improvements to Part D that will improve beneficiary access and affordability, including establishing an out-of-pocket cap. We look forward to working with our partners and policymakers to address the issue of high and rising prescription drug prices for people with Medicare and their families.

Read the report, The Out-of-Pocket Cost Burden for Specialty Drugs in Medicare Part D in 2019