By Surabhi Dangi-Garimella, Ph.D.

Prescription drugs can be expensive, and for patients undergoing treatment for certain chronic conditions, cost-sharing is a heavy financial burden, especially if you are a Medicare beneficiary on a fixed income. While bills introduced in Congress have recommended radical changes to the Medicare Part D prescription plan, they have not made much headway yet. But with a new government and Democratic control of both the House and Senate, there is an opportunity for implementing some big policy changes.

According to the National Council on Aging, Part D enrollees have the following cost-sharing responsibility in 2021:

  • Up to $445 deductible, which may vary by plan
  • 25% of the cost of covered drugs during the initial coverage period (ICP)
    • Up to $1,032.50 out-of-pocket (OOP) maximum if the plan has no deductible
  • 25% of the cost of covered drugs between the ICP and the catastrophic coverage phase (formerly known as the “donut hole”)
  • Once the OOP reaches $6,550, beneficiaries reach the catastrophic benefit period
    • Reduce copay/coinsurance
    • 5% coinsurance OR copay of $3.70 (generic) or $9.20 (brand), whichever is greater
    • There is no cap on patient OOP cost in this phase

Policy Changes Have Been Proposed

In its drug pricing report released in mid-2019, the bipartisan Senate Finance Committee proposed several solutions to control rising prescription drug prices, regulate sticky incentives within Medicare and Medicaid, and provide help to seniors who are facing high OOP costs for their prescription drugs. The most contentious part of the report proposed forcing pharmaceutical manufacturers to pay additional rebates to Medicare if the increase in cost of Medicare Part B drugs (administered in a doctor’s office or infusion clinic) or Part D drugs (self-administered) surpassed the inflation rate. The companies may also be penalized an amount equivalent to 125% of the rebate amount.

Additionally, the Committee has proposed a Part D benefit redesign to force plans to negotiate drug costs. Patients who are on very expensive prescription medications face a significant cost burden in the “catastrophic phase” (see above) of their coverage, where they are responsible for 5% of medication cost without an annual OOP cap. Medicare pays 80% of the remaining cost while health plans pay 15%. The Committee recommends capping patient share at $3,100 starting 2022, reducing Medicare’s responsibility to 20%, and raising plan responsibility to 60%. According to an estimate by the Congressional Budget Office, implementing these changes could save $20 billion for Medicare Part D beneficiaries and it would force health plans to negotiate harder; however, legal enforcement will be tricky.

The bill died in the Senate when first introduced in 2019 and did not receive a vote when it was reintroduced in 2020. With both the House and Senate now under Democratic control, the Biden administration will have the power to push for drug pricing legislation reform.

Congress Needs to Act on Capping OOP

Capping OOP costs for Medicare enrollees during the catastrophic phase has the support of newly elected President Joe Biden as well as Congressional Democrats and Republicans. The sticking point has been deciding on who covers the cost cap—insurance plans or pharmaceutical manufacturers? While financial assistance programs may provide resources for patients to support their OOP spending, they are definitely not the solution.

A 2019 report by the Kaiser Family Foundation found that 1 million Part D enrollees spent beyond the catastrophic threshold in 2017, and the average OOP cost was over $3,200. The highest bills were paid by those patients seeking treatments for autoimmune disease, hepatitis C, and certain cancers—drugs treating these conditions were the most expensive, and patients using them ended up spending on average $5,000 OOP.

Limiting patient cost-sharing during the catastrophic phase seems the ideal patient-focused path forward—what the Biden health care team has planned remains to be seen.


Surabhi Dangi-Garimella, Ph.D. is a biologist with academic research experience, who brought her skills and knowledge to the health care communications world. She provides writing and strategic support to non-profit groups via her consultancy, SDG AdvoHealth, LLC.