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A Health Care Win for Congress: Stop the Medicare Part D Out-of-Pocket Cliff

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Better health care was the top concern for 41 percent of voters in the midterm elections, but Congress does not have to wait until next year to pass bipartisan health legislation. Among the must-pass bills for the 2018 lame duck session should be legislation that averts a looming Medicare Part D “cliff,” saving seniors and disabled Americans billions in out-of-pocket spending on their prescription drugs.

Today, more than 44 million Medicare recipients — nearly one in eight Americans — are enrolled in Part D and have access to a wide range of oral and self-administered medications through drug plans approved by the federal government. These plans are not only popular with the public, but studies show that Part D improves health outcomes and achieves savings for the health system.

Yet, the Part D program faces a looming crisis. Unless Congress acts soon, many patients with significant health needs will pay a lot more in out-of-pocket expenses for their medicines, threatening their ability to afford these therapies. These are the seniors and disabled who exceeded Part D’s annual initial coverage limit and entered the “donut hole,” when they must pay a large percentage of the cost for their drugs. As a reference point, 5.2 million Part D enrollees reached this coverage gap in 2016, providing an estimate of the number of Americans who could be harmed.

The reason for raising the alarm bells is a fast-approaching deadline. A provision of the Affordable Care Act that helps patients in the donut hole is set to expire at the end of 2019. What this measure does is to slow the amount of spending needed for enrollees to exit the donut hole and qualify for catastrophic coverage when they generally pay 5 percent of the plan’s costs for their medications for the rest of the year. The ACA accomplishes this by allowing those in the donut hole to pay a percentage of the cost of their prescription medicines instead of the full amount and by counting 95 percent of the cost of the brand-name drugs, including the discount that drug manufacturers provide.

However, with the expiration of the ACA measure, this help goes away. Instead, the out-of-pocket threshold for patients to obtain catastrophic coverage will spike dramatically — from $5,100 in out-of-pocket costs in 2019 to $6,350 in 2020 — or a 24.5 percent increase. This means patients will have to spend an additional $1,250 to leave the donut hole, which for many is simply impossible.

Congress is well aware of the looming Medicare Part D “cliff,” and there appears to be a bipartisan desire to fix the problem.  The question is what can be done quickly that will have widespread support.

Patient advocates and senior organizations have an answer that is both simple and backed by prestigious policy institutions: Pass legislation establishing an annual out-of-pocket cap to protect Part D beneficiaries with costs above the catastrophic coverage threshold.

A 2017 report from the Institute of Medicine calls on Congress to remove the cost-sharing requirement for patients who reach the catastrophic coverage limit. Reinforcing this recommendation, a Kaiser Family Foundation report using 2015 statistics concluded that Part D enrollees would have collectively saved $1.2 billion if the program had a hard cap on out-of-pocket spending, rather than requiring enrollees to pay up to 5 percent coinsurance in the catastrophic coverage phase. 

Unlike many areas of health policy that the next Congress will take up in 2019, tackling the Part D cliff does not require additional fact finding and debate. Therefore, as 2018 comes to an end, the current Congress can take an important step to resolve an urgent problem facing millions of patients by passing legislation to cap Part D beneficiaries’ out-of-pocket costs in the lame-duck session.