Prescription drug coverage in Medicare, provided via private health insurance plans under Part D, covers more than 53 million Americans. The Part D benefit-first available in 2006-has undergone significant policy changes in its nearly 20-year history. As initially designed, Part D left beneficiaries with considerable out-of-pocket cost obligations; they were responsible for the full cost of their drugs during a deductible period, faced cost sharing in the form of co-pays or coinsurance during the initial coverage period, were responsible for the full cost of their drugs during the coverage gap or “donut hole,” and had reduced, but uncapped, coinsurance if they reached the catastrophic phase of coverage.
As initially designed, Part D left beneficiaries with substantial out-of-pocket cost obligations.
Changes over time have reduced the risk of extremely high drug costs for Part D enrollees. This includes the Affordable Care ActS (ACA) reduction of the beneficiary’s share of cost during the donut hole and the implementation of a $2,000 out of pocket cap under the Inflation Reduction Act (IRA). Other challenges,however,remain.
## Plans Shift Costs Pre-Cap
A recent paper published by the Leonard D. Shaeffer Institute for Public Policy and Government Service examines trends in Part D plan design among stand alone Part D plans (PDPs) as well as Part D plans that are combined with a Medicare Advantage Plan (MA-PDs). Coverage rules, including the ACA and IRA policy changes described above, apply to both types of plans, but there are some financing and operational differences. Namely, MA-PDs can use savings (or overpayments) realized in the administration of Part A and Part B services to offset Part D expenses, while PDPs cannot.
The paper examines how both types of plans are responding to the shifting landscape under the IRA. the authors note the cost cap “provides vital insurance protection for beneficiaries, but other Inflation Reduction Act changes incentivized plans to increase beneficiary exposure to cost sharing prior to reaching the cap.”
They found that both PDPs and MA-PDs are shifting costs to enrollees in the form of higher deductibles and increased use of coinsurance, rather than copays.
they found that both types of plans are doing so by shifting costs to enrollees in the form of higher deductibles and increased use of coinsurance, rather than copays. Coinsurance is tied to the list price of the drug; a copay is a set amount for a month’s supply of all drugs on a particular tier. These shifts have been seen since 2020, but increasingly in more recent years.
These findings suggest that beneficiaries with moderate prescription drug expenses-those who do not reach the annual out-of-pocket limit of $2,000-may see out-of-pocket costs increase due to plan decisions to raise cost sharing. The researchers note,however,that they did not examine changes in premium amounts or take into account the reductions in cost-sharing obligations for people who ar