Medicare Part D Out-of-Pocket Drug Costs Differ Widely for Enrollees

For Medicare Part D enrollees in 2016, it will pay to shop around during the open enrollment period because plan costs differ considerably with respect to what drugs are listed on formularies, their use of formulary tiers, and the level and structure of cost sharing applied to those tiers, according to an analysis by the Kaiser Family Foundation.

The difference is especially acute for those taking specialty prescription medications for conditions such as hepatitis C, multiple sclerosis, rheumatoid arthritis, and cancer, the report found. The differences can cost thousands of dollars for a single specialty drug even though Part D plans provide substantial protection against catastrophic costs. Medicare defines specialty drugs as those that cost more than $600 per month.

“The findings illustrate how high prescription drug prices, one of the public’s top health care concerns, pose a financial challenge not only for Medicare and other federal health programs but for people on Medicare as well,” the Kaiser Family Foundation noted.

The report found that for 12 specialty drugs used to treat these conditions, Part D beneficiaries face at least $4000 and as much as nearly $12,000 in out-of-pocket costs in 2016 for one drug alone. In 2014, 2% of Part D enrollees used these and other specialty tier drugs. The analysis also found that significant share of the out-of-pocket expenses for such drugs can be incurred even after enrollees’ drug spending reaches the drug benefit’s catastrophic threshold.

Out-of-pocket costs are substantially higher (often 10 times higher or more) for specialty drugs when they are not listed on formulary by a Part D plan. Six of the 12 specialty drugs included in the analysis were not on formulary in some plans, which triggered added costs of $40,000 or more annually, the report noted.

“With median income among Medicare beneficiaries at about $24,000 per person, the cost of off-formulary specialty and other high-priced drugs is beyond the reach of many Part D enrollees,” the authors wrote.

The report also shows how monthly out-of-pocket costs for commonly used brand and generic drugs can vary widely across plans, even when included on plan formularies: for five of the 10 top brands, monthly costs vary by as much as $100 across plans.

“Yet while it pays to shop, most people do not switch plans during the open enrollment period,” the authors concluded. “As a result, many Part D enrollees leave money on the table—sometimes thousands of dollars.”