Frontloading of Medicare Part D prescription plans:

  • In 2020, Medicare Part D enrollees are facing a relatively large increase in out-of-pocket drug costs before they qualify for catastrophic coverage (Figure 2). This is due to the expiration of the ACA provision that constrained the growth in out-of-pocket costs for Part D enrollees by slowing the growth rate in the catastrophic threshold between 2014 and 2019; in 2020 and beyond, the threshold will revert to the level that it would have been using the pre-ACA growth rate calculation. For 2020, the out-of-pocket spending threshold will increase by $1,250, from $5,100 to $6,350.
  • Higher cost burden in 2020 for Part D enrollees for the deductible and in the initial coverage phase. The standard deductible is increasing from $415 in 2019 to $435 in 2020, while the initial coverage limit is increasing from $3,820 in 2019 to $4,020 in 2020. For costs in the coverage gap phase, beneficiaries will pay 25% for both brand-name and generic drugs, with plans paying the remaining 75% of generic drug costs—which means that, effective in 2020, the Part D coverage gap will be fully phased out.
  • What does this mean for non-LIS Part D enrollees who take only brand-name drugs and whose annual total drug costs reach the catastrophic coverage limit, these changes in the Part D benefit amounts will increase their annual out-of-pocket costs. In the catastrophic phase, Part D cost sharing will increase for manufacturers while plan sponsors will pay a smaller share. 
  • Part D plans will pay a smaller share of total drug costs up to the catastrophic threshold for enrollees who take only brands in 2020 (32%) than in 2019 (35%) due to the increase in the out-of-pocket threshold in 2020 and the reduction in plan liability for brand-name drug costs in the coverage gap which took effect in 2019. The actual dollar increase in liability for total drug costs in 2020 is smaller for Part D plan sponsors ($197) than for Part D enrollees themselves ($377).
  • Drug manufacturers will be responsible for a larger share of total drug costs up to the catastrophic threshold in 2020 (40%) than in 2019 (36%) because of the 70% discount on the price of brand-name drugs in the coverage gap benefit phase, the amount of which will increase due to the higher out-of-pocket threshold for 2020. The actual dollar increase in total annual covered drug costs will be significantly larger for drug manufacturers ($873) than for Part D plan sponsors ($197).
  • Which Part D enrollees will be most affected by these changes? Those with very high OOP cost drugs. In 2017 (the most current year of Part D claims data available), 4.9 million non-LIS enrollees reached the coverage gap phase; of that total, 1 million non-LIS enrollees had out-of-pocket drug costs that exceeded the catastrophic threshold (Figure 4). Had the threshold been higher in 2017, fewer than 1 million enrollees would have qualified for catastrophic coverage that year. This means that a larger number of enrollees would have remained in the coverage gap in 2017, where they pay a larger share of their total costs than in the catastrophic phase.

Medicare’s LIS program (Extra Help)

Part D Low-income subsidy: