While little progress was made this year to lower overall drug costs, some changes made by the Bipartisan Budget Act (BBA) of 2018 are helping an estimated 5 million Medicare beneficiaries with the highest annual out-of-pocket drug costs. Provisions of the BBA reduced Part D enrollees’ out-of-pocket co-insurance for brand-name drugs in the “doughnut hole” which is also called the coverage gap phase of coverage.
In 2018, people who hit the Part D coverage gap pay a co-insurance of 35% for discounted brand-name drugs and 44% of the cost of generics. That will decline to 25% for brand name drugs and 37% for generics in 2019, a year sooner than scheduled under previous legislation.
In 2018, once drug plan enrollees enter the coverage gap phase, they remain there until they spend a total of $5,000 out-of-pocket. This out-of-pocket threshold is calculated entirely on drugs covered by the enrollee’s drug plan formulary. If a drug isn’t on the plan formulary, beneficiaries must pay 100% of the cost of drugs and those out-of-pocket costs do not count toward the out-of-pocket threshold for catastrophic coverage.
In 2019, that out-of-pocket threshold will increase to $5,100. Once that threshold is reached, the catastrophic phase of coverage begins, when beneficiaries pay 5% co-insurance, or $3.40 for generics and $8.50 for brand name drugs, whichever is greater.
The lower co-insurance in 2019, however, comes as the annual out-of-pocket threshold, the amount beneficiaries must spend before the coverage gap ends and catastrophic phase begins, is projected to take a stunning leap. The threshold is scheduled to increase by $1,250 in 2020, from $5,100 to $6,350. In fact, the catastrophic threshold is forecast to almost double over the next 9 years rising from $5,000 in 2018 to $9,450 in 2027.
According to TSCL’s 2018 Senior Survey, 62% of survey participants support capping out-of-pocket spending on prescription drugs. Only 8% are opposed to the idea.
TSCL supports legislation that would eliminate beneficiary cost - sharing in excess of the Medicare prescription benefit's annual out-of-pocket threshold. In addition, TSCL supports legislation to allow Medicare to negotiate drug prices to benefit all beneficiaries.
Sources: Medicare Trustees 2018 Annual Report, June 5, 2018. Fact sheet: “Medicare Part D Prescription Drug Benefit in 2019,” National Council on Aging, 2018.