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Impact of 2025’s IRA Out-of-Pocket Cap on Medicare Part D Beneficiaries

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Prior to the IRA, there were no limits on beneficiary OOP spending throughout the year. However, by 2025 the IRA will introduce the $2,000 maximum OOP expenses.

The impact of the Inflation Reduction Act‘s (IRA) out-of-pocket cap will mostly affect Non-White Part D beneficiaries, with Black beneficiaries experiencing substantial savings as the highest spenders, according to an analysis shared back in October during the AMCP Nexus conference in Orlando.

Authors of the analysis also found that low-income subsidy (LIS) beneficiaries are anticipated to reach the out-of-pocket (OOP) threshold earlier than their non-LIS counterparts.

Shared as a poster during the conference, the analysis looked at the impact of the IRA’s $2,000 OOP spending cap on Medicare Part D beneficiaries as it comes with new obligations for both Medicare Part D plan providers and drug manufacturers throughout the entire benefit coverage period.

Caitlin Sheetz, vice president and head of analytics at ADVI Health and co-author of the analysis, told MHE that the study sheds light on what's going to happen to this particular patient group most affected by the OOP cap.

Caitlin Sheetz, vice president and head of analytics at ADVI Health and co-author of the analysis, told MHE that the study sheds light on what's going to happen to this particular patient group most affected by the OOP cap.

Since becoming a legislation in 2022, the IRA has included provisions that affect prescription drug prices and the financial responsibility of Medicare Part D enrollees.

Prior to the IRA, there were no limits on beneficiary OOP spending throughout the year. However, by 2025, the IRA will introduce the $2,000 maximum OOP expenses.

Researchers of the analysis explored the potential impacts on various demographics, the timing when enrollees could exceed OOP threshold and what can happen in result of high-cost drugs pushing individuals over the $2,000 threshold.

Observed were Part D Event Files from 2017 to 2021. Patient OOP, which included direct out-of-pocket expenses, low-income subsidy payments and other payer payments, were totaled within each calendar year for each beneficiary.

In 2021 there were 51.6 million Part D beneficiaries in total; of that there were 6.3 million Part D beneficiaries who exceeded the $2,000 the OOP threshold.

Master Beneficiary Summary Files, which include patient demographic and low-income subsidy status were also reviewed during this 5-year period.

Research revealed that a proportion of beneficiaries exceeding $2,000 in OOP spending remained relatively constant, ranging from ~29% to 32% over those five years.

Other key findings include:

  • Beneficiaries with OOP spending are disproportionally Black and Hispanic.
  • 42% of the 6.2 million beneficiaries that meet the $2,000 OOP threshold took at least one of the ten Part D drugs subject to price negotiation for 2026 under the IRA.
  • Black beneficiaries have the highest spending in both LIS and non-LIS.
  • ~50% of LIS beneficiaries will reach the OOP threshold in June and ~50% of non-LIS beneficiaries reach the OOP threshold 2 months later in August.

Caitlin Sheetz, vice president and head of analytics at ADVI Health and co-author of the analysis, told MHE that this analysis revealed 12% of Medicare Part D beneficiaries are going to reach the cap.

“So, when we think about who the top spenders are, this study helps focus on what patient groups are going to need the most education, what patients are going to be affected by this and really what patient groups are taking the most medications,” Sheetz said. “I think this just sort of sheds light on what's going to happen to this small patient group.”

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