How To Create A Part D MOOP That Ensures Access And Affordability For Seniors

posted by AHIP

on June 3, 2019

Everyone should be able to get the prescription drugs they need at a cost they can afford, particularly seniors and people with disabilities. Health insurance providers live this commitment every day by negotiating with drug makers and providing those savings to their members. But when drug prices are out of control and continue to skyrocket, more needs to be done to protect affordability and access for everyone.

The Part D “catastrophic” phase was designed to protect enrollees who aren’t eligible for low-income subsidies. Once they reach a certain spending threshold ($6,350 in 2020), they only pay 5% of their drug costs the rest of the year. Fewer than 10% of seniors with Part D enter the catastrophic phase each year. But as drug prices continue to rise with prices for branded drugs that can exceed tens of thousands or hundreds of thousands of dollars, even the 5% they’re responsible for creates a huge financial strain for millions of Americans.

That’s why health insurance providers support a “Maximum Out of Pocket” limit (MOOP) for Part D. This would put a hard cap on how much Part D enrollees pay in a year for their medications – saving thousands of dollars a year for those who can least afford it.

The question is, how should it be funded?

A MOOP will cost money. Some have proposed that this cost could be offset by changing the structure of federal subsidies for Part D spending. In a new study, Oliver Wyman evaluated the 10-year impact (2021-2030) of proposals creating a Part D MOOP and reducing federal reinsurance payments. It found that creating a MOOP would:

  • decrease member cost sharing in the catastrophic phase by $59.3 billion BUT
  • increase Part D premiums for everyone by $20 billion, and raise taxpayer costs by $84.7 billion.

Reducing federal reinsurance payments would:

  • increase Part D premiums for everyone by nearly $6 billion more AND
  • increase taxpayer costs by nearly $7 billion more by shifting federal funds into higher premium subsidies.

That’s not protecting seniors. That’s simply shifting costs.

Instead, drug makers should have some skin in the game to pay for a MOOP. Today, drug makers have perverse incentives to set their prices high, and raise them higher year after year, to move as many seniors into the catastrophic phase as quickly as possible. And now, we’re seeing drugs with price tags of $1 million or more being brought to market. Once seniors are in the catastrophic phase, drug makers pay nothing and reap all the profits, while seniors, taxpayers, and insurance providers all pay the price.

Let’s build on what’s already working. Let’s extend the Medicare Coverage Gap Discount Program – so drug makers pay some of the costs once seniors reach the catastrophic phase. That solution will enable seniors to get the drugs they need at a cost they can afford, while ensuring the sustainability of the program.

Estimated Total Cost of Restructuring the Part D Catastrophic Liabilities (2021 through 2030)

Scenario Change (In Billions)
Government Liability Member Premium Member Cost Sharing
Establish a MOOP $84.7 $20.0 ($59.3)
Reduce Federal Reinsurance $6.9 $5.9 $0.0

Source: Giese, G., Conway, B., Sober, J. Part D catastrophic coverage – Financial implications of restructuring liability. Oliver Wyman.
May 2019.


Download the full report by clicking here.

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