OFFICE OF
fi/@- ASPE HEALTH POLICY RESEARCH 55';2RT

-Inflation Reduction Act Research Series-
Medicare Part D Enrollee Out-Of-Pocket Spending:
Recent Trends and Projected Impacts of the
Inflation Reduction Act

The Inflation Reduction Act's redesign of Medicare Part D will reduce enrollee out-
of-pocket spending by about $7.4 billion annually among more than 18.7 million
enrollees (36 percent of Part D enrollees) in 2025 - nearly $400 per person among
enrollees who have savings in out-of-pocket costs under the IRA.

Bisma A. Sayed, Kenneth Finegold, T. Anders Olsen, Kaavya Ashok, Sarah Schutz, Steven Sheingold,
Nancy De Lew, and Benjamin D. Sommers

KEY POINTS

e The Inflation Reduction Act (IRA) will make key changesto improve drug affordability for seniors
and people with disabilities who have Medicare.

e PriortotheIRA, enrollees who enteredthe Part D catastrophic coverage phase of the Part D
benefit and did not receive the Low-Income Subsidy (LIS)* paid the most in out-of-pocket costs
for their prescriptions. About four percent of non-LIS Part D enrollees, or 1.5 million enrollees,
reachedthe catastrophic coverage phase, paying about $3,093 on average in out-of-pocket costs
for their Part D medicationsacross all Part D payment phases.®

e Qut-of-pocket spending for Part D drugs was highest for enrollees with certain health conditions
and who take certain types of medications. For example, the average out-of-pocket drug
spending was highest for enrollees with cystic fibrosis (59,522 per enrollee).

e Startingin 2025, the IRA will add an out-of-pocket capin Medicare Part D, $2,000 in 2025 and
indexed annually for inflation thereafter. The IRA also includes other provisions designed to
decrease spending for Part D enrollees and taxpayers.

 

 

* *For eligible enrollees whose income and resources are limited, the Medicare Prescription Drug, Improvement and Modernization Act
of 2003 established extra help (a subsidy) with for prescription drugs. Subsidies are paid by the Federal government to drug plans and
provide assistance with premiums, deductibles, and co-payments. Under the IRA, beginningin 2024, the LIS program is expanded to
individuals with limited financial resources and incomes up to 150 percent of the Federal Poverty Limit(FPL), which is about $21,870
perindividual in 2023. For more information, please see here.

* Enrollee out-of-pocket costs are based on actual payments made by enrollees. Thisvalue excludes manufacturer gap discount
payments that count towards the true out-of-pocket limit (TrOOP). TrOOP refers to incurred costs that count towards an enrollee's
Medicare Part D drug plan out-of-pocket threshold ($7,400 for 2023). TrOOP determines entry into the catastrophic coverage phase
of the Part D benefit and consists of both payments paid by the enrollee (e.g., annual deductible, out-of-pocket costs, and others) as
well as other payments not paid by the enrollee (e.g., manufacturer gap discounts for brand drugs).

 

aspe.hhs.gov 1
 

e QOur analysis estimatesthe combined effect of the IRA provisions modeled in this Report.**
When these IRA provisions are all in effect in 2025, it will lead to about a $7.4 billion reductionin
annual out-of-pocket spending for 18.7 million enrollees (LIS and non-LIS) in 2025.

e ASPE modeling projectsthat about 36 percent or 18.7 million of LIS and non-LIS Medicare Part D
enrollees will have savings under the IRA provisions in 2025, with their out-of-pocket costs
expectedto be reduced by about $400 per enrollee. Among this population, 8.4 million
enrollees are non-LIS enrollees. Theyare expectedto have anestimated $759 average
reduction in out-of-pocket spending in 2025.

e Among the population of enrolleeswho are expectedtosave in out-of-pocket costs for Part D
medications, there's a subset of enrollees who are projected to save at least $1,000. Our
modeling estimatesthat nearly 1.9 million enrollees, which consists mostly of non-LIS enrollees,
will save at least $1,000 under the IRA provisions; the average annual out-of-pocket savings for
this population in 2025 is projectedto be about $2,500 per enrollee, a 66 percent decline
relative to baseline.

e Otherfeaturesof the IRA not included in these estimates-including drug price negotiationand
inflation rebatesfor drug price increases - are expectedto produce additional savings for
enrollees and taxpayers.

 

BACKGROUND

High prescriptiondrug costs are a challenge for many people enrolled in Medicare, with one report estimating
that more than five million Medicare enrollees experience difficulties with drug affordability.* On August 16,
2022, President Biden signed the Inflation Reduction Act (IRA) into law. The IRAincludes provisions that
redesign the Medicare Part D prescription drug payment structure and benefits, with the goal of making
prescription drugs more affordable and accessible for enrollees.? Prior to the IRA, there was no cap on out-of-
pocket spending in Medicare Part D, a provision which goes into effect in 2025 when a $2,000 cap will apply.
For Medicare enrollees who require high-priced medications or those who need many different types of
medications, the out-of-pocket costs can be substantial.

Since it was createdin 2006, Medicare's Part D benefit has grown to provide prescription drug coverage for 51
million of the 65 million Medicare enrollees in 2022. 34 Some Medicare enrollees have drug coverage from a
former employer and do not elect to enroll in Part D, while about nine percent of enrollees have no drug
coverage atall.5 Under Part D, Medicare subsidizes premium costs for all enrollees through direct subsidy
payments made to Part D plans and provides additional premium and cost sharing subsidies for low-income
enrollees. The benefit's original design- which included a coverage gap and some enrollee responsibility
during a catastrophic phase -left some enrollees with exceedingly high out-of-pocket expenses. The
Affordable Care Act (ACA)and the Bipartisan Budget Act of 2018 phased out the coverage gap,* and the
coverage gap phase of the Medicare Part D benefit will be eliminated under the IRA. Nonetheless, factors such

 

* IRA provisions modeled in this Report include provisions that institute a $35 out-of-pocket cost sharing cap on a month's supply of
each covered insulin and eliminate deductibles for covered insulin in Part D, eliminate out-of-pocket costs for Advisory Committee on
Immunization Practices {ACIP)-recommended adult vaccines under Part D, impose a maximum out-of-pocket cap of $2,000 startingin
2025 and indexed to inflation annually thereafter, and eliminate the coverage gap phase and replace the coverage gap discount
program with the manufacturer discount program. A complete list of provisions modeled are presented in Table 1.

* Out-of-pocket spendingincludes only the amount paid by the enrollee as cost sharing for their prescription drugs covered under
Medicare Part D. It does not include premium payments for health insurance.

* The coverage gap was phased out through the Coverage Gap Discount Program. This program will be replaced by the Manufacturer
Discount Program, starting in 2025, as part of the IRA. Note that the coverage gap phase still exists and will be eliminated in 2024
under the IRA.

 

July 2023 RESEARCH REPORT 2
as rising prices for drugs and the increasing availability of high-cost specialty drugs have resultedin many
enrollees being exposed to high out-of-pocket costs. 6

Enrollees with chronic health conditions may be especially at risk for high drug costs in Part D. Among
Medicare enrollees over the age of 65, existing researchfinds that about 11 percent with asthma or chronic
obstructive pulmonary disease (COPD)report having affordability challenges, 10 percent with diabetes report
affordability challenges, and 7 percent with hypertension report affordability challenges.? Affordability
challenges are higher for Black and Latino enrollees (about 10 percent each) relative to White enrollees (about
6 percent).® Among Medicare enrollees who are under the age of 65, nearly a quarter report drug affordability
problems.®

Additionally, some health conditions are particularly expensive to treat, and prescriptiondrugs arean added
cost for enrollees beyond other health care costs. The cost of long-term medications for conditions such as
diabetes and heart disease, for example, can be expensive as therapies are long-term. %11 Moreover,
conditions that require treatment with biologic immunosuppressant therapies, such as medications for
rheumatoid arthritis and other inflammatory conditions, can be particularly expensive, with some studies
finding that drug costs alone can average over $10,000 per year.12 For Medicare enrollees on fixed incomes,
treating such conditions with prescription drugs can represent a substantial expense.

When people cannot afford medications, they may not take their medication as directed, skip doses, or ration
in other ways, all of which can have serious healthand cost-related consequences. Researchshows that nearly
30 percent of adults report not taking their prescription drugs as prescribed for cost-related reasons. 3

The IRAincludes several provisions designed toimprove affordability of the Part D benefit design. In this
Research Report, we analyze utilization and out-of-pocket spending of prescription drugs that are covered
under Part D and project impacts of the IRA's drug-related provisions on Part D out-of-pocket spending. First,
we examine Part D enrollment and spending from 2007 to 2022 to understand how much enrollees have been
paying out-of-pocket for prescription drugs over time. Then, we estimate the impact of IRA Part D drug-
related provisions that we expect to have the most direct impact on out-of-pocket spending for prescription
drugs. The provisions analyzed here include the following:
e 535 out-of-pocket cap on each month's supply of covered insulin and elimination of deductibles for
covered insulin, effective January 2023;
¢ elimination of out-of-pocket costs for Advisory Committee on Immunization Practices (ACIP)-
recommended adult vaccines covered under Part D, effective January 2023;
elimination of five percent coinsurance in the catastrophic coverage phase, effective January 2024;
elimination of the coverage gap phase and replacement of the Coverage Gap Discount Program with
the new Manufacturer Discount Program, effective in 2025;
e and a maximum out-of-pocket cap of $2,000, effective 2025, and indexed annually to inflation
thereafter.

Medicare Part D Benefit Structure under the IRA

The IRA's drug related provisions change the Medicare Part D standard benefit structure, which originally
consisted of four phases of prescription drug coverage. Enrollees move through the phases depending on their
drug spending and plan policies. Figure 1 shows the coverage phases pre-IRAand under the IRA, beginning
with the deductible phase, for Part D enrollees who do not receive the Low-Income Subsidy (LIS), which is
financial assistance offered to enrollees who meet certainincome and asset requirements. Non-LISenrollees
represent about 72 percent of the program's enrollment and have higher out-of-pocket spending for Part D
drugs than their counterparts who receive LIS.'# Figure 1 also shows how, in general, the Medicare Part D
standard structure changes withthe IRAredesign in 2025.

 

July 2023 RESEARCH REPORT 3
Figure 1. IRA Changes to the Part D Benefit for Non-LIS Enrollees in 2025
I:I Beneficiary I:I Plan . Manufacturer discount Reinsurance

 

 

    
 
 

 

 

   
 

Pre-IRA Post-IRA
Catastrophic ) %///// ) Catastrophic
Coverage Phase Catastrophic 30% Catastrophic Coverage Phase
Coverage / ° Coverage
00P threshold 15% 5%
Coverage Gap Phase (67,400) - = 4 Beneficiary
Generic |l 75% zrand Generic
drugs rugs drugs Zrand
5% Plan rugs
Initial Coverage ' 25%
Initial Coverage Phase Limit
($4,660)
POFThiEHold Initial Coverage Phase
(52,000) 10%
Manufacturer
: . Discount*
Deductible Phase Deductible Deductible

($550) ($550) Deductible Phase

 

 

Notes: Figure 1 represents Part D payment benefit structure before and afterthe IRA redesignin 2025 for non-LIS
enrollees. Pre-RA and Post-IRA benefit are scaled to $10,000 of total liability in 2023.

*|RA Manufacturer Discount phased in during the initial coverage phase from 2025 through 2029 and in the catastrophic
phase from 2025 through 2031. Full details of the IRA changes are available at: Inflation Reduction Actand Medicare |
CMS

Source: Centers for Medicare and Medicaid Services
IRA = Inflation ReductionAct

Under the IRA, in 2024, enrollees will no longer pay five percent coinsurancein the catastrophic coverage
phase. In 2025, the coverage gap phase will be eliminated and the Coverage Gap Discount Program will be
replaced with the new Manufacturer Discount Program. Enrollees will transition from the initial coverage
phase to the catastrophic coverage phase when they have incurred $2,000in out-of-pocket costs in 2025 and
indexed annually for inflation thereafter. When this provision goes into effect in 2025, Part D enrollees will no
longer be responsible for out-of-pocket spending above the annual threshold. This is expectedto have a
considerable impact on out-of-pocket spending. Existing research shows thatin 2019, out-of-pocket drug
spending for about 1.5 million Part D enrollees exceeded the 2019 annual catastrophic coverage threshold
($5,100) for total out-of-pocket drug spending.15 Non-LIS enrollees who reach the catastrophic coverage phase
have more chronic conditions and use more specialty care drugs relative to enrollees who do not enter the
catastrophic coverage phase. 16

These Part D benefit structure changes are phasedin over time, alongside other key provisions." Figure 2
presents the implementation timeline of IRA Part D provisions from 2023 to 2025 that are modeled in this
Report to understand theirimpacts on out-of-pocket spending. These program changes, along with other IRA

 

* This reportdoesnotinclude IRA provisions related to Medicare Part B. For acompletelist of changes related to the IRA
for both Parts B and D, please see here: Inflation Reduction Act Timeline (cms.gov).

 

July 2023 RESEARCH REPORT 4
Part D changes, aimto decrease prescription drug costs for Medicare enrollees and taxpayers while improving
enrollee access to prescription drugs.

Figure 2. Implementation Timeline of IRA Part D Provisions Modeled in This Report, 2023 - 2025

 

2023 * Medicare Part D enrollees will not pay more than $35 for a month's supply of each covered
insulin product. Deductibles for covered insulin products will be eliminated.

* Part D enrollees will not pay anything out-of-pocket for adult vaccines covered by Part D and
recommended by the Advisory Committee on Immunization Practices.

2024 * Individuals with Medicare Part D who have low incomes will benefit from expanded financial
help with prescription drug cost-sharing and premiums. The low-income subsidy program (LIS
or "Extra Help") under Medicare Part D will be fully available to certain people with Medicare
with limited resources who earn less than 150% of the federal poverty level starting in 2024.

* Elimination of 5% enrollee cost sharing in the catastrophic coverage phase, which means
people will not have to pay anything out-of-pocket for covered drugs obtained while in this
phase

2025 * The coverage gap phase is eliminated and the Manufacturer Discount Program in Medicare
Part D will replace the Medicare coverage gap discount program. The new Manufacturer
Discount Program will require manufacturer discounts for applicable drugs both in the initial
coverage phase and in the catastrophic phase.

* People with Medicare Part D won't pay more than $2,000 out-of-pocket annually for
prescription drugs.

* Government reinsurance in the catastrophic phase of Part D will decrease from 80% to 20% for
brand-name drugs, biologicals, and biosimilars and will decrease from 80% to 40% for

¥ generics.

 

 

Notes: This figure presents Inflation Reduction Act {IRA) provisionsthatimpact prescriptiondrugs covered under
Medicare Part D thatare modeled in this Report. Provisions go into effect at different points in the year. Thisfigure does
notpresentacomplete list of all IRA drug-related provisions. Complete details of all drug-related provisions of the IRA
are available here: Inflation Reduction Act Timeline {(cms.gov).?

METHODS

This Report consists of a two-part study: 1) examination of Part D enrollment and spending over time and 2)
identification of impacts of select IRA drug-related provisions on Part D out-of-pocket spending.

Methods to Identify Trends in Enroliment and Spending Over Time

We used the Prescription Drug Event (PDE) data and Part D enrollment data, from 2007 through 2022 to
examine trends in Medicare Part D enrollment overall and by LIS status. We alsoexamined trends in average
out-of-pocket spending for non-LIS enrollees by payment coverage phase for the same time period. We
defined out-of-pocket spending as the amount paid by enrollees and reported in the Medicare PDE data." We
alsoexamined trends in total Part D costs to understand how the share of drug spending that is paid out-of-

 

* We considered using the CMS's True out-of-pocket (TrOOP) cost, less gap discount, to define out-of-pocket spending. However, we
only present findings from payment paid by enrollees as it represents the actual copayment paid by enrollees and may play an
important role in drug affordability and an enrollee's decision to purchase the medicationor forgo it. Spendingtrendswere similar
when we used enrollee payments and the TrOOP less gap discount definition.

 

July 2023 RESEARCH REPORT 5
pocket has changed over time. Our estimates include all Part D enrollees, including those in fee-for-service
Medicare and Medicare Advantage, as well as enrollees in Employer Group Waiver Plans (EGWPs)."

Although we present estimates for all enrollees, we focused specifically on non-LIS enrollees because these
enrollees have higher out-of-pocket costs than LIS enrollees who receive financial assistance to help pay for
prescription drug costs and premiums in Part D. Additionally, we highlight findings for non-LIS enrollees who
reach the catastrophic coverage phase because these enrollees have the highest out-of-pocket spending, and
the IRA Part D benefit redesign aims to reduce financial burden for enrollees who reach this phase.

We also examined demographic characteristics of enrollees to identify any group differences and identified
medical conditions with the highest average out-of-pocket Part D drug spending among enrollees in the
catastrophic coverage phase using PDE data in 2021 or 2022, depending on the latest year for which dataon
enrollees' medical conditions was available. In addition, we examined Part D out-of-pocket drug spending by
state of residencein 2022,

Methods to Estimate the Impacts of the IRA's Drug-related Provisions

We used Medicare PDE data for Part D enrollees in 2021 to develop a simulation model to understandthe
overall and state-specificimpacts on Part D out-of-pocket spending for IRA drug-related provisions that we
expect to have direct impacts on out-of-pocket drug spending. PDE data from 2021 was used because atthe
time the simulation model was being developed, this was the latest year of complete Part D data that was
available.

We developed two specifications of our simulation model, which allowed us to identify impacts of IRA-drug
related provisions depending on whether the provisions arein effectin 2024 or 2025 (Table 1). Note that
some provisions go into effect earlier than 2024 or 2025, but we only model the combined effect of provisions
in effect in 2024 and 2025. Although we report results from both specifications, we focus primarily on
specification B representing the more comprehensive set of IRA policies in effect in 2025 and beyond.

Table 1. IRA Part D Drug Related Provisions Included in the Simulation Model

 

Specification A: Provisions that are Modeled in Specification B: Full set of Provisions Modeled that

 

combination and in effect in Calendar Year 2024 are in effect in Calendar Year 2025

e Enrollee cost sharing (i.e., out-of-pocket e Enrollee cost sharing is limited to $35 for a
spending) is limited to $35 for a month's month's supply of each covered insulin
supply of each covered insulin product product and deductibles for covered insulin
and deductibles for covered insulin products are eliminated
products are eliminated e Enrollee cost sharing for ACIP-recommended

e Enrollee cost sharing for ACIP- adult vaccines is eliminated
recommended adult vaccines is eliminated e Full LIS assistance is expanded to people with

e Full LIS assistance is expanded to people limited resources who earn less than 150
with limited resources who earn less than percent of the federal poverty level
150 percent of the federal poverty level e Reduction of enrollee coinsurancein the

e Reduction of enrollee coinsurancein the catastrophic coverage phase from five to zero
catastrophic coverage phase from five to percent
zero percent

 

 

* EGWPs are a type of health plan that employers can choose to offer their employees that include prescription drug coverage.
EGWPs are required to meet CMS Part D plan standards but their plans can be more generousthan the standard benefit. For more
information on EGWPs, please see here: Employer Group Waiver Plans (EGWPs) | CMS.

 

July 2023 RESEARCH REPORT 6
 

e 52,000 maximum annual out-of-pocket capfor
enrollees, beginning in 2025, and indexed to
inflation thereafter

o Elimination of the coverage gap phase and
replacement of the coverage gap discount
program with the Manufacturer Discount
Program; the new Manufacturer Discount
Programrequires a 10 percent manufacturer
discount on brand drugs in the initial coverage
phase and 20 percent in the catastrophic
coverage phase

e Government reinsurance decreases inthe
catastrophic coverage phase-from 80
percent to 20 percent for brand-name drugs,
biologicals, and biosimilars, and from 80
percent to 40 percent for generics

Notes: Estimates do notinclude non-IRAregulations that may impact drug spending (e.g., Part D regulations requiring that
pharmacy price concessions be reflected at the point of sale beginningin January 2024). There will be changes to the Part
D benefitbetween calendaryears 2024 and 2025. For example, the accumulation of costs for TrOOPis different pre-IRA
and in 2025, which is taken into accountin our modeling.

ACIP = AdvisoryCommittee on Immunization Practices

 

We focused on these provisions because they are expected to have a direct impact on out-of-pocket drug
spending and there is sufficient information available on how these provisions will be implemented to allow
for the development of a simulation model to identify impacts.

Our simulation model estimated what will happen to Medicare enrollees' Part D out-of-pocket drug spending
in 2024 and 2025, when all of the IRA provisions in Table 1 for each calendar year are in effect, while holding
enrollment to 2021 levels. We beganwith actual drug costs from the PDE data, matched with Part D
enrollment data, inflated to projected 2024 or 2025 values, depending on the model specification and
appropriate statutory formulas, and calculated cost sharing (i.e., out-of-pocket spending) based on the pre-IRA
benefit." We then calculated cost sharing on the sameinflated 2021 claims, assuming no change in enrollment
or the mix of drugs that are used, but with out-of-pocket costs based on the IRA provisions that go into effect
by 2024 for Specification A {in 2024 dollars) and by 2025 for Specification B {in 2025 dollars).

Our modeling alsotakes into account changes in true out-of-pocket (TrOOP) accumulation, beginning in 2025
under the IRA. TrOOP refers to incurred costs that count towards an enrollee's Medicare Part D drug plan out-
of-pocket threshold. TrOOP consists of both payments paid by the enrollee (e.g., annual deductible, out-of-
pocket costs, and others) as well as other payments not paid by the enrollee (e.g., manufacturer gap discounts
for brand drugs). In2025, payments that count towards TrOOP change and our modeling takes these changes
into account.'

There are a number of assumptions in our model. We did not adjust 2021 enrollment to projected 2024 and
2025 levels and instead assumed enroliment remains at 2021 levels. Although our simulation model adjusts
for utilization changes, it does not adjust for how the mix of prescriptiondrug use may change over time,

 

* Thisinformation was obtained from the Medicare Trustee's Report. Please see here for more details: 2022 Medicare Trustees Report
{cms.gov).

 For example, under the IRA, the manufacturer payments under the discount program will not count towards TrOOP beginningin 2025
and plan supplemental benefits (including EGWP benefits) will count towards TrOOP.

 

July 2023 RESEARCH REPORT 7
changes in utilization that may occur due to the IRA's out-of-pocket cap on spending, or changes in drug
formulary preferences. We projected copay adjustments from the enhanced plans based on existing
information on how enhanced plans have deviated from the standard benefit in 2021.

Additionally, our model does not account for all Part D drug-related provisions in the IRA. For example, the
simulation model does not account for the IRA's requirement for Part D sponsors, starting January1, 2025,
to provide their plan enrollees with the option to pay out-of-pocket costs under the plan in monthly
amounts that are spread throughout the year. The simulation model also does not include any potential
impacts associated with negotiation of Part D drugs, which may impact out-of-pocket spending once
implemented. Nor does it account for the increasein access todrugs and new drugs that will come out in
future years. Italsodoes not account for the Part D inflation rebates nor for spillover effects that may occur
if, for example, the inflation rebate provisions in the IRAlead to changes in the prices of drugs covered by
private insurance. Our model also does not include changes in plan behavior resulting from the redesign of
the Part D benefit. Finally, our model does not take into account other federal or state programs that may
reduce spending on Part D drugs.* Additional details about the model are presentedin the Appendix.

Our savings estimates are conservative because they do not fully capture policy changes that are designed
to reduce the cost of prescription drugs to the Medicare program and taxpayers.

FINDINGS
Trends in Medicare Part D Enroliment, Total Spending, and Out-Of-Pocket Spending

Medicare Part D enrollment more than doubled from 26 million in 2007 to 53 million in 2022 (Figure 3). The
majority of enrollment growth was driven by increases in enrollment among non-LIS enrollees, which grew
from about 15 million in 2007 to 38 million in 2022.

Figure 3. Medicare Part D Enroliment (Millions of Enrollees), 2007 - 2022

 

53.1
51.6
a5, 46.8 184 >0-1
43.6 45
31.5
29.8
26.2 27.5 28-7

41.9
37.8 40.0
33.8
R
24.6126.4)27.8 29.2]30.5|31.8 EEW) EZWA ELEY
15.2§16.3J17.3|17.8 19.1]21.0]° ™

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

   

B All non-LIS Enrollees ~ m AII LIS Enrollees

 

Source: Enrollment calculated using the 2007-2022 Medicare Part D Prescription Drug Event data and Part D enroliment
data.

 

* For example, the impacts of the Part D Senior Savings Model (PDSS), which is a voluntary model that tested alternative Part D plan

options that offer lower out-of-pocket costs for insulin as supplemental benefits, are not separately accounted in the modeling.
Reductionsin out-of-pocket spending are included onlyin so far as the information is presentin the 2021 PDEdata. PDSS began

January 1, 2021 and will end in December 31, 2023. Please see here: Part D Senior Savings Model | CMS Innovation Center.

 

July 2023 RESEARCH REPORT 8
Table 2 presents Part D annual total spending per enrollee, out-of-pocket spending per enrollee, and out-of-
pocket spending as a share of total spending over time for both non-LIS and LISenrollees. Total spending is
based on gross drug costs, which represent total spending for the prescription claim, including Medicare, plan,
and beneficiary payments."

For non-LIS enrollees, total spending per enrollee grew from about $1,748 per enrollee in 2007 to $3,293 per
enrollee in 2022, an increase of about 88 percent." For LISenrollees, total spending per enrollee grew from
about $3,214in 2007 to $7,658in 2022, an increase of 138 percent. This is consistent with researchthat
shows Medicare Part D costs have increased over time. 18 Existing researchfinds these increases have been
driven partly by shifts towards use of newer high-priced brand-name drugs relative to drugs that have been on
the market.?®

Part D out-of-pocket spending declined about 27 percent for non-LIS enrollees between 2007 - 2022, going
from about $639 per enrollee in 2007 to $464 per enrollee in 2022, Out-of-pocket spending representeda
considerable portion of total spending, ranging from a high of nearly 36.5 percent of total spending in 2007
and then declining over time to a low of about 14 percent of total spending in 2022, The decline in out-of-
pocket spending over this period may have been driven by multiple factors, including closing of the Part D
coverage gap, which began under the ACAin 2010, and the Bipartisan Budget Act of 2018.20

For LIS enrollees, as expected, out-of-pocket spending made up a smaller portion of total spending compared

to non-LIS enrollees across all years. Out-of-pocket spending represented less than one percent of total Part D
spending for LIS enrollees in 2022.

Table 2. Part D Annual Total Drug Spending and Out-Of-Pocket Spending, By LIS Status and Year

 

 

 

Non-LIS Enrollees LIS Enrollees
Out-Of- Average
AverageTotal AverageOut- Pocket TotalDrug AverageOut- Out-Of-Pocket
Drug Of-Pocket Spendingasa Spending Of-Pocket Spendingasa
SpendingPer SpendingPer ShareofTotal Per SpendingPer ShareofTotal
Year Enrollee?($) Enrollee ($) Spending Enrollee®($) Enrollee ($) Spending
2007 $1,748 $639 36.5% $3,214 $109 3.4%
2008 $1,796 $619 34.5% $3,463 $109 3.1%
2009 $1,843 $627 34.0% $3,634 $114 3.1%
2010 $1,847 $626 33.9% $3,726 $117 3.1%
2011 $1,901 $538 28.3% $3,897 $109 2.8%
2012 $1,894 $507 26.8% $3,889 $97 2.5%
2013 $2,034 $484 23.8% $4,030 $99 2.5%
2014 $2,230 $492 22.1% $4,561 $94 2.1%
2015 $2,401 $493 20.6% $4,983 $93 1.9%
2016 $2,448 $492 20.1% $5,141 $95 1.8%
2017 $2,482 $481 19.4% $5,337 $94 1.8%
2018 $2,617 $482 18.4% $5,642 $93 1.7%

 

* The Part D spending measures do not reflect any manufacturers' rebates or other price concessions. Please see here for more detail:
Medicare Part D Spending by Drug - Centers for Medicare & Medicaid Services Data (cms.gov).
T Spending estimates are not adjusted for inflation over time

 

July 2023 RESEARCH REPORT 9
 

Non-LIS Enrollees LIS Enrollees

 

 

Out-Of- Average
AverageTotal AverageOut- Pocket TotalDrug AverageOut- Out-Of-Pocket
Drug Of-Pocket Spendingasa  Spending Of-Pocket Spendingasa
SpendingPer SpendingPer ShareofTotal Per SpendingPer Share ofTotal
Year Enrollee®(S) Enrollee ($) Spending Enrollee®($) Enrollee ($) Spending
2019 $2,778 $462 16.6% $5,968 $89 1.5%
2020 $2,937 $461 15.7% $6,258 $93 1.5%
2021 $3,087 $457 14.8% $6,680 $89 1.3%
2022 $3,293 $464 14.1% $7,659 $52 0.7%

 

Source: 2007 - 2022 Medicare Prescription Drug Event data and Part D Enroliment data

Notes: Out-Of-Pocket spending is based on the actualenrollee payment as it represents the amount paid by enrollees and
may play an importantrole in drug affordability and an enrollee's decisionto purchasethe medication or forgoit. Costs
paid on behalf of an enrollee by a plan throughenhanced coverage or certainotherentities (e.g., the Indian Health
Service) count toward the out-of-pocket cost limit but are notreflected in the enrollee payment. Spendingestimatesare
notadjusted for inflation.

2 Total spendingis based on grossdrug costs, which represent total spending for the prescription claim, including

Medicare, plan, and beneficiary payments.
Trends in Out-Of-Pocket Spending for Enrollees Reaching the Catastrophic Coverage Phase

The share of enrollees reaching the catastrophic coverage phase
increased over time. In 2022, about 8.1 percent of all Part D

 

enrollees, or almost 4.3 million people, reached the catastrophic About 8 percent of all Part
coverage phase. Among non-LIS enrollees, about 4 percent of D enrollees, or almost 4.3
enrollees, or about 1.5 million people, reached the catastrophic million people, reached
coverage phase.

the catastrophic coverage

Figure 4 shows the share of non-LIS enrollees who reached the phase in 2022.

catastrophic coverage phase and the average out-of-pocket drug

spending per such enrollee from 2007 - 2022. Out-of-pocket

spending includes spending in all coverage phases. These enrollees paid substantially more out-of-pocket
for Part D covered drugs than their counterparts who did not reach the catastrophic coverage phase.
Average out-of-pocket Part D drug spending in the catastrophic phase declined in years immediately
following enactment of the ACA, likely because the ACA beganto close the coverage gap after enactment."

In 2022, average annual out-of-pocket spending was $3,093 for non-LIS enrollees who ended the year in the
catastrophic coverage phase. Existing research shows that the medianincome of Medicare enrollees is
about $29,650 per person, which means that spending about
$3,100annually in out-of-pocket costs for prescription drugs
In 2022, average annual out-of- represents more than 10 percent of income for a typical
pocket spending was $3,093 for Medicare Part D enrollee. 2!

non-LIS enrollees who ended the

year in the catastrophic coverage Among LIS enrollees, 18 percent of enrollees, or 2.7 million
phase, which represents more people, reached the catastrophic coverage phasein 2022. A
larger proportion of LIS enrollees reach the catastrophic
coverage phase compared to non-LIS enrollees because this

 

than 10 percent of income for a
typical Medicare Part D enrollee.

 

* The Bipartisan Budget Act of 2018 closed the Part D coverage gap in 2019.

 

July 2023 RESEARCH REPORT 10
population tends to be sicker and requires greater use of prescription drugs than non-LIS enrollees. 22

However, because LIS enrollees receive assistance with out-of-pocket costs, their copays are limited and the
out-of-pocket costs for LIS enrollees who reached the catastrophic coverage phase averaged $87in 2022."

Figure 4. Share of Non-LIS Medicare Part D Enrollees Reaching Catastrophic Coverage Phase and
Average Annual Out-Of-Pocket Drug Spending for Such Enrollees, 2007 - 2022

5.0% ACA $5,000

4.5% | $4,500
4.0% | $4,000
3.5% 0 $3,500
3.0% | $3,000
2.5% $2,500
2.0% | $2,000
1.5% | $1,500
1.0% | $1,000
0.5% | $500
0.0% | 0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Percent of Beneficiaries in Catastrophic
Phase (%)
Average Out-of-Pocket Spending (S)

wn

I Average Out-of-Pocket (S) == Percent of Enrollees in Catastrophic Phase

 

Source: Out-of-pocket spending calculated using the 2007 -2022 Medicare Prescription Drug Event data and PartD

Enrollmentdata.

Notes: ACA = "Affordable Care Act", whichbeganto close the Part D coverage gap whenit was enacted, startingin 2010.
The gap closed in 2019, ayear earlier than ACA legislated, as aresult of the Bipartisan Budget Act of 2018. The average
out-of-pocket spending includes spending for all Part D benefit phases for enrolleeswho reach the catastrophiccoverage
phase. Spending estimates are not adjusted forinflation.

Medicare Part D Out-Of-Pocket Drug Spending by Demographic Characteristics

Table 3 shows the number of non-LIS enrollees by demographic characteristics that reached each coverage
phasein 2022 and Table 4 shows average out-of-pocket costs for non-LIS enrollees by their end of year
coverage phase. For example, of all women that were non-LIS enrollees, 3.4 percent (or 714,000 out of 21.2
million women), reached the catastrophic coverage phase (Table 3). These women paid an average of $3,048
out-of-pocket in 2022 for Part D prescription drugs (Table 4) across all coverage phases.

Generally similar proportions of enrollees across demographic groups reachedthe catastrophic coverage
phase, though there were some exceptions. A greater share of men (5 percent) than women (3 percent)
reachedthe catastrophic coverage phase. Additionally, a greater share of Medicare enrollees betweenthe
ages of 65 - 84 reached the catastrophic coverage phase relative to those under the age of 65 and those ages
85 and over. There are also higher proportions of American Indian/Alaskan Native (Al/AN) enrollees who

 

* The LIS subsidy prior to 2024 can be a full or partial subsidy. For more details, please see: Limited Income and Resources | CMS and
https://secure.ssa.gov/poms.nsf/Inx/0603001005.

 

July 2023 RESEARCH REPORT 11
reachedthe catastrophic coverage phase (9 percent). Asian Americans had the lowest share of enrollees
reaching the catastrophic coverage phase (3 percent) relative to otherracial and ethnic groups. The absolute
number of Part D enrollees in these groups are low relative to White non-Latinos compared to the general
population. A similarshare of enrollees from urban or rural areas reached the catastrophic coverage phase.

Table 3. Demographic Characteristics of Medicare Part D Non-LIS Enrollees by Coverage Phase in

 

 

2022
All Deductible Initial Coverage Coverage Catastrophic

Enrollee Characteristics (millions) Phase Phase Gap Phase Coverage Phase
Total (Nin Millions) 38.1 6.2 25.2 5.2 1.5
Gender

Women 21.2 15.9% 67.8% 12.9% 3.4%

Men 16.9 16.7% 63.8% 14.6% 4.9%
Age

<65 4.0 63.8% 27.9% 5.7% 2.6%

65-69 8.9 11.2% 74.2% 10.8% 3.9%

70-74 9.4 11.1% 71.1% 13.3% 4.5%

75-79 7.2 10.7% 68.6% 16.1% 4.7%

80-84 4.6 9.5% 67.8% 18.4% 4.4%

85+ 4.1 10.3% 67.3% 19.1% 3.3%
Race & Ethnicity

White non-Latino 323 15.8% 66.0% 14.1% 4.1%

Black non-Latino 2.7 18.8% 65.0% 12.6% 3.6%

Latino 0.6 17.4% 70.8% 9.0% 2.9%

Asian American 0.7 19.4% 69.3% 8.7% 2.6%

American Indian / Alaska Native 0.07 15.5% 58.5% 17.0% 8.9%

Other or Unknown 1.7 19.3% 65.1% 11.6% 4.1%
Geographic Characteristics

Urban 34.4 15.6% 66.2% 14.0% 4.1%

Rural 2.5 15.5% 67.0% 13.6% 4.0%

 

Source: Demographic descriptive statistics calculated using the 2022 Medicare Part D Prescription DrugEventdata and
PartD Enrolimentdata.

Notes: Percentagesare calculatedfor each demographic group by row using the total enrollees in each group as the
denominator.

Table 4 presents average out-of-pocket drug spending in 2022 for non-LIS enrollees by demographic
characteristics. Among enrollees who reached the catastrophic coverage phase, Part D out-of-pocket drug
spending was highest for those younger thanage 65 ($3,318) relative to other age groups, which ranged from
$3,046 for ages 65- 69 to $3,107 for those ages 85 and older. This is expected because these enrollees qualify
for Medicare based on certain illnesses or disability. *

Among those who reached the catastrophic coverage phase, White non-Latino and Other or Unknown race
enrollees had the highest out-of-pocket spending ($3,113) in 2022, followed by Black non-Latino enrollees
($3,007), though differences were fairly modest. Out-of-pocket spending was slightly higher for enrollees in
rural enrollees ($3,175) than in urban areas ($3,085).

 

* Individuals can qualify for Medicare at any age based on receipt of Social Security Disability benefits for 24 months or certain health
condition, including end-stage renal disease (ESRD) and Amyotrophic Lateral Sclerosis (ALS). For more information, please see:

Medicare (ssa.gov).

 

July 2023 RESEARCH REPORT 12
Table 4. Average Annual Out-Of-Pocket Part D Drug Spending Among Non-LIS Medicare
Enrollees by Demographic Characteristics and Coverage Phase by End of Year (2022)

 

 

] . Deductible InitialCoverage  Coverage Catastrophic
DemographicCharacteristics All Phase Phase Gap Phase  Coverage Phase
Total $464 $70 $259 $1,147 $3,093
Gender

Women $449 $75 $272 $1,155 $3,048
Men $483 $65 $241 $1,138 $3,131
Age
<65 $239 s3 $309 $1,107 $3,318
65-69 $407 $96 $214 $1,114 $3,046
70-74 $478 $118 $247 $1,149 $3,059
75-79 $527 $126 $272 $1,146 $3,073
80-84 $560 $131 $291 $1,157 $3,150
85+ $553 $129 $316 $1,184 $3,107
Race & Ethnicity
White non-Latino $482 $73 $269 $1,174 $3,113
Black non-Latino $375 $61 $215 $911 $3,007
Latino $222 $27 $130 $698 $2,164
Asian $286 $49 $163 $1980 $2,993
American Indian/Alaska
Native $696 $57 $334 $1,323 $2,977
Other or Unknown $408 S$63 $218 $1,107 $3,113
Geographic Characteristics
Urban $471 574 $259 $1,141 $3,087
Rural $517 $80 $308 $1,267 $3,175

 

Source: Out-of-pocket spending calculated using the 2022 Medicare Part D PrescriptionDrugEvent dataand PartD
Enrollmentdata. Estimates are based on the last coverage phasereachedby enrollees by the end of 2022 and theirtotal
out-of-pocket spending across all Part D benefit phases in 2022.

Estimates for LIS enrollees are available in the Appendix (Tables B1 and B2). Although LIS enrollees proceed
through the coverage phases, theyreceive financial assistance with premiums, deductibles, and copayments so
their out-of-pocket spending, even for enrollees who reach the catastrophic coverage phase, is much lower
than non-LIS enrollees.

Medical Conditions for Enrollees Who Reach the Catastrophic Coverage Phase

Table 5 presents the top five medical conditions that had the highest share of enrollees who reached the
catastrophic coverage phase in 2021 and their average out-of-pocket spending. The average out-of-pocket
spending was highest for enrollees with cystic fibrosis ($9,522 per enrollee), which is a genetically inherited
disorder that primarily affects lung function. About 34 percent of enrollees with cystic fibrosis reached the
catastrophic coverage phase. Enrollees with HIV had the highest share reaching the catastrophic coverage
phase (79 percent). Through the year, enrollees with HIV paid about $2,478 in out-of-pocket drug costs.
Among enrollees with diabetes who use insulin, about 44 percent {or 186,000 enrollees) reached the
catastrophic coverage phase and they paid an average of $2,031in out-of-pocket spending for Part D drugs.
The remaining medical conditions presentedin Table 5 are for blood cancers (multiple myeloma including
other neoplastic disorders and chronic myeloid leukemia).

 

July 2023 RESEARCH REPORT 13
Table 5. Top 5 Medical Conditions with Highest Share of Enrollees Reaching Catastrophic Coverage
Phase and their Out-Of-Pocket Spending, 2021

 

Average Out-Of-

 

Number of Number of Percentin  Pocket Spending Per
Enrollees Enrolleesin Catastrophic Enrollee for Enrollees

Taking Part D Catastrophic Coverage in Catastrophic

Medical Conditions Drugs Coverage Phase Phase Coverage Phase?
HIV/AIDS 54,988 43,367 79% $2,478
Diabetes with Insulin Use 425,089 186,428 44% $2,031
Multiple Myeloma* 105,013 36,756 35% $7,565
Cystic Fibrosis 3,257 1,110 34% $9,522
Chronic Myeloid Leukemia 20,474 5,866 29% 54,712

 

Source: Out-of-pocket spending calculated using the 2021 Medicare Part D Prescription DrugEvent data and PartD
Enrolimentdata.
*Includes Other Neoplastic Disorders related to bone marrow dysfunction.

Notes: 2 Estimates are total Part D average out-of-pocket spending perenrollee for those who reached the catastrophic
coverage phasein 2021. These estimates include Part D out-of-pocket spending for all phases.

Next, we examined the conditions with the highest average out-of-pocket drug spending among non-LIS Part D
enrollees who reached the catastrophic coverage phasein 2021. Figure 5 presents these conditions along with
the absolute number and percent of enrollees with the condition who reached the catastrophic coverage
phase. For example, about 1,110 enrollees with cystic fibrosis reached the catastrophic coverage phasein
2021, which represents about 34 percent of enrollees with this condition in Part D.

The average out-of-pocket drug spending per enrollee ranged from approximately $4,712 for enrollees with
chronic myeloid leukemia to $9,552 per enrollee for those with cystic fibrosis. Four of the conditions include
various systemic cancers (multiple myeloma, secondary cancers, myelodysplastic syndromes, and chronic
myeloid leukemia), while other conditions on the listinclude hereditarydisorders, autoimmune disease,
primary pulmonary hypertension, and organ transplantation.

 

July 2023 RESEARCH REPORT 14
Figure 5. Ten Medical Conditions with the Highest Average Annual Out-Of-Pocket Part D Drug
Spending among Non-LIS Enrollees Who Reach the Catastrophic Coverage Phase in 2021

 

Cystic Fibrosis (n=1,110 or 34%)

$9,522

Hereditary Metabolic/Immune Disorders (n=3,093 or 20%) $7,900

Multiple Myeloma and Other Neoplastic Disorders (n=36,756 or

35%) $7,565

Major Organ Transplant* (n=17,634 or 23%) $6,323

Primary Pulmonary Hypertension (n=11,389 or 16%) $5,282

Secondary Cancers of Bone, Lung, Brain & Other sites _ $4.975
(n=44,785 or 21%) '
Myelodysplastic Syndromes and Myelofibrosis (n=11,315 or 15%) _ $4,972
Motor Neuron Disease** (n= 8,541 or 10%) _ $4,821
Intellectual Disability/Development Disorders (n= 1,270 or 9%) _ $4,752
Chronic Myeloid Leukemia (n=5,866 or 29%) _ $4,712

 

Source: Out-of-pocket costs calculated usingthe 2021 Medicare Part D Prescription Drug Event dataand PartD
Enrolimentdata.

Notes: 'n' refer to the number of enrollees with the conditionand percent refers to the percent of enrollees with the
medical condition that reachedthe catastrophiccoverage phasein 2021. Estimates are total average out-of-pocket
spending perenrollee forthose who reached the catastrophic coverage phasein 2021. These estimatesinclude spending
for all coverage phases.

*Major organ transplant excludes lung, kidney, and pancreas transplants. **Motor Neuron Disease includes Myasthenia
Gravis, Amyotrophic Lateral Sclerosis, and Other Motor Neuron Disease.

We also examined prescription drugs that were used by 10,000 or more enrollees in 2022 and the average out-
of-pocket spending specifically for these drugs among enrollees using these medications and who reached the
catastrophic coverage phase. Results show that seven of the top 10 drugs taken by 10,000 or more enrollees
with the highest average out-of-pocket spending were for oncology, which highlights the cost burden of cancer
for Medicare enrollees (Table C1in Appendix). This is consistent with existing research that finds a large share
of out-of-pocket financial burden is due to cancer treatment, with oncology drugs making up over half of total
Part B drug spending in 2021.23

In addition, we examined average out-of-pocket spending for enrollees with various autoimmune diseases by
demographic characteristicsand the percentage of enrollees reaching the catastrophic coverage phase (Table
C2in Appendix). Results show that about 17 percent of non-LIS enrollees with diseases that require chronic
immunosuppressive therapyreached the catastrophic coverage phasein 2022. Additionally, we examined
average out-of-pocket costs specifically for biologics among enrollees who reached the catastrophic coverage
phase (Appendix Tables C3 and C4). * Enrollees taking immune suppression treatments for rheumatologic
diseases and psoriasis had the highest out-of-pocket spending for these drugs. These findings are also

 

* We only examined biologics taken by 10,000 or more enrolleesin the catastrophic coverage phase and rank ordered by average out-
of-pocket spending specifically for each drug.

 

July 2023 RESEARCH REPORT 15
consistent with the results from previous analyses showing that biologic medications have contributed to
growthin total Medicare drug spending.2* Collectively, these findings suggest that Part D out-of-pocket

prescription drug costs are concentrated among a subset of enrollees with specific medical conditions.

Part D Annual Out-Of-Pocket Drug Spending by State in 2022

We examined Part D out-of-pocket spending for each state in 2022 and modeled the distribution of out-of-
pocket drug spending for enrollees with and without LIS (Table 6). In 2022, the states with the highest average
Part D out-of-pocket spending for non-LIS enrollees were North Dakota (S606 per enrollee), Nebraska ($590
per enrollee), and Oklahoma ($589). For LISenrollees, the states with the highest average Part D out-of-

pocket spending were Kentucky ($90), North Dakota (589), and Alabama ($81). The variations in meanand

median annual out-of-pocket drug spending by state is driven by a number of factors, including differences in

medical conditions and in the proportion of enrollees with LIS status.

Table 6. Part D Annual Out-Of-Pocket Spending for Enrollees by State in 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-LIS LIS Total (Non-LIS and LIS)
Mean Mean Mean

Numberof | OOP | Median | Numberof [ OOP | Median | Numberof | OOP | Median
State Enrollees ($) OOP(S) | Enrollees ($) 00P($) | Enrollees ($) 0O0P ($)
Alabama 585,515 | §$523 5250 284,624 581 $30 870,139 | $378 5138
Alaska 53,523 | $316 $57 24,032 $50 $16 77,555 | $233 $37
Arizona 861,325 | $443 $143 297,780 $42 $8 | 1,159,105 | $340 $75
Arkansas 339,687 | $521 $222 181,972 $72 $20 521,659 | $365 $107
California 3,805,184 | $378 $120 | 1,865,506 $37 $16 | 5,670,690 | $266 $57
Colorado 617,814 | $401 $112 177,786 $42 $0 795,600 [ $321 $61
Connecticut 403,946 [ $509 5166 214,672 548 S1 618,618 | $349 569
Delaware 146,341 | $484 $201 41,191 563 $14 187,532 | $392 $127
District of
Columbia 24,780 | $511 5174 40,491 525 S0 65,271 [ $209 516
Florida 2,983,100 | $447 $129 | 1,126,576 $40 $0 | 4,109,676 | $336 $60
Georgia 1,024,270 | $529 5206 477,385 574 $24 | 1,501,655 [ $385 5104
Hawaii 168,087 | $328 $136 59,804 532 S0 227,891 | $251 $76
Idaho 226,532 | $447 5140 63,832 561 512 290,364 | $362 $90
lllinois 1,388,504 | $510 $197 528,878 $44 $0 | 1,917,382 | $382 $93
Indiana 836,981 | $505 $187 284,288 $51 S0 | 1,121,269 | $390 $100
lowa 449,847 | $535 $187 113,482 $62 $4 563,329 | $440 $119
Kansas 358,774 | $531 $184 94,222 566 S8 452,996 | $434 5116
Kentucky 554,774 | $523 $240 | 257,806 $90 $32 812,580 | $386 $138
Louisiana 478,784 | $528 5242 289,844 564 $20 768,628 | $353 5101
Maine 198,404 | $417 $144 101,473 543 S3 299,877 | $290 $65
Maryland 537,061 | 5486 5201 212,831 572 $31 749,892 | $369 5118
Massachusetts 795,634 | $490 $208 376,434 $49 $8 | 1,172,068 | $348 $96
July 2023 RESEARCH REPORT 16

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-LIS LIS Total (Non-LIS and LIS)
Mean Mean Mean

Numberof | OOP | Median | Numberof [ OOP | Median | Numberof | OOP | Median
State Enrollees (S) OOP(S) | Enrollees (S) 00P($) | Enrollees (S) 0O0P ($)
Michigan 1,435,443 | $419 $173 447,515 $55 $16 | 1,882,958 [ $333 $102
Minnesota 739,081 | $439 5128 182,919 549 s3 922,000 | $362 $82
Mississippi 300,418 | $590 $249 197,848 S77 $30 498,266 [ 5386 $110
Missouri 814,773 | $487 $170 256,954 $61 $5 | 1,071,727 | $385 $99
Montana 146,277 | $468 5158 41,063 566 $21 187,340 [ $380 5102
Nebraska 239,631 [ $590 $208 56,185 566 sS4 295,816 [ $490 $132
Nevada 339,582 | 5416 5124 105,269 563 $22 444,851 $332 579
New
Hampshire 197,424 | $472 5174 49,369 576 $27 246,793 | $393 $120
New lersey 1,055,504 | $499 5194 319,275 549 S4 | 1,374,779 | $395 5113
New Mexico 226,178 | $406 $156 125,908 $50 $16 352,086 | $279 §71
New York 2,004,789 | $460 5164 | 1,193,725 538 $2 | 3,198,514 | $303 $58
North Carolina | 1,283,141 | $496 $197 459,632 $70 $18 | 1,742,773 | $384 $112
North Dakota 89,128 [ $606 5233 21,179 589 $28 110,307 | $506 5156
Ohio 1,599,399 | $475 $169 511,384 $51 S0 [ 2,110,783 | $372 $98
Oklahoma 414,046 [ $589 $263 166,425 $65 $14 580,471 $439 $131
Oregon 560,735 | $429 $156 189,980 556 $15 750,715 | $335 $92
Pennsylvania 1,807,454 | 5477 $182 613,392 S$57 $11 | 2,420,846 | $371 $103
Rhode Island 138,456 | $418 $121 57,774 $45 $0 196,230 | $309 $53
South Carolina 695,691 | $535 $220 240,353 561 512 936,044 | $413 5120
South Dakota 117,219 | $559 $191 26,819 $78 $17 144,038 | $469 $132
Tennessee 837,009 | $512 5193 340,906 $73 $20 | 1,177,915 | $385 $110
Texas 2,594,766 | $491 $193 | 1,024,379 $59 $10 | 3,619,145 [ $369 $101
Utah 285,592 | $441 5141 59,087 552 513 344,679 | $374 594
Vermont 94,600 | $467 5141 33,318 555 $22 127,918 | $360 582
Virginia 863,825 | 5493 5183 292,424 566 $13 | 1,156,249 [ $385 $109
Washington 795,807 | $437 $140 273,502 $44 $0 | 1,069,309 | $337 $73
West Virginia 227,697 | $487 $237 116,423 576 $24 344,120 | $348 $126
Wisconsin 788,856 | $453 $159 221,345 541 S0 | 1,010,201 | $362 $94
Wyoming 69,651 [ $528 $195 15,742 $73 $11 85,393 | $444 $133
Total* 38,279,655 | $462 $164 | 14,784,568 $53 $9 | 53,064223 | $348 $85

 

 

 

 

 

 

 

Source: State estimates for Part D out-of-pocket spending calculated usingthe 2022 Medicare Part D Prescription Drug
Eventdata and PartD Enrollment data.
* Totalsinclude Medicare Part D enrolleesresidingin territories or outside the United States, who are notshown

separately.

OOP = Out-Of-Pocket

 

July 2023

RESEARCH REPORT 17

 
Projected Impacts of the IRA on Part D Enrollees' Annual Out-Of-Pocket Spending

The second part of our study aims to understand the impact of the IRA's Part D redesign and drug-related
provisions on enrollee out-of-pocket spending using a simulation model. Our simulation model estimated
the impact of the IRA's Part D redesign and other drug-related provisions on enrollee out-of-pocket
spending using two specifications: specification A includes the IRA Part D related provisions that are in effect
in 2024 and specification B, our main specification, includes additional IRA Part D related provisions that are
in effect in 2025, as described in Table 1. Note that not all IRAPart D related provisions were included in
the modeling."

Specification A: 2024 IRA Part D Impacts

Our modeling estimates suggest that the IRA's Part D related provisions that arein effect in 2024 (specification
A} are projected to result in an annual reduction of 15 percent in average out-of-pocket Part D spending,
declining from $463 per enrollee (without the IRA)to $394 per enrollee under the IRAin 2024. Overall, this
results in an approximate $3.6 billion reduction in out-of-pocket costs annually.

For the baseline scenario, using 2021 data, we projected spending in 2024 in the absence of the IRA. Under
this scenario, about 3.9 million enrollees would have reached the catastrophic coverage phase and therefore
met the catastrophic coverage threshold (about $8,000 in 2024). Under the IRA, in 2024, this estimate s
expectedto reduce to about 3.65 million enrollees, a decline of about 7 percent. This is likely due to the cost
sharing caps on insulin and vaccines. Under the IRA, the average out-of-pocket cost are projected to decline
about 42 percent ($611) for enrollees who would have previously reached the catastrophic coverage phase
pre-IRA.*

Under the baseline scenario, in 2024, about 36.3 million non-LIS enrollees are projected to pay $3,000 or less
in out-of-pocket costs andabout 913,000 non-LIS enrollees are projected to pay more than $3,000. Under the
IRA, about 36.8 million enrollees are projected to pay $3,000 or less in out-of-pocket costs and about 507,000
enrollees are projected to pay more than $3,000. Therefore, the percentage of non-LIS Part D beneficiaries
spending more than $3,000 out of pocket will drop due to the IRAfrom 2.5% to 1.4%, which represents about
407,000 fewer enrollees paying $3,000 or more in a year. In 2025, as discussed below, all beneficiaries will
have their Part D OOP spending capped at $2,000.

Detailed average impact estimates per enrollee by LIS status are presentedin Table 7A for specification A.

 

* For example, the potential impacts of the inflation rebate provisions and the impact of Part D drugs that are selected for negotiation
are not included in the simulation model.

* Thisincludes some enrollees who are in the catastrophic coverage phase in the baseline but would fall below the catastrophic
coverage phase under the IRA.

 

July 2023 RESEARCH REPORT 18
Table 7A. Model Specification A: Projected Average Annual Out-Of-Pocket Impact Per Enrollee of
2024 Inflation Reduction Act Medicare Part D Redesign, by Low-income Subsidy (LIS) Status

 

 

2024 2024
Annual Out-Of- Baseline Projected IRA Policy Percentage
Pocket Spending (withoutIRA) (with IRA) Impact Change
Non-LIS $610 $541 -$70 -11.4%
LIS $82 $15 -$67 -81.9%
All $463 $394 -$69 -14.9%

 

Source: ASPE Part D Simulation Model

Notes: Table 7A presents modeling estimates forannual enrollee out-of-pocket drug spending underthe Inflation
Reduction Act (IRA) in 2024 dollars. This specificationincludes onlythe IRA drug-related provisions that are modeledin
this study that are in effectin 2024 as presented in Table 1. Estimates arebasedon a simulation of what would happen in
2024 without the IRA (baseline)and with the IRA (projected). The simulation modelis based on a 10 percent random
sample of PDEdatain 2021.

Specification B: 2025 Part D IRA Impacts

Our results show that the IRA drug-related provisions modeled in this paper that are in effect in 2025 will
reduce average out-of-pocket drug spending by 30 percent, a reduction of about $144 per enrollee. Atthe 90t
percentile for savings, this translates to savings of about $298 and at
the 95 percentile, this translates tosavings of about $709 per
When the IRA Part D drug- enrollee. Overall, this results in about a $7.4 billion reduction in out-
related provisions modeled of-pocket costs in 2025. |n specification B, as expected, the impact of
are in effect, we project it will the IRAis greater thanin specification A because in 2025, the $2,000
out-of-pocket cap goes into effect, which substantially limits out-of-
pocket spending for enrollees.

 

reduce out-of-pocket drug
spending by 30 percent,

declining from 5486 annually For the baseline scenario, using 2021 data, we estimated spending in
per enrollee to $342 under 2025 in the absence of the IRA. Under this scenario, about 3.8
the IRA in 2025 million enrollees are expected to reach the catastrophic coverage

phase and therefore meet the catastrophic coverage thresholdin the

absence of the IRA, which is estimated tobe about $8,500. Among
enrollees who would reach the catastrophic coverage phase in the absence of the IRA, enrollees with high
spending (those at the 90 percentile and 95t percentiles of out-of-pocket spending) are projected to have
about $4,000 and $5,500in out-of-pocket costs, respectively. Under the IRA, the number of enrollees who
reach the catastrophic coverage phase would increase to 9.5 million enrollees, an increase of about 5.6 million
enrollees or 147 percent from baseline. This increase in the number of enrollees in the catastrophic coverage
phasein 2025 is due to the much lower out-of-pocket limit ($2,000) imposed by the IRA. Under the IRA, the
average out-of-pocket costs are projected to decline about 73 percent ($1,126) for enrollees who would have
previously reachedthe catastrophic coverage phase pre-IRA.

Additionally, in the baseline scenario, about 36.2 million non-LIS enrollees are projected to pay $3,000 or less
in out-of-pocket costs andabout 1.1 million non-LIS enrollees are projected to have out-of-pocket spending
greaterthan $3,000in 2025. Under the 2025 IRA, this changes sothat enrollees no longer have out-of-pocket
payments greater thanthe $2,000 due tothe out-of-pocket cap instituted by the IRA.

Detailed average impact estimates per enrollee by LIS status are presented in Table 7B for Specification B.

 

July 2023 RESEARCH REPORT 19
Table 7B. Model Specification B: Projected Enrollee Average Annual Out-Of-Pocket Impact of 2025
Inflation Reduction Act Medicare Part D Redesign, by Low-income Subsidy (LIS) Status (2025

 

 

dollars)
2025 2025
Annual Out-Of- Baseline Projected IRA Policy Percentage
Pocket Spending (without IRA) (with IRA) Impact Change
Non-LIS $640 $468 -$171 -26.8%
LIS $86 $13 -$72 -84.3%
All 5486 $342 -$144 -29.6%

 

Source: ASPE Part D Simulation Model

Notes: Table 7B presents modeling estimates for annual enrollee out-of-pocket drug spending underthe Inflation
Reduction Act(IRA)in 2025 dollars. Specification B includes all IRA drug-related provisions modeled in this study thatare
in effectin 2025as presented in Table 1. Estimates are based on a simulation of what would happen in 2025 without the
IRA (baseline) and with the IRA (projected). The simulation model is based on a 10 percent random sample of PDE data in
2021.

The IRAPart D provisions have a greater relative impact on LIS enrollees than non-LIS enrollees (84 percent vs.
27 percent in specification B), but larger absolute impact on non-LIS enrollees ($171 in savings vs. $72 in
savings). LISenrollees have higher gross drug costs, onaverage, than non-LIS enrollees, but have lower out-of-
pocket spending because much of their cost sharing is covered by federal assistance. The dollar impact of the
IRA on out-of-pocket drug spending is thus larger for non-LIS enrollees thanfor LIS enrollees. LISenrollees,
however, have a larger percentage impact because they will be more likely to reach the $2,000 limit, toward
which low-income cost sharing and third-party payments will all be counted, as they are now before the IRA
out-of-pocket limit is implemented.

Distribution of Projected Savings

We examined the distribution of projected savings to understand how many people would save under the IRA.
We began by examining those with the most savings, specifically, the projected population of enrollees who
are expected to save at least $1,000 or more in 2024 and 2025.

Table 8 presents the average savings distribution only among enrollees with savings of $1,000 or more in 2024
and 2025. Among those who are expected to save $1,000 or more, the average savings are projectedto be
about $2,900in 2024 for nearly 636,000 LIS and non-LIS enrollees and $2,500in 2025 for nearly 1.9 million LIS
and non-LIS enrollees. Of the nearly 1.8 non-LIS enrollees saving over $1,000in out-of-pocket costs, about 1.1
million (63%) were in the catastrophic coverage phase in the baseline."

 

* Our analysis shows that enrollees do not have to reach the catastrophic coverage phase to save over $1,000, as the baseline TrOOP
limit is about $8,500.

 

July 2023 RESEARCH REPORT 20
Table 8. Average Out-Of-Pocket Savings Among Enrollees with Projected Savings of $1,000 or More

 

Policy Impact

 

 

Average OOP MedianOOP  Average OOP
Number of Savings Per Percentage Savings Per Savings atthe
Enrollees Enrollee Change Enrollee 90t Percentile
Specification A:
2024
Non-LIS 579,000 $2,948 56.8% $1,798 $6,607
LIS 56,740 $1,939 88.4% $1,916 $2,594
Total 635,740 $2,858 58.0% $1,806 $6,219
Specification B:
2025
Non-LIS 1,787,390 $2,504 65.7% $1798 $4,265
LIS 69,300 $2,060 86.4% $1,915 $2,857
Total 1,856,690 $2,487 66.2% $1,801 $4,165

 

Source: ASPE Part D Simulation Model
Notes: OOP=0ut-Of-Pocket

Table 9 presents demographic and health characteristics for non-LIS enrollees who are expectedto save
$1,000 or more. Results show that a larger share of Al/AN enrollees are expected to have out-of-pocket
savings of $1,000 or more than other racial/ethnic groups, with average out-of-pocket savings of about $2,460,
followed by White enrollees (4.9 percent with average savings of $2,477). Among enrollees with health
conditions, a greater share of those with HIV {about 71 percent)and those who are long-term insulin users (51
percent) are expected to have savings of at least $1,000 or more, with enrollees with HIV demonstrating the
largest average out-of-pocket savings ($3,181) across the health conditions examined.

Table 9. Demographic Characteristics and Average Savings Among Non-LIS Enrollees with Projected
Savings of $1,000 or More in 2025

 

Percentof  Average Out-Of-
Numberof Enrollees with at Pocket Savings

Number of Enrollees with least$1,000in among those with

 

Demographic TotalEnrollees Savings of Out-Of-Pocket  $1,0000r morein
Characteristics with Savings  $1,000 or More Savings savings
Age
<65 3,437,750 175,600 5.1% $2,892
65-69 10,279,640 460,880 4.5% $2,506
70-74 9,531,160 468,010 4.9% $2,483
75-79 6,498,130 341,350 5.3% $2,480
80-84 3,991,460 200,410 5.0% $2,436
85-89 2,207,650 98,270 4.5% $2,302
90+ 1,313,870 42,870 3.3% $2,085
Gender
Women 20,691,770 857,070 4.1% $2,444
Men 16,567,890 930,320 5.6% $2,559
Race
White 31,672,420 1,564,800 4.9% $2,477
Black 2,683,950 108,390 4.0% 82,827

 

 

July 2023

RESEARCH REPORT 21
 

 

Percentof  Average Out-Of-
Numberof Enrolleeswith at Pocket Savings
Number of Enrollees with least$1,000in among those with
Demographic Total Enrollees Savings of Out-Of-Pocket $1,0000r morein
Characteristics with Savings $1,000 or More Savings savings
Latinos 574,580 15,770 2.7% $2,584
Asian 696,370 21,900 3.1% $2,573
American Indian/Alaskan
Native 68,680 7,530 11.0% $2,460
Other 1,563,660 69,000 4.4% $2,561
Geography
Urban 33,849,090 1,622,660 4.8% $2,508
Rural 2,454,360 119,960 4.9% $2,460
Health Characteristics
HIV 68,240 48,380 70.9% $3,181
Non-HIV 37,191,420 1,739,010 4.7% $2,485
Long-term Insulin User 452,080 229,760 50.8% $2,116
Non-long-term Insulin
User 36,807,580 1,557,630 4.2% $2,561
Rheumatic Disorders 562,740 80,960 14.4% $2,894
Non-Rheumatic Disorders 36,696,920 1,706,430 4.7% $2,485

 

Source: ASPE Part D Simulation Model

Notes: Savings are in 2025 dollars.

Table 10A and Table 10B show savings thresholds and the number of enrollees expectedto save under each
threshold across the entire population of enrollees in Part D. Our analyses showthatin 2024, 15.4 million
enrollees (or 30 percent) would have savings under the IRA provisions that are in effect that year. In 2025,
18.7 million or 36 percent of enrollees would have savings under the IRA provisions that are in effect that year.

 

July 2023

RESEARCH REPORT 22
Table 10A. Specification A: Distribution of Projected Out-Of-Pocket Savings for 2024 IRA Drug-
Related Provisions, by LIS Status

 

 

 

Non-LIS LIS All
Numberof Percentof | Numberof Percentof | Numberof Percentof

Projected IRA Savings Enrollees Enrollees Enrollees Enrollees Enrollees Enrollees

Savings <= $0? 32,202,680 86.4% | 4,052,330 28.2% | 36,255,010 70.2%
$0 < Savings <= $100 2,007,510 5.4% | 7,328,150 51.0% | 9,335,660 18.1%
$100 < Savings <= $200 875,310 2.3% | 1,597,120 11.1% | 2,472,430 4.8%
$200 < Savings <= $300 774,740 2.1% 417,360 2.9% [ 1,192,100 2.3%
$300 < Savings <= $400 205,430 0.6% 735,860 5.1% 941,290 1.8%
$400 < Savings <= $500 173,440 0.5% 103,400 0.7% 276,840 0.5%
$500 < Savings <= $600 124,980 0.3% 34,010 0.2% 158,990 0.3%
$600 < Savings <= $700 99,870 0.3% 17,870 0.1% 117,740 0.2%
$700 < Savings <= $800 83,590 0.2% 11,470 0.1% 95,060 0.2%
$800 < Savings <= $900 71,510 0.2% 7,850 0.1% 79,360 0.2%
$900 < Savings <= $1,000 61,600 0.2% 5,910 0.0% 67,510 0.1%
Savings > $1,000 579,000 1.6% 56,740 0.4% 635,740 1.2%
Total 37,259,660 100.0% | 14,368,070 100.0% | 51,627,730 100.0%

 

 

 

Source: ASPE Part D Simulation Model
Notes: Savings are in 2024 dollars. Enrolimentis based on 2021 levels.
aThere are situations where an enrollee may have an increase in out-of-pocket spending under the 2024 IRA drug-related

provisions.

Table 10B. Specification B: Distribution of Projected Out-Of-Pocket Savings for 2025 IRA Drug-
Related Provisions, by LIS Status

 

 

 

Non-LIS LIS All

Numberof Percentof | Numberof Percentof | Numberof Percentof
Projected IRA Savings Enrollees Enrollees | Enrollees Enrollees Enrollees  Enrollees
Savings <= $0° 28,849,140 77.4% | 4,039,670 28.1% | 32,888,810 63.7%
$0 < Savings <= $100 2,056,990 5.5% | 7,287,500 50.7% | 9,344,490 18.1%
$100 < Savings <= $200 1,116,020 3.0% | 1,538,980 10.7% | 2,655,000 5.1%
$200 < Savings <= $300 1,115,240 3.0% 480,400 3.3% | 1,595,640 3.1%
$300 < Savings <= $400 506,700 1.4% 714,390 5.0% | 1,221,090 2.4%
$400 < Savings <= $500 443,790 1.2% 139,870 1.0% 583,660 1.1%
$500 < Savings <= $600 353,190 0.9% 46,660 0.3% 399,850 0.8%
$600 < Savings <= $700 309,930 0.8% 20,790 0.1% 330,720 0.6%
$700 < Savings <= $800 275,710 0.7% 13,950 0.1% 289,660 0.6%
$800 < Savings <= $900 242,960 0.7% 9,440 0.1% 252,400 0.5%
$900 < Savings <= $1,000 202,600 0.5% 7,120 0.0% 209,720 0.4%
Savings > $1,000 1,787,390 4.8% 69,300 0.5% | 1,856,690 3.6%
Total 37,259,660 100.0% | 14,368,070 100.0% | 51,627,730 100.0%

 

 

 

Source: ASPE Part D Simulation Model
Notes: Savings are in 2025 dollars. Enrolimentis based on 2021 levels.
aThere are situations where an enrollee may have an increase in out-of-pocket spending under the 2024 IRA drug-related

provisions.

 

July 2023

RESEARCH REPORT 23
The distribution of savings suggest that a sizable subset of the Medicare Part D enrollee population is expected
to save in out-of-pocket costs under the IRA. In 2025, this translates to about 36 percent of all enrollees who
are projected to have savings, including 23 percent of LIS enrollees and 72 percent of non-LIS enrollees. Given
the subset of enrollees that are expected to save under the IRA's drug related provisions, we examined the
average annual out-of-pocket savings per enrollee taking into account only enrollees with savings in 2025. Our
results (Table 11) suggest that average out-of-pocket costs will amount to about $396 in savings per enrollee
with savings, with greater savings accruing to non-LIS enrollees, who would save about $759 per enrollee, than
LIS enrollees.

Table 11. Specification B: Projected Average Annual Out-Of-Pocket Savings Per Enrollee Among
Enrollees with Savings in 2025

 

 

Number of Enrollees Out-Of-Pocket Savings for Each Enrollee
LIS Status TotalSavings with Savings (Among Enrollees with Savings)
Non-LIS $6,386,000,000 8,410,520 $759
LIS $1,037,000,000 10,328,400 $100
Total $7,422,000,000 18,738,920 $396

 

Source: ASPE Part D Simulation Model
Notes: Savings are shown only for enrollees who had out-of-pocket savingsunder 2025 IRA provisions, which represent
about 36 percentof all enrollees. Savingsare in 2025dollars.

We also examined savings by demographic groups to understand differences in savings. Appendix Table D2
presents the policy impact and the percent change in out-of-pocket spending from baseline for each
simulation model specification. Our findings show that generally, the share of savings accrue at similar rates
across specifications. Enrollees under the age of 65 have savings of about 44 percent in out-of-pocket
spending under 2025 IRA provisions. This is consistent with our earlier findings that show this age group has
higher out-of-pocket spending than other age groups, likely because they qualify for Medicare based on
disability or illness. Men have slightly more savings than women (about 4 percentage point difference in
2025). Among racial and ethnic groups, Al/AN enrollees have the greatest reduction in out-of-pocket savings
in 2025, followed by Latinos enrollees. As expected, non-LIS enrollees have greater relative reduction in out-
of-pocket spending comparedto LIS enrollees. Enrollees in rural and urban areas have similar reductions in
out-of-pocket spending.

Results also show that enrollees with HIV are expected to have the largest reductionin out-of-pocket spending
(69 percent), followed by enrollees who use insulin long-term (63 percent), and enrollees with rheumatic
disorders (44 percent).

Savings by State

We modeled the impact of the IRAPart D redesign on Part D out-of-pocket spending for enrollees in eachstate
(Table 12). Our results show that the states with the largest average savings per enrollee who have savings in
out-of-pocket costs are Nebraska ($387) and Wyoming ($375) in 2024 (Specification A) and Nebraska ($630)
and Wyoming ($608) in 2025 (Specification B).

 

July 2023 RESEARCH REPORT 24
Table 12. Projected Impact of Inflation Reduction Act Medicare Part D Redesign for Enrollees
Expected to Have Out-Of-Pocket Savings, by State, 2024 and 2025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Spedcification A: 2024 Savings (2024 dollars) Specification B: 2025 Savings (2025 dollars)
Average

Number of Savings Numberof | Average

Enrollees per Enrollees | Savings per

with Out- Enrollee Total Estimated | withOut- Enrollee Total Estimated

Of-Pocket with Out-Of-Pocket Of-Pocket with Out-Of-Pocket
State Savings Savings Savings Savings Savings Savings
Alabama 306,150 $218.33 $66,840,296 366,890 $359.73 $131,983,143
Alaska 24,400 $161.97 $3,952,168 30,520 $309.38 $9,442,237
Arizona 319,030 $220.77 $70,433,176 388,850 $379.35 $147,508,867
Arkansas 177,740 $210.48 $37,410,810 203,210 $341.84 569,464,876
California 1,914,530 $162.25 $310,630,320 | 2,180,530 $295.51 $644,379,120
Colorado 177,270 $272.37 $48,283,780 220,050 $451.28 $99,304,666
Connecticut 210,880 $209.37 $44,151,087 255,900 $367.55 $94,055,573
Delaware 48,030 $257.14 $12,350,623 63,350 $448.51 528,413,083
District of
Columbia 31,270 $120.61 $3,771,380 33,190 $183.87 $6,102,580
Florida 1,212,260 $235.12 $285,027,129 | 1,479,230 $401.15 $593,397,513
Georgia 498,960 $240.82 $120,161,017 589,320 $394.96 $232,756,502
Hawaii 68,180 $140.50 $9,579,566 82,130 $280.75 $23,057,663
Idaho 65,470 $275.83 $18,058,327 82,160 $461.75 $37,937,117
lllinois 470,160 $248.88 $117,015,573 597,880 $432.70 $258,702,317
Indiana 306,360 $278.52 $85,328,914 385,650 $465.07 $179,352,376
lowa 126,560 $327.45 $41,442,197 163,690 $524.51 $85,857,481
Kansas 100,930 $333.43 $33,653,011 129,630 $550.04 571,301,576
Kentucky 280,240 $223.84 $62,727,677 333,560 $359.04 $119,760,791
Louisiana 281,590 $189.77 $53,436,767 327,110 $320.05 $104,692,595
Maine 110,280 $178.66 $19,702,230 126,850 $298.30 $37,839,589
Maryland 232,500 $226.56 $52,675,430 284,990 $387.91 $110,551,046
Massachusetts 406,650 $193.52 $78,694,886 481,730 $333.23 $160,525,210
Michigan 541,020 $208.35 $112,723,226 672,860 $356.00 $239,539,146
Minnesota 184,490 $298.18 $55,012,011 234,800 $483.22 $113,461,163
Mississippi 177,700 $226.86 $40,313,171 203,300 $364.26 574,054,703
Missouri 276,380 $278.65 $77,014,526 348,280 $461.94 $160,886,006
Montana 44,830 $283.96 $12,730,030 54,010 $460.60 $24,877,143
Nebraska 67,170 $387.17 $26,006,108 88,600 $629.59 555,781,343
Nevada 117,370 $266.68 $31,300,207 143,020 $433.81 562,043,947
New Hampshire 56,260 $307.09 $17,276,733 72,960 $490.01 $35,751,168
New Jersey 352,520 $288.27 $101,620,278 473,370 $519.78 $246,047,780
New Mexico 110,150 $167.84 $18,487,579 125,870 $272.72 534,327,699
New York 928,480 $212.17 $196,995,599 | 1,145,400 $389.63 $446,277,061
North Carolina 542,140 $243.55 $132,040,481 662,600 $405.85 $268,914,391

 

 

 

 

 

 

 

 

 

July 2023 RESEARCH REPORT 25

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North Dakota 26,380 $298.26 $7,868,054 33,050 $505.87 516,718,953
Ohio 541,670 $271.58 $147,107,228 687,430 $451.18 $310,154,676
Oklahoma 166,080 $262.46 $43,589,795 206,000 $452.25 $93,164,394
Oregon 185,550 $231.55 $42,963,391 224,100 $388.30 587,017,149
Pennsylvania 645,530 $269.94 $174,255,025 829,770 $466.79 $387,330,525
Rhode Island 56,590 $197.75 $11,190,442 68,120 $339.62 $23,134,972
South Carolina 270,890 $251.06 $68,009,386 334,960 $434.55 $145,557,773
South Dakota 31,210 $371.89 $11,606,591 39,710 $586.73 523,299,064
Tennessee 379,460 $255.77 $97,054,529 459,280 $417.36 $191,685,868
Texas 1,098,260 $234.83 $257,901,924 1,323,430 $399.64 $528,899,748
Utah 75,960 $291.68 $22,156,230 95,950 $490.54 547,067,108
Vermont 36,350 $308.85 $11,226,635 44,030 $491.89 $21,658,034
Virginia 314,440 $266.35 $83,749,536 390,400 $440.62 $172,017,610
Washington 288,470 $243.89 $70,355,127 344,470 $412.96 $142,251,405
West Virginia 117,150 $208.41 $24,414,649 140,540 $346.26 548,663,280
Wisconsin 234,150 $283.82 $66,457,248 298,750 $47491 $141,879,088
Wyoming 16,260 $375.37 $6,103,591 21,920 $607.58 513,318,138
Total* 15.4 million $231.19 $3.6 billion | 18.7 million $396.08 $7.4 billion

 

Source: ASPE Part D Simulation Model
Notes: *Totals include Medicare Part D enrollees residing in territories or areas outside the United States, who are not

shown separately.

DISCUSSION

Substantial numbers of Medicare enrollees in Part D experience high out-of-pocket spending burdens, but
several provisions under the IRAwill produce meaningful savings for more than 18 million people by 2025.

Medicare Part D enrollment doubled from 2007 to 2022, and the majority of enroliment growthwas driven by
increases in enrollment among non-LIS enrollees, who are alsothe most affected by Part D out-of-pocket
costs. Ourfindings show that the share of enrollees reaching the catastrophic coverage phase (the phase
under which enrollees have five percent cost sharing responsibilities pre-IRA) has been increasing over time.
For some health conditions, the share of enrollees reaching the catastrophic coverage phase is particularly
high (e.g., HIV where about 79 percent of enrollees reached the catastrophic coverage phase or enrollees with
diabetes who use insulin where about 44 percent of enrollees reached the catastrophic coverage phasein
2021).

For enrollees who reach the catastrophic coverage phase, Part D out-of-pocket spending can be substantial. *
In 2022, average annual Part D out-of-pocket spending was $3,093 for the 1.5 million non-LIS enrollees who
reached the catastrophic coverage phase. For atleast half of Medicare enrollees, this represents about 10
percent of their totalincome on Part D drugs alone. For some health conditions, the out-of-pocket costs are
much higher. For example, the average out-of-pocket drug spending per enrollee who reachedthe
catastrophic coverage phase ranged from approximately $4,712 for chronic myeloid leukemia, a type of cancer
of the blood, to $9,552 per enrollee for cysticfibrosis. These findings suggest that althoughthe Part D
coverage gap closed after implementation of the ACA and the Bipartisan Budget Act of 2018, some Medicare
Part D enrollees with serious health conditions still face substantial out-of-pocket spending requirements to
receive their medications.

 

* Other out-of-pocket medical costsare notincluded in the estimates presented in this Report.

 

July 2023 RESEARCH REPORT 26
Under the previous Part D benefit design, there were no caps to limit these out-of-pocket payments. For all
Part D enrollees, and particularly for enrollees prescribed high priced medications or enrollees who take many
medications, the absence of limits on out-of-pocket spending creates significant financial burdens. The IRA
builds on the ACAand aims to reduce Medicare spending and enrollee out-of-pocket spending for Part D drugs
through a series of provisions that change the Medicare Part D benefit structure, such as limiting Part D out-of-
pocket spending to $2,000 and indexed to inflation annually thereafter, instituting a $35 monthly cap on each
one-month supply of covered insulin products, eliminating cost sharing for Advisory Committee on
Immunization Practices (ACIP)-recommended adult vaccines, and expanding the full LIS subsidy to certain
people with limited resources who earnless than 150 percent of the federal poverty level.

Our analysis shows that when the full implementation of the Part D drug-related provisions of the IRAthat are
modeled in this paper are in effect, it will result in an estimated $7.4 billion reduction in annual out-of-pocket
spending for enrollees in 2025. This estimate is conservative, since the inflation rebate and negotiation
provisions of the IRA are not modeled in this paper. Across the Medicare Part D population who do not receive
LIS, this translates to an average annual savings of $171 per non-LIS enrollee in 2025. Our analyses of out-of-
pocket spending over time suggests that there is a subset of enrollees who incur significant financial burden
due to out-of-pocket costs. When we examine out-of-pocket savings only among the subset of enrollees with
savings, this translates to about $759 saved annually per non-LIS enrollee with savings, which would benefit
8.4 million enrollees. We find that nearly 1.9 million enrollees, consisting mostly of non-LIS enrollees, will save
atleast $1,000in out-of-pocket costs. Collectively, these findings suggest that the subset of enrollees who had
the highest out-of-pocket spending under the pre-IRA Part D benefit structure are expected to benefit the
most from the IRA drug-related provisions modeled in this Report.

Our estimate for the number of enrollees who would be impacted by reductions in out-of-pocket drug
spending is higher than previous studies that did not account for IRA provisions that both reduce enrollee cost
sharing from five percent to zero percent after reaching the catastrophic threshold and lower the catastrophic
threshold.1213 As noted above, other aspects of the IRAincluding theinflation rebate cap and negotiationare
expected to generate additional out of pocket savings for enrollees and taxpayers.

Our estimates do not account for the potential increases in Part D drug accessibility. The IRA's provisions may
allow enrollees to obtain drugs that were previously unaffordable to them, allowing them to better manage
their health conditions. Future researchshould explore the impact of these and other provisions, such as the
IRA's inflation caps on drug prices and Medicare price negotiation of select high-cost drugs.

 

July 2023 RESEARCH REPORT 27
APPENDIX

Section A: IRA Simulation Model Estimate Methodology and Assumptions

Our simulation model estimated what would have happened to Part D out-of-pocket drug spending under the
following IRA provisions, depending on whether they arein effectin 2024 or 2025.

Table Al. IRA-Part D Drug Related Provisions Included in the Simulation Model

 

Specification A: Provisions that are Modeled in Specification B: Full set of Provisions Modeled that

combination and in effect in Calendar Year 2024

are in effect in Calendar Year 2025

 

e Enrollee cost sharing (i.e., out-of-pocket
spending) is limited to $35 for a month's
supply of each covered insulin product
and deductibles for covered insulin
products are eliminated

e Enrollee cost sharing for ACIP-
recommended adult vaccines is eliminated

e Full LIS assistance is expanded to people
with limited resources who earn less than
150 percent of the federal poverty level

e Reduction of enrollee coinsurancein the
catastrophic coverage phase from five to
zeropercent

Enrollee cost sharing is limited to $35 for a
month's supply of each covered insulin
product and deductibles for covered insulin
products are eliminated

Enrollee cost sharing for ACIP-recommended
adult vaccines is eliminated

Full LIS assistance is expanded to people with
limited resources who earn less than 150
percent of the federal poverty level
Reduction of enrollee coinsurancein the
catastrophic coverage phase from five to zero
percent

$2,000 maximum annual out-of-pocket cap for
enrollees, beginning in 2025, and indexed to
inflation thereafter

Elimination of the coverage gap phase and
replacement of the coverage gap discount
program with the Manufacturer Discount
Program; the new Manufacturer Discount
Programrequires a 10 percent manufacturer
discount on brand drugs in the initial coverage
phase and 20 percent in the catastrophic
coverage phase

Government reinsurance decreases inthe
catastrophic coverage phase-from 80% to
20% for brand-name drugs, biologicals, and
biosimilars, and from 80% to 40% for generics

 

Notes: Estimates do notinclude non-IRA regulations that may impact drug spending (e.g., Part D regulations requiring that
pharmacy price concessions be reflectedatthe point of sale beginningin January 2024). There will be changes to the Part
D benefitbetween calendaryears 2024 and 2025. For example, the accumulation of costs for TrOOPis different pre-IRA
and in 2025, which is taken into accountin our modeling.

ACIP = Advisory Committee on Immunization Practices

Our model did not include the estimated effects for all Part D drug related provisions in the IRA, which we
expect to impact Part D out-of-pocket spending. For example, we did not model the following provisions:

e requiring Medicare to negotiate prices for certain high-expenditure, single source drugs,
e implementing Part B and Part D inflation rebates, and

 

July 2023 RESEARCH REPORT 28
e requiring plans to provide their plan enrollees with the option to pay out-of-pocket costs under the
plan in monthly amounts that are spread throughout the year.

We used data from the Medicare Prescription Drug Event (PDE)file to estimate the total cost associated with
prescription drug use by coverage phase nationally and for each state. PDE data for Medicare enrollees in
traditional {also known as fee-for-service) and Medicare Advantage plans were used in the analyses.
Specifically, we used data for each enrollee in a 10 percent random sample, thus capturing that enrollee's
entire history of prescriptiondrug use within the year. We matched the 2021 PDE data with Part D enrollment
data to identify enrollees by LIS status, age, gender, race, ethnicity, and state. We fit our simulatedPart D data
to 2021 actuals, attempting to simultaneously match on the per-beneficiary out of pocket amounts by state as
well as by demographic categories, while also attempting to matchtotals for covered plan paid amounts,
reinsurance, and low-income subsidies.

To generate the policy impact of the IRA provisions modeled in this paper, we followed a multistep process:

e We calculated enroliment and baseline drug costs using the PDE files for 2021. We identified totaland
out-of-pocket costs in each individual enrollee's drug claims history observed in the Part D data and
summed across all enrollees to generate overall spending estimates, spending estimates by drug payment
phase, and spending estimates separately for each state andyear. We allocated cost liabilities by payer.

¢ We inflated the 2021 out-of-pocket amounts to projected 2024 or 2025 values using the statutoryformula
for updating the Part D catastrophic threshold, which will continue to apply to the $2,000threshold after
2025. This formula led us to multiply 2021 average out-of-pocket spending per enrollee by an adjustment
ratio of about 1.16 for Specification A, which captures the select IRA Part D-related provisions that arein
effect in 2024, and 1.21 for Specification B, which captures the selected IRA Part D-related provisions that
arein effectin 2025. This information was obtained from the Medicare Trustee's Report, Table IV.B8.25

¢ We then used our microsimulation model to identify the impact of select provisions of the IRA. We
assumed actual 2021 enrollment, plan design, and total drug cost (adjusted for inflation to 2024 and 2025
as above) as in the baseline but applied IRA provisions to each of the 2021 claims depending on when the
provisions arein effect (see Table Al). We used the existing PDE data for each enrollee in 2021 to
estimate out-of-pocket costs under the IRA drug-related provisions we modeled.

e We subtractedthe difference between actual out-of-pocket spending in 2021 projected to 2024 and 2025
levels and out-of-pocket spending projected under the IRA provisions modeled in this Report.

Assumptions and Limitations of Modeling Estimates

Our simulation model includes a series of assumptions and limitations. The simulation uses utilization of drugs
in 2021 as its source of data, but the drug classes that maybe dominant in 2025 is unknown and may change
over time. For 2024 and 2025 simulations, we use hypothetical benefit structures as a baseline, which
represent what Part D would have looked like in absence of IRA. The baseline TrOOP threshold in 2024 was
$8,000and was set toapproximately $8,500in 2025, which is an estimate of what TrOOP would have been if
the IRA had not been passed. For 2024, the phase transitions are already defined, and we modified only the
benefit structure to change the catastrophicthreshold, as well as applied insulin and vaccine copay limits. For
2025, we must assume what the benefit structure and phase transitions would look like under the previous
Part D payment structure (pre-IRA). We applied standard coinsurance at 25 percent and an enrollee premium
share of 25.5 percent.

 

July 2023 RESEARCH REPORT 29
Our model of the Part D redesign under the IRA does not fully take into account how manufacturers may
respond to provisions of the IRA. For example, our estimates do not capture the potential increases in drug
launch prices that manufacturers mayadopt. However, provisions in the IRA aim to limit the ability of
manufacturers and plans to raise costs and premiums. Specifically, provisions requiring manufacturers to pay
a rebate if drug price increases outpace inflation, requiring Part D plans to increase their share of costs that are
above the out-of-pocket spending cap, allowing Medicare to negotiate prices for select drugs, and requiring
drug manufacturers to provide a price discount on brand name drugs above the out-of-pocket spending cap all
aim to limit increases in drug costs and premiums.

Finally, our model does not take into account other federal or state programs that mayreduce spending on
Part D drugs." Nor do we account for changes in enrollee behavior as a result of the IRA Part D provisions.

 

* For example, the impacts of the Part D Senior Savings Model (PDSS), which is a voluntary model that tested alternative Part D plan
options that offer lower out-of-pocket costs for insulin as supplemental benefits, are not separately accounted for in our modeling.
Reductionsin out-of-pocket spending are included onlyin so far as the information is present in the 2021 PDE data. PDSS began
January 1, 2021 under the CMS Innovation Center and will end December 31, 2023.

 

July 2023 RESEARCH REPORT 30
Section B: LIS Enrollees and Out-Of-Pocket Spending

We examined LIS enrollees' coverage phase at the end of the year and their average out-of-pocket spending in
2022. Theseresults are presentedin Tables B1 and B2. For LIS enrollees, about 2.7 million enrollees reached
the catastrophic coverage phase and their average out-of-pocket spending was about $87. There were some
differences by age, race/ethnicity, and geographic location.

Table B1. Demographic Characteristics of Medicare Part D LIS Enrollees by Coverage Phase, 2022

 

 

All Deductible Initial Coverage Coverage Catastrophic

Enrollee Characteristics (millions) Phase Phase Gap Phase Phase
Total (Nin Millions) 14.9 3.0 6.7 2.4 2.7
Gender

Women 8.7 17.1% 46.8% 17.2% 18.9%

Men 6.2 25.0% 42.5% 14.8% 17.7%
Age

<65 6.0 33.6% 34.4% 12.2% 19.8%

65-69 2.9 13.6% 51.5% 16.5% 18.4%

70-74 2.1 11.4% 50.7% 18.7% 19.2%

75-79 1.5 10.0% 51.4% 20.3% 18.3%

80-84 1.1 9.3% 52.7% 21.4% 16.6%

85+ 1.3 10.4% 56.6% 20.7% 12.3%
Race & Ethnicity

White non-Latino 8.8 18.9% 44.9% 17.1% 19.1%

Black non-Latino 3.1 21.1% 45.5% 15.3% 18.1%

Latino 1.3 23.1% 46.4% 14.3% 16.2%

Asian American 0.8 21.8% 43.3% 16.1% 18.9%

American Indian / Alaska 0.1 25.7% 43.0% 14.4% 16.9%

Native

Other or Unknown 0.8 27.2% 43.5% 13.7% 15.7%
Geographic Characteristics

Urban 13.2 19.4% 46.4% 14.3% 16.2%

Rural 1.1 18.0% 43.3% 16.1% 18.9%

 

Source: Demographic descriptive statistics calculated using the 2022 Medicare Part D Prescription DrugEvent dataand
PartD Enrolimentdata.

Notes: Percentagesare calculated for each demographic group by row using the total enrollees in each group as the
denominator.

 

July 2023 RESEARCH REPORT 31
Table B2. Average Annual Out-Of-Pocket Part D Drug Spending Among LIS Medicare
Enrollees by Demographic Characteristics and Coverage Phase by End of Year (2022)

 

Demographic Characteristics Deductible Initial Coverage Coverage Gap Catastrophic

 

All Phase Phase Phase Phase

Total $52 $6 $42 $100 $87
Gender

Women $56 S7 S44 $102 $86

Men S48 $5 $39 $97 $89
Age

<65 $43 $3 S44 $96 $78

65-69 $54 $12 $38 $99 $91

70-74 $60 $14 $42 $102 $95

75-79 $63 $14 $43 $105 $97

80-84 $64 $14 $44 $107 $97

85+ S56 $13 $41 $100 $91
Race & Ethnicity

White non-Latino $62 $7 $49 $116 $99

Black non-Latino S44 $6 $36 $84 $75

Latino $32 $6 $26 $65 S61

Asian $32 $7 $26 $57 $55

American Indian/Alaska S50 S7 $44 $98 $90

Native

Other or Unknown $32 $5 $27 566 $64
Geographic Characteristics

Urban $52 $6 $41 $98 $86

Rural $74 $10 $61 $133 $110

 

Source: Out-of-pocket spending calculated using the 2022 Medicare Part D Prescription DrugEventdataand PartD
Enrollment data.

Notes: Average out-of-pocket spending calculated based on the latest phase the enrolleeisin by the end of the yearand
includes out-of-pocket spending across all coverage phases.

 

July 2023 RESEARCH REPORT 32
Section C: Out-Of-Pocket Spending for Part D Prescription Drugs

Among Medicare Part D enrollees {LIS and non-LIS), thetop 10 Part D drugs ranked by average out-of-pocket
spending for these medications among enrollees who reached the catastrophic coverage phase are presented
in Table C1. These drugs are takenby at least 10,000 enrollees. Out-of-pocket spending for these drugs
ranges from a high of $5,376 for Revlimid, a drug typically used to treat cancer, toa low of $1,910for Nuplazid,
a drug usedto treat psychosis.

Table C1. Top 10 Part D Drugs Taken by at least 10,000 Enrolleeswho reach the Catastrophic
Coverage Phase with Utilization Ranked by Out-Of-Pocket Spending in 2022

 

Numberof  Average OOP Costsfor

 

Biologic General Enrollees Drug per Enrollee

Brand Name (Y/N) Indication Most Common Diagnosis  Utilizing Drug Using Drug

REVLIMID N Oncology Multiple Myelomaor 44,126 $5,376
myelodysplastic syndrome

IMBRUVICA N Oncology CLL and NHLs 21,687 $5,366

POMALYST N Oncology Multiple Myeloma 12,416 $5,195

JAKAFI N Oncology Myelodysplastic 15,820 $4,795
syndromes

CALQUENCE N Oncology CLL 10,938 54,388

OFEV N Pulmonary Idiopathic pulmonary 19,834 $3,671
fibrosis*

XTANDI N Oncology Metastatic Castrate- 15,535 $2,858
resistant Prostate Cancer

VENCLEXTA N Oncology CLL 14,549 $2,849

STELARA Y Rheumatology Psoriatic Arthritisand IBD 19,107 $2,137

NUPLAZID N Psychology Psychosis and Parkinson's 13,291 $1,910

Neurology associated psychosis

 

Source: 2022 Medicare Part D Prescription Drug Event data and Part D Enroliment data.
Notes: Scripts are ranked by average out-of-pocket spending for each drug.

*|diopathic pulmonary fibrosis is a chronic disease that affects the lungs.

CLL = Chroniclymphocyticleukemia

NHL = Non-Hodgkin lymphoma

IBD = Inflammatory bowel disease

OOP = Out-Of-Pocket

We examined total Part D out-of-pocket spending for enrollees with various auto-immune diseases giventhe
high costs of immunosuppressive treatments and the common immunosuppressive therapyregimens across
the different conditions. Specifically, we examined out-of-pocket Part D drug spending for enrollees with
systemic lupus erythematosus, rheumatoid arthritis, Sjogren's syndrome, ulcerative colitis, Crohn's disease,
psoriasis and Graves' disease."

For non-LIS enrollees, the average out-of-pocket cost per enrollee wagher for men ($1,092) than women
($949) (Table C2). Average out-of-pocket spending per enrollee was relatively similar across age groups, with

 

* Hashimoto's thyroiditis was also included in this population

 

July 2023 RESEARCH REPORT 33
the exception of enrollees who are younger than age 65 and those who are betweenthe ages of 70 - 74; both
of these groups had average out-of-pocket spending of about $1,000.

Table C2 also shows that about 17 percent of non-LIS enrollees with diseases that require chronic
immunosuppressive therapyreached the catastrophic coverage phasein 2022. Additionally, 82,726 enrollees
or about 15 percent of non-LIS enrollees paid more thanthe 2025 out-of-pocket cap under the IRA($1662,
which is $2000 deflated to 2022 dollars).

Table C2. Part D Out-Of-Pocket Spending for Non-LIS Enrollees on Chronic Immunosuppressive

 

 

Therapies (2022)
Percent of Number of Percent of
Number of Average Non- . . "
Non-LIS LISOOP Enrollees |n. Enrolle:es with Enrollo.tes with
Enrollees Spending ($) Catastrophic Spending > Spending >
Demographics Coverage Phase $2,000° $2,000°
Total 561,721 - 17.0% 82,726 14.7%
Gender
Women 407,803 $949 15.5% 56,630 13.9%
Men or Unknown 153,918 $1,092 21.1% 26,096 17.0%
Age
<65 69,361 $1,008 17.9% 10,662 15.4%
65-69 154,508 $999 18.2% 22,970 14.9%
70-74 150,026 $1,006 17.9% 22,407 14.9%
75-79 104,261 $988 16.5% 15,211 14.6%
80-84 54,199 $942 14.1% 7,600 14.0%
85-89 21,934 $890 11.9% 2,935 13.4%
90 and older 7,432 $833 9.5% 941 12.7%
Race
White Non-Latino 486,456 $1,010 16.9% 73,845 15.2%
Black 38,514 $746 14.3% 3,445 8.9%
Latino 8,381 $566 19.4% 666 7.9%
Asian 6,857 $831 16.2% 834 12.2%
Al/AN 1,758 $1,800 32.9% 613 34.9%
Other 19,755 $1,084 21.8% 3,323 16.8%

 

Source: Demographic descriptive statistics and out-of-pocket spending calculated usingthe 2022 Medicare Part D
Prescription Drug Event data and Part D Enrollment data.

Notes: *The $2,000 out-of-pocket cap underthe IRA goes into effectin 2025. We deflated this amountto 2022 dollars,
which translatesto $1,662in 2022. Estimates are presented for enrollees who exceeded the $2,000cap in 2025.

OOP = Out-Of-Pocket

Al/AN= AmericanIndian/Alaska Native

Out-Of-Pocket Spending for Biologics

Table C3 lists the top 10 highest average out-of-pocket cost for non-insulin biologics that are taken by at least
10,000 Medicare Part D enrollees who reach the catastrophic coverage phase. The highest average OOP
spending ($2,137 per enrollee) is for Stelara, which is an immune system suppressant often used to treat
inflammatory conditions. Most of these non-insulin biologics in Table C3 are similarly usedto treat
rheumatologic and inflammatory disease.

 

July 2023 RESEARCH REPORT 34
Table C3. Top 10 Non-insulin Biologics taken by at least 10,000 Medicare Part D Enrollees with the
Highest Average Out-Of-Pocket Spending for Each Drug Among Enrollees in the Catastrophic

Coverage Phase, 2022

 

 

Brand name Average OOP Costs Number of Indication Most Commonly Associated
(Drug vs Drug- for Each Drug Per Enrollees Conditions
device) Enrollee Using the Using the
Drug Drug
Stelara(Drug) $2,137 19,107 Rheumatologic: Immune Inflammatory bowel diseases
systemsuppressant and psoriatic arthritis
Enbrel (Drug) $1,159 10,383 Rheumatologic: Immune Rheumatoid arthritisand
systemsuppressant psoriatic arthritis
Enbrel Sureclick $882 30,422 Rheumatologic: Immune Rheumatoid arthritis and
(Drug-device) system suppressant psoriatic arthritis
HumiraPen $823 14,810 Rheumatologic: Immune Rheumatoid arthritisand
(Drug-device) system suppressant inflammatory bowel diseases
Humira (CF) Pen $729 53,355 Rheumatologic: Immune Rheumatoid arthritis and
(Drug-device) system suppressant inflammatory bowel diseases
Humira (CF) $689 11,218 Rheumatologic: Immune Rheumatoid arthritisand
(Drug) system suppressant inflammatory bowel diseases
Dupixent (Drug) $659 34,212 Rheumatologic: Immune Atopic dermatitis or mod-
system suppressant severe eczemaand asthma
more specific to atopic
pathways
Kanjinti (Drug) $584 19,779 Oncology: HER2 Breast cancer most
targeted therapy for commonly
breastcancers
Cosentyx Pen* $562 13,220 Rheumatologic: Immune Psoriatic arthritis
(Drug-device) system suppressant
Repatha $405 51,153 Cardiovascular: Novel Familial

Sureclick (Drug-
device)

targeted therapy for
lowering cholesterol

hypercholesterolemia or
genetically inherited bad
cholesterol syndromes

 

Source: Average out-of-pocket costs calculated using the 2022 Medicare Part D Prescription Drug Event dataand PartD

Enrollment data.

Notes: * Cosentyx pen represents a two-pen product.

OOP = Out-Of-Pocket

Table C4 presents a list of the five biologics with the top highest average out-of-pocket spending for enrollees
reaching the catastrophic coverage phase. Strensiq, a replacement therapyused to treat people with
perinatal/infantile- and juvenile-onset hypophosphatasia,* hadthe highest average out-of-pocket spending

 

* Juvenile-onset hypophosphatasiaisa rare inherited condition that affects the bones and may cause low bone mineral density, joint
pain, skeletal issues, and other challenges. See here for complete details: Childhood hypophosphatasia - About the Disease - Genetic

and Rare Diseases Information Center (nih.gov)

 

July 2023

RESEARCH REPORT 35
among Medicare Part D enrollees (LIS and non-LIS) who ended the year in the catastrophic phasein 2022,
These biologics have high out-of-pocket costs, however the absolute number of enrollees taking these
medications is small.

Table C4. Biologics with the Highest Average Out-Of-Pocket Spending among Medicare Part D
Enrollees in Catastrophic Coverage Phase, 2022

 

 

Brand Name Number of Enrollees Average OOP Costs for each Drug per
Utilizing Drug Enrollee Usingthe Drug

Strensiq 164 $39,681

Naglazyme <10 $21,976

Elelyso <10 $20,884

Kalbitor 42 $11,831

Berinert 58 $11,493

 

Source: Average out-of-pocket costs calculated using the 2022 Medicare Part D Prescription Drug Event dataand PartD

Enrollmentdata.
OO0P = Out-Of-Pocket

 

July 2023 RESEARCH REPORT 36
Section D: Demographic Characteristics for Enrollees with Projected Savings

Our findings show that generally, the share of savings accrue at similar rates across specifications. Enrollees
under the age of 65 have savings of about 44 percent in out-of-pocket spending under 2025 IRA provisions.
This is consistent with our earlier findings that show this age group has higher out-of-pocket spending than
other age groups, likely because they qualify for Medicare based on disability or iliness. Men have slightly
more savings than women (about 4 percentage point difference in 2025). Among racialand ethnic groups,
Al/AN enrollees have the greatest reduction in out-of-pocket savings in 2025, followed by Latinos enrollees. As
expected, non-LIS enrollees have greater relative reduction in out-of-pocket spending compared to LIS
enrollees. Enrollees in rural and urban areas have similar reductions in out-of-pocket spending.

Results also show that enrollees with HIV are expected to have the largest reduction in out-of-pocket spending
(69 percent), followed by enrollees who use insulin long-term (63 percent), and enrollees with rheumatic
disorders (44 percent).

Table D1. Projected Annual Average Out-Of-Pocket Savings by Demographic Characteristics, by
Specification

 

 

Specification A: 2024 Specification B: 2025

Demographic Characteristics Policy Impact Percent Change? Policy Impact PercentChange?
Age

<65 -S81 -31% -$121 -44%

65-69 -569 -16% -$138 -30%

70-74 -$72 -14% -$156 -29%

75-79 571 -13% -$167 -28%

80-84 -562 -11% -$159 -27%

85-89 -548 -9% -$136 -24%

90+ -$27 -6% -595 -20%
Gender

Women -562 -14% -$128 -28%

Men -578 -16% -5165 -32%
Race

White -$71 -14% -$155 -29%

Black -$70 -23% -$112 -36%

Latinos -$51 -31% -$70 -40%

Asian -$49 -21% -$82 -33%

American

Indian/Alaskan Native -$90 -24% -$161 -41%

Other -$62 -16% -$126 -31%
LIS Status

Non-LIS -$70 -11% -$171 -27%

LIS -$67 -82% -$72 -84%
Geography

Urban-Rural -S69 -15% -$144 -30%

Rural -$74 -16% -$145 -30%
Health Care Characteristics

HIV -$576 -45% -$925 -69%

Non-HIV -567 -14% -$140 -29%

 

 

July 2023 RESEARCH REPORT 37
 

Long-term Insulin User
Non-long-term Insulin
User

Rheumatic Disorders
Non-Rheumatic
Disorder

-$533
-561
-$221

-566

-46%

-13%

-25%

-15%

-$767 -63%
-$133 -28%
-$405 -44%
-$139 -29%

 

Source: ASPE Part D Simulation Model

Notes: 2Percent change is calculated relative to baseline out-of-pocket spending.

Specification A presents estimates in 2024 dollars and Specification B presents estimates in 2025 dollars.

 

July 2023

RESEARCH REPORT 38
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beneficiaries-financial-security-before-the-coronavirus-pandemic/

22 Congressional Budget Office. (2011). Spending Patternsfor Prescription Drugs Under Medicare Part D. Congressional

Budget Office Publication42633. https.//www.cbo.qov/publication/42633

2 Nguyen X. Nguyen, T. Anders Olsen, Steven H. Sheingold, and Nancy Delew. Medicare Part B Drugs: Trendsin Spending

and Utilization, 2008-2021. Washington, DC: Office of the Assistant Secretary for Planning and Evaluation, U.S.

Department of Health and HumanServices. June, 2023.

24 Nguyen X.Nguyen, T. Anders Olsen, Steven H. Sheingold, and Nancy Delew. Medicare Part B Drugs: Trendsin Spending
and Utilization, 2008-2021. Washington, DC: Office of the Assistant Secretary for Planning and Evaluation, U.S.
Department of Health and HumanServices. June, 2023,

25 The Board of Trustees, Federal Hospital Insurance, and Federal Supplementary Medical Insurance Trust Funds. (2022).

Retrievedfrom: 2022 Medicare TrusteesReport (cms.gov).

 

July 2023 RESEARCH REPORT 40
 

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of the Assistant Secretaryfor Planning and Evaluation
200 Independence Avenue SW, Mailstop 447D
Washington, D.C. 20201

For more ASPE briefs and other publications, visit:
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ABOUTTHE AUTHORS

Bisma A. Sayed is an Economist in the Office of Health Policy in ASPE.

Kenneth Finegold is a Senior Social Science Analystin the Office of Health Policy
in ASPE.

T. Anders Olsen is an Oak Ridge Institute for Science and Education (ORISE) Fellow
in the Office of Health Policy in ASPE.

Kaavya Ashok was a graduate internin the Office of Health Policy in ASPE.

Sarah Schutz is an Oak Ridge Institute for Science and Education (ORISE) Fellow in
the Office of Health Policyin ASPE.

Steven Sheingoldis the Director of the Division of Health Care Financing Policyfor
the Office of Health Policyin ASPE.

Nancy De Lew is the Acting DeputyAssistant Secretary for Health Policyin ASPE.
Benjamin D.Sommers is Senior Counselor at ASPE.

The authors are grateful for the contributions of Acumen, LLCstaff to the CMS
Medicare data analysis and the simulationmodel. The statements expressedin this
Issue Brief do not necessarilyreflect the views of Acumen, LLC.

SUGGESTED CITATION

Sayed, BA, Finegold, K, Olsen, TA, Ashok, K, Schutz, S, Sheingold, S, De Lew, N,
Sommers, BD. Inflation Reduction Act Research Series: Medicare Part D Enrollee
Out-Of-Pocket Spending: Recent Trends and Projected Impacts of the Inflation
Reduction Act. (Issue Brief No. HP-2023-19). Office of the Assistant Secretaryfor
Planning and Evaluation, U.S. Department of Healthand Human Services. July 2023

COPYRIGHTINFORMATION

All material appearingin thisreportisin the publicdomainand
may be reproduced or copied without permission; citationas to
source, however, is appreciated.

DISCLOSURE
This communication was printed, published, or producedand
disseminated at U.S. taxpayer expense.

 

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July 2023 RESEARCH REPORT

41