OOP Expenses Remain a Problem in Medicare, Especially for Beneficiaries Taking Specialty Drugs

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Medicare beneficiaries still face huge out-of-pocket expenses because of uncapped cost sharing in the catastrophic coverage phase. This is especially true for beneficiaries who take specialty drugs.

One of the primary goals of the Affordable Care Act is to reduce the out-of-pocket (OOP) spending for prescription drugs for Medicare beneficiaries. This spending was to be reduced by narrowing the gap between the initial coverage limit and the catastrophic coverage threshold. However, new research in Health Affairs found that these beneficiaries still face huge OOP expenses because of uncapped cost sharing in the catastrophic coverage phase. This is especially true for Medicare beneficiaries who take specialty drugs.

Health policies have repeatedly focused on making high-cost drugs more affordable to those who need them. Hence, the introduction of the Medicare prescription drug benefit (Medicare Part D). However, the problem of affordability still remained because of the “doughnut hole”—a significant gap in coverage between the initial coverage limit and the catastrophic coverage threshold. Due to this hole, many beneficiaries/seniors have to incur huge OOP expenses because they end up paying the full cost of prescription drugs.

“The issue is exacerbated by the persistence of high spending among specialty drug users,” the authors wrote. “A growing body of evidence also suggests that higher patient cost sharing for specialty drugs is associated with reductions in use, which raises concerns related to patient adherence and potentially broader effects on patients’ health and other medical spending.”


Study Design & Results

Using the pharmacy claims from a nationally representative 20% random sample of Medicare beneficiaries between 2008 and 2012, the researchers analyzed trends in total and OOP spending among Medicare beneficiaries who take at least 1 high-cost specialty drug from the top 8 specialty drug classes in terms of spending. Additionally, only beneficiaries who took specialty drugs for treating multiple sclerosis and rheumatoid arthritis were assessed for when they reached the catastrophic coverage threshold, since these 2 drug classes had a relatively larger patient population.

In general, during the study period, the annual total drug spending per specialty drug user increased from $18,335 to $33,301. Consequently, the proportion of expenditures incurred while in the catastrophic coverage phase increased from 70% to 80%.

For the 2 chronic condition—multiple sclerosis and rheumatoid arthritis—beneficiaries taking specialty drugs reached the catastrophic coverage threshold by the end of the study period. For multiple sclerosis, 96% patients and for rheumatoid arthritis, 86% patients reached the catastrophic coverage threshold at an accelerated level.

Implementing Limits on Patients’ OOP Costs

Beginning 2016, once a beneficiary has reached $4850 in OOP spending, he or she transitions from the doughnut hole phase to the catastrophic coverage phase. This means that the beneficiary pays 5% of the purchase price of covered prescription drugs for the remainder of the year (insurance pays 15% and a federal reinsurance program pays the remaining 80%). Even though 5% may seem less, for patients who depend on these specialty drugs for a long duration, it represents a considerable OOP burden for them. The rising prices for the drugs only add to the woes.

“We believe that policy makers should consider implementing policies that limit seniors’ out-of- pocket liability for prescription drug expenditures, as has recently been implemented in other insurance markets,” the authors concluded. “A proposal implementing a catastrophic coverage cap on annual out-of-pocket spending for pharmaceuticals among beneficiaries enrolled in Part D should be considered as well.”