Out-of-pocket drug costs rise when patients join Medicare

The out-of-pocket drug costs for diabetes medications can go up by as much as $56.36 each quarter once an individual transitions from commercial insurance to Medicare coverage, a jump researchers say negatively impacts medication adherence.

Indeed, as patient financial responsibility for diabetes management drugs goes up, utilization of these medications goes down by around 5%, the researchers said in a new JAMA Network Open article.

These trends are due to differences between commercial insurance, which covers 70% of folks under age 65, and Medicare and Medicare Part D.

In a typical commercial insurance plan, beneficiaries have an out-of-pocket (OOP) maximum and no coverage gap. This means that once an individual has paid up to their OOP max for covered services, they will not have to pay any additional costs for covered services, like prescription drugs for diabetes, for the remainder of the plan year. This ensures financial protection and predictability for patients paying for their medications.

But in Medicare and Medicare Part D, there is no OOP max and there is a coverage gap.

In the JAMA Network Open article, researchers from the Comparative Health Outcomes, Policy, and Economics Institute at the University of Washington School of Pharmacy said those health plan designs lead to higher out-of-pocket costs and poorer medication access and adherence.

Using prescription drug claims data from the TriNetX Diamond Network, the researchers compared out-of-pocket patient costs for type 2 diabetes (T2D) medications for folks before and after turning age 65, when people usually enroll in Medicare.

The analysis showed a marked increase in T2D medication costs. While the mean quarterly costs for diabetes medication increased by $23.04, the jump was much starker for folks in the highest spend category. For those patients, the quarterly cost increase after adjusting for utilization was $56.36.

"This shows that for the highest spenders, it is both the transition to Medicare and compositional changes in utilization that are associated with the increase in spending at age 65 years," the research team explained.

The jump in T2D drug costs was complemented by a 5.3% decrease in diabetes medication utilization. The mean number of claims for diabetes management drugs went down from 3.40 claims per quarter to 3.22 claims per quarter.

Said otherwise, when patients with T2D turn 65 and enroll in Medicare, the likely drug price increases they see have the chance of increasing experiences of medication nonadherence and consequent diabetes complications, the researchers said.

Public policymakers are working to insulate patients with diabetes from these high costs. The Inflation Reduction Act (IRA) introduced a $35 limit on monthly insulin costs for Medicare beneficiaries, which data is already proving effective at increasing insulin prescription fills.

Starting in 2024, OOP spending on all Part D drugs will be capped at $3,250, and in 2025, spending will be capped at $2,000. The $3,250 cap will reduce spending for 3.4% of the study sample, while the $2,000 cap will reduce spending for 9% of the study sample.

But the researchers indicated that public policy regulating out-of-pocket patient costs is only half the battle. If the $35 insulin cap, plus the overall OOP spending limits on all Part D drugs, do increase patient medication access and adherence, they could also spike federal spending on the Medicare program at large.

It is true that increased access to T2D medications would likely improve patient outcomes and reduce acute and costly complications. Still, the list prices for these drugs will need to go down, potentially via Medicare's drug price negotiation power, in order to see true return on investment.

"We expect these policies to increase utilization of expensive classes of drugs, some of which are targeted by upcoming Medicare price negotiations," the researchers concluded. "Future research should clearly identify the value of new classes of T2D prescription drugs using data from clinical use, rather than trials, and should assess the impact of the IRA on OOP costs, drug adherence, and health outcomes."

Sara Heath has covered news related to patient engagement and health equity since 2015.