Medicare Part D Low-Income Subsidy Loss Tied to Higher Out-of-Pocket Costs

Beneficiaries who temporarily lost their Medicare Part D low-income subsidy experienced higher out-of-pocket drug costs and fewer prescription fills, a study published in JAMA Health Forum revealed.

Eligible beneficiaries can receive premium and cost-sharing assistance for Part D prescription drugs through the low-income subsidy program. In 2023, 13.4 million beneficiaries received full or partial low-income subsidy benefits.

CMS and the Social Security Administration (SSA) redetermine beneficiaries’ eligibility for the low-income subsidy program each year. The redetermination process differs for beneficiaries who are automatically eligible for the program and those who are not automatically deemed eligible.

Deemed eligible beneficiaries include full and partial benefit dually eligible people and those without Medicaid who receive Supplemental Security Income. Non-deemed beneficiaries qualify for the full subsidy if their incomes are below 135 percent of the federal poverty level (FPL) and their assets are below the program limit, which was $9,090 for an individual in 2023. Beneficiaries with incomes below 150 percent FPL and assets below $15,160 are eligible for the partial subsidy. Non-deemed beneficiaries are selected by SSA and contacted in September; they have 30 days to return their paperwork.

Researchers used Medicare enrollment and Part D event data from 2007 to 2018 to assess how often beneficiaries experienced subsidy losses in the Part D low-income subsidy program and how losses were associated with out-of-pocket spending and utilization changes.

Around 4.2 million beneficiaries had the full low-income subsidy benefit in December 2007; 3.4 million (83 percent) were deemed eligible and 731,000 (17 percent) were non-deemed. This figure grew to 5.7 million in December 2017.

Among deemed beneficiaries, the annual share who retained the full subsidy ranged from 99 percent to 100 percent between 2007 and 2018. The share of non-deemed beneficiaries who kept the full subsidy peaked in 2012 at 84 percent and hit a low of 78 percent in 2018. The total monthly enrollment of non-deemed full low-income subsidy recipients typically increased throughout each year and decreased in January after redeterminations occurred.

In December 2007, 10 percent of non-deemed full subsidy recipients had extended subsidy losses in 2008, 5 percent had temporary losses, 2 percent had subsidy reductions, and 2 percent had disenrolled from Medicare Part D after losing their subsidy. Beneficiaries with temporary losses went a mean of 3.3 months without the subsidy.

Beneficiaries younger than 65 and those of racial and ethnic minority groups were more likely to experience temporary subsidy loss and to disenroll from Part D after subsidy loss compared to their older White counterparts.

Beneficiaries who maintained their subsidy saw little to no change in monthly out-of-pocket costs or prescription drug fills across the study period. These beneficiaries filled an average of 4.2 prescription drug fills per month and had mean out-of-pocket costs of $9.14. Annual changes ranged from a 3 percent decrease in spending for antipsychotics to a 2 percent increase for all prescription drugs. Similar differences were seen in prescription drug fills.

On the other hand, beneficiaries who experienced temporary subsidy losses saw their average monthly out-of-pocket costs increase by 700 percent, while prescription drug fills fell by 15 percent. Monthly spending increases ranged from $5.50 for antilipid drugs to $34.47 for antipsychotic drugs among beneficiaries with temporary losses. Drug use reductions ranged from 0.26 fills per month for antidiabetes drugs to 0.12 fills per month for antidepressants.

Beneficiaries with extended subsidy losses and subsidy reductions also experienced reductions in out-of-pocket costs and prescription drug fills in the months without a full subsidy.

The enrollment patterns and subsidy losses highlighted in the study raise concerns about the Part D low-income subsidy program. A lack of continuous enrollment indicates that policymakers should prioritize addressing barriers to the renewal process.

Helping beneficiaries retain access to Medicare Part D subsidies can ensure affordability and adherence among low-income and minority beneficiaries and address disparities in medication access.