Part D Out-of-Pocket Spending Cap Could Promote Health Equity
Imposing an out-of-pocket spending cap on Medicare Part D is not a new concept, but new research reveals that it may be important for advancing equity.
Source: Getty Images
- Applying an out-of-pocket spending cap to Medicare Part D could be a tool for promoting health equity, according to an insight from Avalere.
Avalere researchers leveraged 2019 Medicare Part D Drug Event data and used a random sample that equaled approximately a fifth of the Part D beneficiary population and scaled it to the entire population. They based their analysis on the proposed Build Back Better Act (BBBA) which would cap out-of-pocket healthcare spending for Part D at $2,000.
“A disproportionate share of beneficiaries who are disabled or from a racial/ethnic minority group would have OOP spending of $2,000 or more,” the researchers found.
According to the insight, capping out-of-pocket healthcare spending at $2,000 would most benefit underserved populations. This was the case for both Medicare beneficiaries who were eligible based on age and those who were eligible based on disability.
The insight found that 15 percent of Black beneficiaries in Medicare Part D have out-of-pocket healthcare spending that surpasses $2,000, despite the fact that this population only contributes to 11 percent of the overall Part D enrollment.
Hispanic beneficiaries in the Part D program make up only three percent of the entire Part D population. But the researchers discovered that five percent of Hispanic enrollees have out-of-pocket healthcare spending that exceeds $2,000.
Whereas these two underserved populations experience a rate of Part D spending that exceeds the BBBA threshold that is higher than their share of the Part D beneficiary population, the White beneficiary population has a lower likelihood of exceeding the threshold than this group’s share of the overall Part D population.
Slightly less than eight in ten beneficiaries enrolled in Medicare Part D identify as White individuals (79 percent). The researchers found that 73 percent of White beneficiaries exceed the $2,000 out-of-pocket spending threshold.
Moreover, when the researchers calculated the average spending for beneficiaries who exceeded the threshold and compared the averages by race, they found that White individuals who exceeded the $2,000 out-of-pocket spending threshold had the lowest average spending.
White beneficiaries who exceeded the threshold spent on average $5,013 in Part D out-of-pocket healthcare spending. In contrast, Black beneficiaries who exceeded the threshold spent on average $5,993, and Hispanic beneficiaries who exceeded the threshold spent on average $6,062.
Asian beneficiaries who exceeded the threshold had the highest average out-of-pocket healthcare spending at $5,848. Four percent of Asian beneficiaries in Medicare Part D exceed the $2,000 BBBA threshold.
Additionally, disabled beneficiaries were very likely to benefit from an out-of-pocket healthcare spending cap since nearly half of all Part D beneficiaries who exceed $2,000 in out-of-pocket healthcare spending on Part D expenses are disabled. This is true despite the fact that this population of beneficiaries only makes up less than a quarter of total Medicare Part D enrollment (24 percent).
The researchers noted that the results of this analysis did not correspond to the Part D benefit redesign bill from April 6, 2022.
“While debate on the BBBA is currently stalled in Congress, Part D benefit redesign remains a key priority among lawmakers, raising the possibility of a scaled-down legislative version, standalone Part D redesign legislation, or other actions to implement drug pricing reforms,” the researchers concluded.
“As discussion continues, stakeholders with an interest in Part D policy should consider the impact that changes to the Part D benefit parameters would have on disparate subsets of beneficiaries, such as the impact that various OOP cap levels could have on different patient populations.”
The BBBA would seek to lower prescription drug spending by adjusting the noninterference clause, demanding that rebates account for inflation rates for Medicare-covered single-source drugs and biologicals, limiting cost-sharing for insulin, covering all vaccines for free, and repealing the drug rebate rule.
A separate study found that Part D out-of-pocket healthcare spending may prove to be a significant barrier to care.
These studies come shortly after Medicare beneficiaries saw a five percent increase in the Medicare Part D premium for 2022.
