The rising costs of healthcare have taken center stage in the United States, particularly for Medicare beneficiaries who rely on Part D for their prescription drug coverage. A new study conducted by researchers at the USC Schaeffer Center for Health Policy & Economics underscores a troubling trend: expected out-of-pocket costs for commonly prescribed brand name medications are surging at an unprecedented rate, largely due to the structural changes in how these drugs are reimbursed under Medicare. This investigation has unveiled a significant shift in the cost-sharing model utilized by stand-alone Part D plans, highlighting a growing reliance on coinsurance, rather than fixed copayment amounts, that essentially tie patient costs to the inflated list prices of drugs.
The research delineates the evolution of payment structures within Medicare Part D plans over a four-year span, revealing that the percentage of stand-alone prescription drug plans leveraging coinsurance for preferred brand-name medications has skyrocketed from a modest 9.9% in 2020 to a staggering 71.9% by the year 2024. This sharp increase in the use of coinsurance contrasts markedly with the less than 5% utilization in Medicare Advantage plans, signifying a troubling departure from previous pricing models that offered more predictability for patients.
With the transition toward a greater reliance on coinsurance, the ramifications for Medicare beneficiaries become increasingly dire. As these individuals are finding themselves increasingly tethered to the fluctuating list prices of medications, they are becoming less insulated from the effects of rising drug prices. The typical coinsurance percentage is around 25%, a figure that, when applied to the soaring list prices, translates into significantly heightened out-of-pocket expenses for patients who, prior to this shift, may have enjoyed more stable cost-sharing through copayment arrangements.
The research points out that stand-alone Part D plans represent 43% of the overall market, highlighting that beneficiaries who choose these plans are not only facing elevated costs but are also often unaware of the full impact of these changes until they are confronted at the pharmacy counter. The study emphasizes that, even though overall rebates and discounts in the pharmaceutical industry have ballooned in recent years, the financial benefits accruing from these negotiations primarily favor pharmacy benefit managers (PBMs) and health plans, leaving very little for the patients who need these medications the most. The steeper rebates demanded by PBMs often lead to inflated list prices, compounding the financial strain for patients with coinsurance plans.
A prime example of this phenomenon is the blood thinner Eliquis, commonly prescribed for atrial fibrillation and other cardiovascular conditions. As of 2024, the list price for Eliquis has reached approximately $550 per month. Simultaneously, the average pharmacy cost for the medication has surged by 22% over the past four years. While the average rebate for Eliquis has been around 45%, these discounts do little to cushion the blow for patients. In fact, the expected out-of-pocket costs for beneficiaries utilizing stand-alone Part D plans have more than doubled—from $46.76 in 2020 to $102.32 in 2024—an alarming statistic that signals the increasing burden on those relying on Medicare for their prescription drug needs.
The impact of this shift is echoed in the projected cost increases for other commonly-prescribed brand-name drugs. Trulicity, a medication used for managing Type 2 diabetes, has seen its expected out-of-pocket costs leap from $54.04 to $128.43. Similarly, Xarelto, another medication known for treating blood clots, has experienced a jump from $46.54 to $94.50 over the same period. Ozempic, which is also prescribed for diabetes and other conditions, has witnessed an increase from $56.95 to $135.43, underscoring the widespread nature of the cost escalation affecting Medicare beneficiaries.
The ramifications of these rising costs extend beyond mere financial strain; they risk creating barriers to necessary medications. Many patients may experience sudden, unexpected increases in out-of-pocket expenses, leading to a phenomenon that researchers describe as "sticker shock." Such financial burdens can create significant hurdles for beneficiaries trying to adhere to their prescribed treatments, which may, in turn, exacerbate health disparities and lead to adverse health outcomes.
Researchers, including the lead author Erin Trish, highlight that this scenario runs counter to the fundamental principles of insurance. Instead of protecting beneficiaries from the burdens of high costs, the current structure is resulting in a disproportionate transfer of financial risk onto patients, particularly for those who require costly medications that are subject to rebates and discounts negotiated by intermediary actors in the pharmaceutical supply chain. As these dynamics continue to evolve, more beneficiaries may find themselves in a precarious position where they bear the brunt of escalating drug prices, generating rebates that do not serve their interests.
To mitigate these adverse effects, it has been suggested that improvements in plan design, alongside a reevaluation of the role that PBMs play in the medication distribution process, could offer paths to alleviating the financial pressures faced by Medicare beneficiaries. However, given the complexity of the U.S. healthcare system and the entrenched interests of various stakeholders, implementing significant changes may be an uphill battle.
As the landscape of Medicare Part D continues to shift, the analysis by the USC Schaeffer Center serves as a clarion call to policymakers, healthcare providers, and patient advocates alike. Ensuring that Medicare beneficiaries are not left vulnerable to rising costs will require collective efforts and informed advocacy, aimed at restoring balance to a system that should prioritize patient access and affordability. The time for comprehensive reform is now, as the stakes grow higher with each passing year and each new wave of rising medication prices.
Continued research and scrutiny into how drugs are priced and covered under Medicare will be essential in crafting solutions that prioritize patient well-being. As the healthcare community pays closer attention to the implications of these findings, there remains a glimmer of hope that changes can be made to enhance the stability and predictability of out-of-pocket costs for Medicare beneficiaries. Only then can the promise of affordable and accessible healthcare be realized for all.
Moreover, as this topic gains traction in public discourse, it is crucial to maintain a spotlight on the experiences and challenges faced by ordinary patients who often bear the financial brunt of a complicated healthcare system. Their stories and the research underscoring these issues will serve as powerful motivators for change, inspiring collective action that can transform the existing landscape for the better.
Subject of Research: Rising out-of-pocket drug costs for Medicare beneficiaries
Article Title: Medicare Part D: The New Era of Rising Costs
News Publication Date: February 14, 2025
Web References: USC Schaeffer Center
References: Trish, E. et al., "Out-of-Pocket Costs for Medicare Part D Beneficiaries: Increasing Reliance on Coinsurance," JAMA, 2024.
Image Credits: USC Schaeffer Center for Health Policy & Economics
Keywords: Medicare, drug costs, healthcare policy, coinsurance, pharmaceutical economics
