Since its inception, Medicare Part D has been a boon to seniors with a 2015 Medicare Today national survey showing that 89% of seniors are satisfied with their Part D drug coverage. In the same survey, 71% of seniors say they derive a great deal of peace of mind from their prescription drug coverage. On the surface, these are impressive numbers but a closer look shows many areas of concern.

Here are three reasons to worry:

Nearly half of Medicare recipients have annual incomes less than $24,150 and a full quarter of the recipients have annual  incomes lower than $14,350

  1. Yearly median Part D OOP costs for the most popular specialty drugs range from $4,400 (~18% of the $24,150 income level) to $11,500 (~47% of the same income level)
  2. Cost of specialty drugs increased 30% just in 2014 and continues to grow rapidly while median income for medicare recipients is expected to grow only by <20% over the next 10 year period
  3. Even with catastrophic coverage, where patients pay only 5% of the drug cost, Part D recipients can be expected to pay thousands of dollars out of pocket.

Well, if specialty drug costs are high how can these patients afford their therapy? Do they have savings or other assets that can pay for much needed high-cost medications?

  1. 8% of Medicare patients have no savings and another 25% of patients have savings less than $11,900And already
  2. Medicare beneficiaries spend 15% of their household income on healthcare

What else can be done? A recent Kaiser Family Foundation analysis of Medicare out-of-pocket costs shows that for the same mix of drugs, OOP costs can vary up to four-fold across Medicare Part D plans in the same area. KFF essentially recommends that patients shop for plans based on the mix of prescription drugs they use because they can potentially save up to 75% in OOP costs.

Sounds like a great idea, but even this may not work in the case of specialty drugs. Stotle analysis of the 2016 Medicare plan finder data shows that across plans specialty drug OOPs vary only at marginal levels (<10%).

Clearly, things will only get worse with time as Medicare Part D rolls swell to 88M beneficiaries by 2020.  This is an impending crisis and we don't have a magical solution at hand. But, there are a couple of ideas worth considering:

  1. CMS can modify the Part D benefit to change the 5% catastrophic coverage OOP into a flat $ amount so that patients are insulated from the high cost of specialty drugs
  2. Alternatively, CMS can tie catastrophic coverage OOP based on income levels with low-income non-LIS enrollees paying co-pays and high-income enrollees paying slightly greater than 5%

We urge PhRMA and patient advocacy groups to advocate for these and other policies that could improve access to critical medications for the Medicare population. The clock is ticking.